Energy Conservation Program: Energy Conservation Standards for Miscellaneous Refrigeration Products

DEPARTMENT OF ENERGY

10 CFR Part 430

[EERE-2020-BT-STD-0039]

RIN 1904-AF62

Energy Conservation Program: Energy Conservation Standards for Miscellaneous Refrigeration Products

AGENCY:

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

ACTION:

Direct final rule.

SUMMARY:

The Energy Policy and Conservation Act, as amended (“EPCA”), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including miscellaneous refrigeration products. In this direct final rule, the U.S. Department of Energy (“DOE”) is adopting amended energy conservation standards for miscellaneous refrigeration products. DOE has determined that the amended energy conservation standards for these products would result in significant conservation of energy, and are technologically feasible and economically justified.

DATES:

The effective date of this rule is September 4, 2024. If adverse comments are received by August 26, 2024 and DOE determines that such comments may provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o), a timely withdrawal of this rule will be published in the

Federal Register

. If no such adverse comments are received, compliance with the amended standards established for miscellaneous refrigeration products in this direct final rule is required on and after January 31, 2029. Comments regarding the likely competitive impact of the standards contained in this direct final rule should be sent to the Department of Justice contact listed in the

ADDRESSES

section on or before June 6, 2024.

ADDRESSES:

The docket for this rulemaking, which includes

Federal Register

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

www.regulations.gov.

All documents in the docket are listed in the

www.regulations.gov

index. However, not all documents listed in the index may be publicly available, such as information that is exempt from public disclosure.

The docket web page can be found at

www.regulations.gov/docket/EERE-2020-BT-STD-0039.

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

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

ApplianceStandardsQuestions@ee.doe.gov.

The U.S. Department of Justice Antitrust Division invites input from market participants and other interested persons with views on the likely competitive impact of the standards contained in this direct final rule. Interested persons may contact the Antitrust Division at

www.energy.standards@usdoj.gov

on or before the date specified in the

DATES

section. Please indicate in the “Subject” line of your email the title and Docket Number of this direct final rule.

FOR FURTHER INFORMATION CONTACT:

Mr. Lucas Adin, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (202) 287-5904. Email:

ApplianceStandardsQuestions@ee.doe.gov.

Ms. Kristin Koernig, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: (240) 243-3383. Email:

kristin.koernig@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Direct Final Rule

A. Benefits and Costs to Consumers

B. Impact on Manufacturers

C. National Benefits and Costs

D. Conclusion

II. Introduction

A. Authority

B. Background

1. Current Standards

2. Current Test Procedures

3. History of Standards Rulemaking for MREFs

4. The Joint Agreement

III. General Discussion

A. Scope of Coverage

B. Fairly Representative of Relevant Point of View

C. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

D. Energy Savings

1. Determination of Savings

2. Significance of Savings

E. Economic Justification

1. Specific Criteria

a. Economic Impact on Manufacturers and Consumers

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

c. Energy Savings

d. Lessening of Utility or Performance of Products

e. Impact of Any Lessening of Competition

f. Need for National Energy Conservation

g. Other Factors

2. Rebuttable Presumption

IV. Methodology and Discussion of Related Comments

A. Market and Technology Assessment

1. Product Classes

a. Product Classes With Automatic Icemakers

b. Addition of Product Class C-5-BI

2. Technology Options

B. Screening Analysis

1. Screened-Out Technologies

2. Remaining Technologies

C. Engineering Analysis

1. Efficiency Analysis

a. Built-In Classes

b. Baseline Efficiency/Energy Use

c. Higher Efficiency Levels

d. Variable-Speed Compressor Supply Chain

2. Cost Analysis

3. Cost-Efficiency Results

D. Markups Analysis

E. Energy Use Analysis

F. 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

G. Shipments Analysis

H. National Impact Analysis

1. Product Efficiency Trends

2. National Energy Savings

3. Net Present Value Analysis

I. Consumer Subgroup Analysis

J. Manufacturer Impact Analysis

1. Overview

2. Government Regulatory Impact Model and Key Inputs

a. Manufacturer Production Costs

b. Shipments Projections

c. Product and Capital Conversion Costs

d. Manufacturer Markup Scenarios

3. Discussion of MIA Comments

K. Emissions Analysis

1. Air Quality Regulations Incorporated in DOE's Analysis

L. Monetizing Emissions Impacts

1. Monetization of Greenhouse Gas Emissions

a. Social Cost of Carbon

b. Social Cost of Methane and Nitrous Oxide

c. Sensitivity Analysis Using Updated 2023 SC-GHG Estimates

2. Monetization of Other Emissions Impacts

M. Utility Impact Analysis

N. Employment Impact Analysis

O. Other Comments

V. Analytical Results and Conclusions

A. Trial Standard Levels

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers

a. Life-Cycle Cost and Payback Period

b. Consumer Subgroup Analysis

c. Rebuttable Presumption Payback

2. Economic Impacts on Manufacturers

a. Industry Cash Flow Analysis Results

b. Direct Impacts on Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Subgroups of Manufacturers

e. Cumulative Regulatory Burden

3. National Impact Analysis

a. Significance of Energy Savings

b. Net Present Value of Consumer Costs and Benefits

c. Indirect Impacts on Employment

4. Impact on Utility or Performance of Products

5. Impact of Any Lessening of Competition

6. Need of the Nation To Conserve Energy

7. Other Factors

8. Summary of Economic Impacts

C. Conclusion

1. Benefits and Burdens of TSLs Considered for MREF Standards

2. Annualized Benefits and Costs of the Adopted Standards

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

D. Review Under the National Environmental Policy Act of 1969

E. Review Under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

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

I. Review Under Executive Order 12630

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

K. Review Under Executive Order 13211

L. Information Quality

M. Congressional Notification

VII. Approval of the Office of the Secretary

I. Synopsis of the Direct Final Rule

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

1

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

2

established the Energy Conservation Program for Consumer Products Other Than Automobiles. (42 U.S.C. 6291-6309, as codified) These products include miscellaneous refrigeration products (“MREFs”), the subject of this direct final rule.

1

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.

2

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

Pursuant to EPCA, any new or amended energy conservation standard must, among other things, be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B))

In light of the statutory authority above and under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule amending the energy conservation standards for MREFs.

The adopted standard levels in this direct final rule were proposed in a letter submitted to DOE jointly by groups representing manufacturers, energy and environmental advocates, consumer groups, and a utility. This letter, titled “Energy Efficiency Agreement of 2023” (hereafter, the “Joint Agreement”

3

), recommends specific energy conservation standards for MREFs that, in the commenters' view, would satisfy the EPCA requirements in 42 U.S.C. 6295(o). DOE subsequently received letters of support from states, including California, Massachusetts, and New York,

4

as well as San Diego Gas and Electric (“SDG&E”) and Southern California Edison (“SCE”) advocating for the adoption of the recommended standards.

5

3

This document is available in the docket at:

www.regulations.gov/document/EERE-2020-BT-STD-0039-0034.

4

This document is available in the docket at:

www.regulations.gov/document/EERE-2020-BT-STD-0039-0035.

5

This document is available in the docket at:

www.regulations.gov/document/EERE-2020-BT-STD-0039-0036.

In accordance with the direct final rule provisions at 42 U.S.C. 6295(p)(4), DOE has determined that the recommendations contained therein are compliant with 42 U.S.C. 6295(o). As required by 42 U.S.C. 6295(p)(4)(A)(i), DOE is also simultaneously publishing a notice of proposed rulemaking (“NOPR”) that contains the identical standards to those adopted in this direct final rule. Consistent with the statute, DOE is providing a 110-day public comment period on the direct final rule. (42 U.S.C. 6295(p)(4)(B)) If DOE determines that any comments received may provide a reasonable basis for withdrawal of the direct final rule under 42 U.S.C. 6295(o), or any other applicable law, DOE will publish the reasons for withdrawal and continue the rulemaking under the NOPR. (42 U.S.C. 6295(p)(4)(C)) See section II.A of this document for more details on DOE's statutory authority.

The amended standards that DOE is adopting in this direct final rule are the efficiency levels recommended in the Joint Agreement (shown in Table I.1) expressed in terms of kilowatt hours per year (“kWh/yr”) as measured according to DOE's current MREF test procedure codified at title 10 of the Code of Federal Regulations (“CFR”) part 430, subpart B, appendix A (“appendix A”).

The amended standards recommended in the Joint Agreement are represented as trial standard level (“TSL”) 4 in this document (hereinafter the “Recommended TSL”) and are described in section V.A of this document. The Joint Agreement's standards for MREFs apply to all products listed in Table I.1 and manufactured in or imported into the United States starting on January 31, 2029.

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A. Benefits and Costs to Consumers

Table I.2 summarizes DOE's evaluation of the economic impacts of the adopted standards on consumers of MREFs, as measured by the average life-cycle cost (“LCC”) savings and the simple payback period (“PBP”)

6

The average LCC savings are positive for all product classes, and the PBP is less than the average lifetime of MREFs, which varies by product class (see section IV.F of this document).

6

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

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

B. Impact on Manufacturers

7

7

All monetary values in this document are expressed in 2022 dollars. unless indicated otherwise. For purposes of discounting future monetary values, the present year in the analysis was 2024.

The industry net present value (“INPV”) is the sum of the discounted cash flows to the industry from the base year through the end of the analysis period (2024-2058). Using a real discount rate of 7.7 percent, DOE estimates that the INPV for manufacturers of MREFs in the case without amended standards is $807.7 million. Under the adopted standards, which align with the Recommended TSL (

i.e.,

TSL 4) for MREFs, DOE estimates the change in INPV to range

from −11.4 percent to −7.5 percent, which is approximately −$92.1 million to −$60.3 million. In order to bring products into compliance with amended standards, it is estimated that industry will incur total conversion costs of $130.7 million.

DOE's analysis of the impacts of the adopted standards on manufacturers is described in sections IV.J and V.B.2 of this document.

C. National Benefits and Costs

DOE's analyses indicate that the adopted energy conservation standards for MREFs would save a significant amount of energy. Relative to the case without amended standards, the lifetime energy savings for MREFs purchased in the 30-year period that begins in the anticipated year of compliance with the amended standards (2029-2058) amount to 0.32 quadrillion British thermal units (“Btu”), or quads.

8

This represents a savings of 26 percent relative to the energy use of these products in the case without amended standards (referred to as the “no-new-standards case”).

8

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

i.e.,

coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy efficiency standards. For more information on the FFC metric, see section IV.H.1 of this document.

The cumulative net present value (“NPV”) of total consumer benefits of the standards for MREFs ranges from $0.17 billion (at a 7-percent discount rate) to $0.77 billion (at a 3-percent discount rate). This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product costs for MREFs purchased in 2029-2058.

In addition, the adopted standards for MREFs are projected to yield significant environmental benefits. DOE estimates that the standards will result in cumulative emission reductions (over the same period as for energy savings) of 5.85 million metric tons (“Mt”)

9

of carbon dioxide (“CO

2

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

2

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

X

”), 48.64 thousand tons of methane (“CH

4

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

2

O”), and 0.01 tons of mercury (“Hg”).

10

9

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

2

are presented in short tons.

10

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

Annual Energy Outlook 2023

(“

AEO2023

”).

AEO2023

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

AEO2023

assumptions that affect air pollutant emissions.

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

2

(“SC-CO

2

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

4

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

2

O”). Together these represent the social cost of GHG (“SC-GHG”). DOE used interim SC-GHG values (in terms of benefit per ton of GHG avoided) developed by an Interagency Working Group on the Social Cost of Greenhouse Gases (“IWG”).

11

The derivation of these values is discussed in section IV.L of this document. For presentational purposes, the climate benefits associated with the average SC-GHG at a 3-percent discount rate are estimated to be $0.32 billion. DOE does not have a single central SC-GHG point estimate and it emphasizes the value of considering the benefits calculated using all four sets of SC-GHG estimates. DOE notes, however, that the adopted standards would be economically justified even without inclusion of the estimated monetized benefits of reduced GHG emissions.

11

To monetize the benefits of reducing GHG emissions this analysis uses the interim estimates presented in the

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

published in February 2021 by the IWG. (“February 2021 SC-GHG TSD”).

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

(last accessed November 29, 2023.)

DOE estimated the monetary health benefits of SO

2

and NO

X

emissions reductions, using benefit per ton estimates from the Environmental Protection Agency (“EPA”),

12

as discussed in section IV.L of this document. DOE estimated the present value of the health benefits would be $0.24 billion using a 7-percent discount rate, and $0.62 billion using a 3-percent discount rate.

13

DOE is currently only monetizing health benefits from changes in ambient fine particulate matter (“PM

2.5

”) concentrations from two precursors (SO

2

and NO

X

), and from changes in ambient ozone from one precursor (for NO

X

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

2.5

emissions.

12

U.S. EPA. Estimating the Benefit per Ton of Reducing Directly Emitted PM

2.5

, PM

2.5

Precursors and Ozone Precursors from 21 Sectors. Available at

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

(last accessed November 29, 2023.)

13

DOE estimates the economic value of these emissions reductions resulting from the considered TSLs for the purpose of complying with the requirements of Executive Order 12866.

Table I.3 summarizes the monetized benefits and costs expected to result from the amended standards for MREFs. There are other important unquantified effects, including certain unquantified climate benefits, unquantified public health benefits from the reduction of toxic air pollutants and other emissions, unquantified energy security benefits, and distributional effects, among others.

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The benefits and costs of the adopted standards can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are (1) the reduced consumer operating costs, minus (2) the increase in product purchase prices and installation costs, plus (3) the value of climate and health benefits of emission reductions, all annualized.

14

14

To convert the time-series of costs and benefits into annualized values, DOE calculated a present value in 2022, the year used for discounting the NPV of total consumer costs and savings. For the benefits, DOE calculated a present value associated with each year's shipments in the year in which the shipments occur (

e.g.,

2030), and then discounted the present value from each year to 2022. Using the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in the compliance year, that yields the same present value.

The national operating cost savings are domestic private U.S. consumer monetary savings that occur as a result of purchasing the covered products and are measured for the lifetime of MREFs shipped during the period 2029−2058. The benefits associated with reduced emissions achieved as a result of the adopted standards are also calculated based on the lifetime of MREFs shipped during the period 2029-2058. Total benefits for both the 3-percent and 7-percent cases are presented using the average GHG social costs with 3-percent discount rate. Estimates of SC-GHG values are presented for all four discount rates in section IV.L of this document.

Table I.4 presents the total estimated monetized benefits and costs associated with the standards adopted in this direct final rule, expressed in terms of annualized values. The results under the primary estimate are as follows.

Using a 7-percent discount rate for consumer benefits and costs and health benefits from reduced NO

X

and SO

2

emissions, and the 3-percent discount rate case for climate benefits from reduced GHG emissions, the estimated cost of the standards adopted in this direct final rule is $72.7 million per year in increased equipment costs, while the estimated annual benefits are $90.6 million in reduced equipment operating costs, $18.3 million in climate benefits, and $25.6 million in health benefits. In this case, the net benefit would amount to $61.7 million per year.

Using a 3-percent discount rate for all benefits and costs, the estimated cost of the standards is $70.8 million per year in increased equipment costs, while the estimated annual benefits are $115 million in reduced operating costs, $18.3 million in climate benefits, and $35.6 million in health benefits. In this case, the net benefit amounts to $98.0 million per year.

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

D. Conclusion

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

Using a 7-percent discount rate for consumer benefits and costs and NOx and SO

2

reduction benefits, and a 3-percent discount rate case for GHG social costs, the estimated cost of the standards for MREFs is $72.7 million per year in increased product costs, while the estimated annual benefits are $90.6 million in reduced product operating costs, $18.3 million in climate benefits, and $25.6 million in health benefits. The net benefit amounts to $61.7 million per year. DOE notes that the net benefits are substantial even in the absence of the climate benefits,

15

and DOE would adopt the same standards in the absence of such benefits.

15

The information on climate benefits is provided in compliance with Executive Order 12866.

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.

16

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.

16

Procedures, Interpretations, and Policies for Consideration in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment, 86 FR 70892, 70901 (Dec. 13, 2021).

As previously mentioned, the standards are projected to result in estimated national energy savings of 0.32 quads full-fuel-cycle (“FFC”), the equivalent of the primary annual energy use of 2.1 million homes. In addition, they are projected to reduce cumulative CO

2

emissions by 5.85 million metric tons. Based on these findings, DOE has determined the energy savings from the standard levels adopted in this direct final rule are “significant” within the meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of the basis for

these conclusions is contained in the remainder of this document and the accompanying technical support document (“TSD”).

17

17

The direct final rule TSD is available in the docket for this rulemaking at

www.regulations.gov/docket/EERE-2020-BT-STD-0039/document.

Under the authority provided by 42 U.S.C. 6295(p)(4), DOE is issuing this direct final rule amending the energy conservation standards for MREFs. Consistent with this authority, DOE is also simultaneously publishing elsewhere in this issue of the

Federal Register

a NOPR proposing standards that are identical to those contained in this direct final rule.

See

42 U.S.C. 6295(p)(4)(A)(i).

II. Introduction

The following section briefly discusses the statutory authority underlying this direct final rule, as well as some of the relevant historical background related to the establishment of standards for MREFs.

A. Authority

EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA

18

established the Energy Conservation Program for Consumer Products Other Than Automobiles, which, in addition to identifying particular consumer products and commercial equipment as covered under the statute, permits the Secretary of Energy to classify additional types of consumer products as covered products. (42 U.S.C. 6292(a)(20)) DOE added MREFs as covered products through a final determination of coverage published in the

Federal Register

on July 18, 2016 (the “July 2016 Final Coverage Determination”). 81 FR 46768. MREFs are consumer refrigeration products other than refrigerators, refrigerator-freezers, or freezers, which include coolers and combination cooler refrigeration products. 10 CFR 430.2. MREFs include refrigeration products such as coolers (

e.g.,

wine chillers and other specialty products) and combination cooler refrigeration products (

e.g.,

wine chillers and other specialty compartments combined with a refrigerator, refrigerator-freezers, or freezers). EPCA further provides that, not later than 6 years after the issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a NOPR including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)) Not later than 3 years after issuance of a final determination not to amend standards, DOE must publish either a notice 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))

18

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

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 the 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).

Federal energy efficiency 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 instances for particular State laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (

See

42 U.S.C. 6297(d))

Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of 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 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 procedure for MREFs appears at appendix A (

Uniform Test Method for Measuring the Energy Consumption of Refrigerators, Refrigerator-Freezers, and Miscellaneous Refrigeration Products

).

DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including MREFs. Any new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3))

Moreover, DOE may not prescribe a standard (1) for certain products, including MREFs, if no test procedure has been established for the product, or (2) if DOE determines by rule that the standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is economically justified, 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, or maintenance expenses for the covered products that are likely to result from the standard;

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

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

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

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

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

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

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

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

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

Id.

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

Additionally, pursuant to the amendments contained in the Energy Independence and Security Act of 2007 (“EISA 2007”), Public Law 110-140, final rules for new or amended energy conservation standards promulgated after July 1, 2010, are 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 procedure for MREFs addresses standby mode and off mode energy use, as do the amended standards adopted in this direct final rule.

Finally, EISA 2007 amended EPCA, in relevant part, to grant DOE authority to issue a final rule (

i.e.,

a “direct final rule”) establishing an energy conservation standard upon receipt of a statement submitted jointly by interested persons that are fairly representative of relevant points of view (including representatives of manufacturers of covered products, States, and efficiency advocates), as determined by the Secretary, that contains recommendations with respect to an energy or water conservation standard. (42 U.S.C. 6295(p)(4)) Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine whether a jointly-submitted recommendation for an energy or water conservation standard satisfies 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable.

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

i.e.,

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

Id.

)

DOE has previously explained its interpretation of its direct final rule authority. In a final rule amending the Department's “Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products” at 10 CFR part 430, subpart C, appendix A (“Process Rule”), DOE noted that it may issue standards recommended by interested persons that are fairly representative of relative points of view as a direct final rule when the recommended standards are in accordance with 42 U.S.C. 6295(o) or 42 U.S.C. 6313(a)(6)(B), as applicable. 86 FR 70892, 70912 (Dec. 13, 2021). But the direct final rule provision in EPCA does not impose additional requirements applicable to other standards rulemakings, which is consistent with the unique circumstances of rules issued as consensus agreements under DOE's direct final rule authority.

Id.

DOE's discretion remains bounded by its statutory mandate to adopt a standard that results in the maximum improvement in energy efficiency that is technologically feasible and economically justified—a requirement found in 42 U.S.C. 6295(o).

Id.

As such, DOE's review and analysis of the Joint Agreement is limited to whether the recommended standards satisfy the criteria in 42 U.S.C. 6295(o).

B. Background

1. Current Standards

In a direct final rule published on October 28, 2016 (“October 2016 Final Rule”), DOE prescribed the current energy conservation standards for MREFs manufactured on and after October 28, 2019. 81 FR 75194. These standards are set forth in DOE's regulations at 10 CFR 430.32(aa)(1)-(2). These standards are consistent with a negotiated term sheet submitted to DOE by interested parties representing manufacturers, energy and environmental advocates, and consumer groups.

19

19

The negotiated term sheets are available in docket ID EERE-2011-BT-STD-0043 on

www.regulations.gov.

2. Current Test Procedures

On October 12, 2021, DOE published a test procedure final rule (“October 2021 TP Final Rule”) amending the test procedure for MREFs, at appendix A. 86 FR 56790. The test procedure amendments included adopting the latest version of the relevant industry standard published by the Association of Home Appliance Manufacturers (“AHAM”), updated in 2019, AHAM Standard HRF-1, “Energy and Internal Volume of Refrigerating Appliances” (“HRF-1-2019”). 10 CFR 430.3(i)(4). The standard levels adopted in this direct final rule are based on the annual energy use (“AEU”) metrics as measured according to appendix A.

3. History of Standards Rulemaking for MREFs

On April 1, 2015, DOE published a notice announcing its intention to establish a negotiated rulemaking working group under the Appliance Standards Rulemaking Advisory Committee (“ASRAC”) to negotiate energy conservation standards for refrigeration products such as wine chillers. 80 FR 17355. DOE then created a working group of interested parties to develop a series of recommended energy conservation standards for MREFs. On July 18, 2016, DOE published the July 2016 Final Coverage Determination that added MREFs as covered products. 81 FR 46768. In that determination, DOE noted that MREFs, on average, consume more than 150 kilowatt hours per year (“kWh/yr”) and that the aggregate annual national energy use of these products exceeds 4.2 terawatt hours (“TWh”). 81 FR 46768, 46775. In addition to establishing coverage, the July 2016 Final Coverage Determination established definitions for “miscellaneous refrigeration products,” “coolers,” and “combination cooler refrigeration products” in 10 CFR 430.2. 81 FR 46768, 46791-46792.

On October 28, 2016, a negotiated term sheet containing a series of recommended standards and other related recommendations were submitted to ASRAC for approval and, subsequently, DOE published the October 2016 Direct Final Rule adopting energy conservation standards consistent with the recommendations contained in the term sheet. 81 FR 75194. Concurrent with the October 2016 Direct Final Rule, DOE published a NOPR in which it proposed and requested comments on the standards set forth in the direct final rule. 81 FR 74950. On May 26, 2017, DOE published a notice in the

Federal Register

in which it determined that the comments received in response to the October 2016 Direct Final Rule did not provide a reasonable basis for withdrawing the rule and, therefore, confirmed the adoption of the energy conservation standards established in that direct final rule. 82 FR 24214.

4. The Joint Agreement

On September

25, 2023, DOE received a joint statement of recommended standards (

i.e.,

the Joint Agreement) for various consumer products, including MREFs, submitted jointly by groups representing manufacturers, energy and environmental advocates, consumer groups, and a utility.

20

In addition to the recommended standards for MREFs, the Joint Agreement also included separate recommendations for several other covered products.

21

And, while acknowledging that DOE may implement these recommendations in separate rulemakings, the Joint Agreement also stated that the recommendations were recommended as a complete package and each recommendation is contingent upon the other parts being implemented. DOE understands this to mean that the Joint Agreement is contingent upon DOE initiating rulemaking processes to adopt all of the recommended standards in the agreement. That is distinguished from an agreement where issuance of an amended energy conservation standard for a covered product is contingent on issuance of amended energy conservation standards for the other covered products. If the Joint Agreement were so construed, it would conflict with the anti-backsliding provision in 42 U.S.C. 6295(o)(1), because it would imply the possibility that, if DOE were unable to issue an amended standard for a certain product, it would have to withdraw a previously issued standard for one of the other products. The anti-backsliding provision, however, prevents DOE from withdrawing or amending an energy conservation standard to be less stringent. As a result, DOE will be proceeding with individual rulemakings that will evaluate each of the recommended standards separately under the applicable statutory criteria. The Joint Agreement recommends amended standard levels for MREFs as presented in Table II.3. (Joint Agreement, No. 34 at p. 4) Details of the Joint Agreement recommendations for other products are provided in the Joint Agreement posted in the docket.

22

20

The signatories to the Joint Agreement include AHAM, American Council for an Energy-Efficient Economy, Alliance for Water Efficiency, Appliance Standards Awareness Project, Consumer Federation of America, Consumer Reports, Earthjustice, National Consumer Law Center, Natural Resources Defense Council, Northwest Energy Efficiency Alliance, and Pacific Gas and Electric Company. Members of AHAM's Major Appliance Division that manufacture the affected products include: Alliance Laundry Systems, LLC; Asko Appliances AB; Beko US Inc.; Brown Stove Works, Inc.; BSH; Danby Products, Ltd.; Electrolux Home Products, Inc.; Elicamex S.A. de C.V.; Faber; Fotile America; GEA, a Haier Company; L'Atelier Paris Haute Design LLG; LGEUSA; Liebherr USA, Co.; Midea America Corp.; Miele, Inc.; Panasonic Appliances Refrigeration Systems (PAPRSA) Corporation of America; Perlick Corporation; Samsung; Sharp Electronics Corporation; Smeg S.p.A; Sub-Zero Group, Inc.; The Middleby Corporation; U-Line Corporation; Viking Range, LLC; and Whirlpool.

21

The Joint Agreement contained recommendations for 6 covered products: refrigerators, refrigerator-freezers, and freezers; clothes washers; clothes dryers; dishwashers; cooking products; and miscellaneous refrigeration products.

22

The term sheet is available in the docket at:

www.regulations.gov/document/EERE-2020-BT-STD-0039-0034.

BILLING CODE 6450-01-P

ER07MY24.007

BILLING CODE 6450-01-C

When the Joint Agreement was submitted, DOE was conducting a rulemaking to consider amending the standards for MREFs. As part of that process, DOE published a NOPR and announced a public meeting on March 31, 2023 (“March 2023 NOPR”) seeking comment on its proposed amended standards to inform its decision consistent with its obligations under EPCA and the Administrative Procedure Act (“APA”). 88 FR 19382. DOE held a public webinar on May 2, 2023, to discuss and receive comments on the March 2023 NOPR and NOPR TSD (“May 2, 2023, public meeting”). The NOPR TSD is available at:

www.regulations.gov/document/EERE-2020-BT-STD-0039-0026.

The March 2023 NOPR proposed amended standards defined in terms of the AEU metrics as measured according to appendix A.

Id.

at 88 FR 19383-19384.

Although DOE is adopting the Joint Agreement as a direct final rule and no longer proceeding with its prior rulemaking, DOE did consider relevant comments, data, and information obtained during that rulemaking process in determining whether the recommended standards from the Joint Agreement are in accordance with 42 U.S.C. 6295(o). Any discussion of comments, data, or information in this direct final rule that were obtained during DOE's prior rulemaking will include a parenthetical reference that provides the location of the item in the public record.

23

23

The parenthetical reference provides a reference for information located in the docket of DOE's rulemaking to develop energy conservation standards for MREFs. (Docket No. EERE-2020-BT-STD-0039, which is maintained at

www.regulations.gov

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

III. General Discussion

DOE is issuing this direct final rule after determining that the recommended standards submitted in the Joint Agreement meet the requirements in 42 U.S.C. 6295(p)(4). More specifically, DOE has determined that the recommended standards were submitted by interested persons that are fairly representative of relevant points of view and the recommended standards satisfy the criteria in 42 U.S.C. 6295(o).

A. Scope of Coverage

This direct final rule covers those consumer products that meet the definition of “miscellaneous refrigeration product,” as codified at 10 CFR 430.2, which states that it is a consumer refrigeration product other than a refrigerator, refrigerator-freezer, or freezer, which includes coolers and combination cooler refrigeration products.

The differences between miscellaneous refrigeration products and other consumer refrigeration products, which were addressed in a separate rulemaking for refrigerators, refrigerator-freezers, and freezers, are largely in compartment temperature capability. Refrigerators are broadly defined as a cabinet capable of maintaining a compartment temperature above 32 °F and below 39 °F. Freezers are broadly defined as a cabinet capable of maintaining compartment temperature of 0 °F or below. Refrigerator-freezers have two or more compartments, with one capable of maintaining compartment temperatures above 32 °F and below 39 °F (

i.e.,

a fresh food or refrigerator compartment), and the other capable of maintaining a compartment temperature of 8 °F with adjustability down to 0 °F or below (

i.e.,

a frozen food or freezer compartment). Miscellaneous refrigeration products generally include a cooler compartment that is incapable of maintaining the low temperatures achieved by refrigerators, refrigerator-freezers, and freezers.

Coolers (and cooler compartments) have temperature ranges that either extend no lower than 39 °F, or no lower than 37 °F but at least as high as 60 °F. Combination-coolers contain a fresh food and/or frozen food compartment in addition to one or more cooler compartments.

See

10 CFR 430.2 for more information regarding consumer refrigeration products definitions.

When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used, or by capacity, or based upon performance-related features that justify a higher or lower standard. (42 U.S.C. 6295(q)) 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. (

Id.

)

The Joint Agreement proposed approach for MREF product classes embeds within the energy use equations the difference between classes for MREFs that are otherwise identical except for presence of an icemaker, using a logical variable I (equal to 1 for a product with an icemaker and equal to 0 for a product without an icemaker) multiplied by the constant icemaker energy use adder.

The product class representation simplification in the Joint Agreement is consistent with what was proposed by DOE in the March 2023 NOPR. Based on the comments received in response to the March 2023 NOPR and DOE's evaluation of the Joint Agreement, this direct final rule adopts this change. See section IV.A.1 of this document for further detail and discussion regarding the product classes analyzed in this direct final rule.

B. Fairly Representative of Relevant Point of View

Under the direct final rule provision in EPCA, recommended energy conservation standards must be submitted by interested persons that are fairly representative of relevant points of view (including representatives of manufacturers of covered products, States, and efficiency advocates) as determined by DOE. (42 U.S.C. 6295(p)(4)(A)) With respect to this requirement, DOE notes that the Joint Agreement included a trade association, AHAM, which represents 15 manufacturers of MREFs.

24

The Joint Agreement also included environmental and energy-efficiency advocacy organizations, consumer advocacy organizations, and a gas and electric utility company. As a result, DOE has determined that the Joint Agreement was submitted by interested persons who are fairly representative of relevant points of view. Additionally, DOE received a letter in support of the Joint Agreement from the States of New York, California, and Massachusetts. (See NYSERDA, et al., No. 35 at p. 2) DOE also received a letter in support of the Joint Agreement from the gas and electric utility, SDG&E, and the electric utility, SCE (See SDG&E, et al., No. 36 at p. 1).

24

Manufacturers listed in the Joint Agreement include: Asko Appliances AB, BSH Home Appliances Corporation, Danby Products, Ltd., Electrolux Home Products, Inc, GE Appliances, a Haier Company, Liebherr USA, Co., Electronics America Inc., LG Electronics, Midea America Corp., Miele, Inc., Panasonic Appliances Refrigeration Systems (PAPRSA) Corporation of America, Smeg S.p.A, Sub-Zero Group, Inc., The Middleby Corporation (listed with subsidiaries U-Line Corporation and Viking Range, LLC).

C. Technological Feasibility

1. General

In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or equipment that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially available products or in working prototypes to be technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A to 10 CFR part 430, subpart C (“Process Rule”).

After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; (3) adverse impacts on health or safety and (4) unique-pathway proprietary technologies. Sections 7(b)(2)-(5) of the Process Rule. Section IV.B of this document discusses the results of the screening analysis for MREFs, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the direct final rule TSD.

2. Maximum Technologically Feasible Levels

When DOE proposes to adopt a new or amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such product. (42 U.S.C. 6295(o)(2)(A)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (“max-tech”) improvements in energy efficiency for MREFs, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this rulemaking are described in section IV.C of this document and in chapter 5 of the direct final rule TSD.

D. Energy Savings

1. Determination of Savings

For each TSL, DOE projected energy savings from application of the TSL to MREFs purchased in the 30-year period that begins in the year of compliance with the amended standards (2029-2058).

25

The savings are measured over the entire lifetime of products purchased in the 30-year analysis period. DOE quantified the energy savings attributable to each TSL as the difference in energy consumption between 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.

25

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

DOE used its national impact analysis (“NIA”) spreadsheet models to estimate national energy savings (“NES”) from potential amended standards for MREFs. The NIA spreadsheet model (described in section IV.H of this document) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy savings in terms of primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. For natural gas, the primary energy savings are considered to be equal to the site energy savings. DOE also calculates NES in terms of FFC energy savings. The FFC metric includes the energy consumed in

extracting, processing, and transporting primary fuels (

i.e.,

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

26

DOE's approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products or equipment. For more information on FFC energy savings, see section IV.H.2 of this document.

26

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

2. Significance of Savings

To adopt any new or amended standards for a covered product, DOE must determine that such action would result in significant energy savings. (42 U.S.C. 6295(o)(3)(B))

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, taking into account the significance of cumulative FFC national energy savings, the cumulative FFC emissions reductions, and the need to confront the global climate crisis, among other factors.

As stated, the standard levels adopted in this direct final rule are projected to result in national energy savings of 0.32 quads (FFC), the equivalent of the primary annual energy use of 2.1 million homes. Based on the amount of FFC savings, the corresponding reduction in emissions, and need to confront the global climate crisis, DOE has determined the energy savings from the standard levels adopted in this direct final rule are “significant” within the meaning of 42 U.S.C. 6295(o)(3)(B).

E. Economic Justification

1. Specific Criteria

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

a. Economic Impact on Manufacturers and Consumers

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

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

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

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

The LCC is the sum of the purchase price of a product (including its installation) and the operating cost (including energy, maintenance, and repair expenditures) discounted over the lifetime of the product. The LCC analysis requires a variety of inputs, such as product prices, product energy consumption, energy prices, maintenance and repair costs, product lifetime, and discount rates appropriate for consumers. To account for uncertainty and variability in specific inputs, such as product lifetime and discount rate, DOE uses a distribution of values, with probabilities attached to each value.

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

For its LCC and PBP analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with new or amended standards. The LCC savings for the considered efficiency levels are calculated relative to the case that reflects projected market trends in the absence of new or amended standards. DOE's LCC and PBP analysis is discussed in further detail in section IV.F of this document.

c. Energy Savings

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

d. Lessening of Utility or Performance of Products

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

e. Impact of Any Lessening of Competition

EPCA directs DOE to consider the impact of any lessening of competition, as determined in writing by the

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

Federal Register

in a separate notice.

f. Need for National Energy Conservation

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

DOE finds that environmental and public health benefits associated with the more efficient use of energy are important to take into account when considering the need for national energy conservation. The adopted standards are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases (“GHGs”) associated with energy production and use. DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.K of this document; the estimated emissions impacts are reported in section V.B.6 of this document. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L of this document.

g. Other Factors

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

2. Rebuttable Presumption

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

IV. Methodology and Discussion of Related Comments

This section addresses the analyses DOE has performed for this rulemaking with regard to MREFs. Separate subsections address each component of DOE's analyses, including relevant comments DOE received in its separate rulemaking to amend the energy conservation standards for MREFs prior to receiving the Joint Agreement.

DOE used several analytical tools to estimate the impact of the standards considered in this document. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential amended energy conservation standards. The national impacts analysis uses a second spreadsheet set that provides shipments projections and calculates national energy savings and net present value of total consumer costs and savings expected to result from potential energy conservation standards. DOE uses the third spreadsheet tool, the Government Regulatory Impact Model (“GRIM”), to assess manufacturer impacts of potential standards. These three spreadsheet tools are available on the DOE website for this rulemaking:

www.regulations.gov/docket/EERE-2020-BT-STD-0039.

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

Annual Energy Outlook

(“

AEO

”) for the emissions and utility impact analyses.

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 rulemaking include (1) a determination of the scope of the rulemaking 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 MREFs. The key findings of DOE's market assessment are summarized in the following sections. See chapter 3 of the direct final rule TSD for further discussion of the market and technology assessment.

1. Product Classes

The Joint Agreement specifies 11 product classes for MREFs. (Joint Agreement, No. 34 at p. 7) In particular, the Joint Agreement recommends a consolidated product class representation, which incorporates icemaker energy adders and door allowances into the energy use equations for product classes in which they are applicable. As discussed further in section IV.A.1.a of this document, DOE notes that the consolidation of product class representation in the Joint Agreement does not combine the product classes, but rather serves to simplify the list of classes, in particular for those product classes with and without icemakers, and facilitates the implementation of a single equation for representation of their maximum allowable energy use. In this direct final rule, DOE is adopting the product classes from the Joint Agreement, as listed in Table IV.1.

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DOE further notes that product classes established through EPCA's direct final rule authority are not subject to the criteria specified at 42 U.S.C. 6295(q)(1) for establishing product classes. Nevertheless, in accordance with 42 U.S.C. 6295(o)(4)—which is applicable to direct final rules—DOE has concluded that the standards adopted in this direct final rule will not result in the unavailability in any covered product type (or class) of performance characteristics, features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States currently.

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DOE's findings in this regard are discussed in detail in section V.B.4 of this document.

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EPCA specifies that DOE may not prescribe an amended or new standard if the Secretary finds (and publishes such finding) that interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States in any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States at the time of the Secretary's finding. (42 U.S.C. 6295(o)(4))

a. Product Classes With Automatic Icemakers

The Joint Agreement includes a proposed simplification of maximum allowable energy and expresses the maximum allowable energy use for both icemaking and non-icemaking classes in the same equation, thus consolidating the presentation of classes and their energy conservation standards. The energy use equations will, for those classes that may or may not have an icemaker, include a term equal to the icemaking energy use adder multiplied by a factor that is defined to equal 1 for products with icemakers and to equal 0 for products without icemakers. This approach does not combine classes that are the same other than the presence of an icemaker but does simplify the list of classes and representation of their maximum allowable energy use, providing for each set of classes with and without ice makers a single equation for maximum energy use. This simplification is consistent with the approach proposed in the March 2023 NOPR.

See

88 FR 19382, 19395.

In this direct final rule, DOE is adopting the Joint Agreement proposal to express the maximum allowable energy use for any set of classes differing only in whether the class includes an icemaker or not within a single equation. The single equation does this by including the icemaker energy use adder multiplied by logical variable I that is set equal to 1 for a product with an icemaker present and 0 for a product without an icemaker.

b. Addition of Product Class C-5-BI

The Joint Agreement recommends the addition of a new product class C-5-BI (

i.e.,

built-in combination cooler-refrigerator-freezers with bottom-mounted freezers and automatic icemakers) and specific energy efficiency standards for the new product class (“PC”). (Joint Agreement, No. 34 at p. 7) The current energy conservation standards for MREFs do not include a separate product class for products of this configuration. However, DOE has previously proposed establishing a separate product class for C-5-BI configurations in the March 2023 NOPR, with a baseline level of 6.08AV + 246 kWh/yr, based in part on input from commenters, and considered increased efficiency levels using PC C-3A-BI as a proxy. 88 FR 19382, 19395.

The Joint Agreement recommends a standard equation of 5.47AV + 196.2 + 28I kWh/yr for product class C-5-BI. DOE notes that this recommended level is consistent with the level proposed in the March 2023 NOPR for product class C-5-BI, which represents a 10 percent more stringent level than the baseline level identified in the March 2023 NOPR.

Considering that the recommendation is consistent with the proposed level in the March 2023 NOPR and carries support from a broad cross-section of interests, including trade associations representing these manufactures, environmental and energy-efficiency advocacy organizations, consumer advocates, and electric utility providers as well as the support of several States, DOE believes it appropriate to adopt this new product class, C-5-BI, and the recommended standard equation. DOE's direct rulemaking authority under 42 U.S.C. 6295(p)(4) is constrained only by the requirements of 42 U.S.C. 6295(o), which does not include the product class requirements in 42 U.S.C. 6295(q). However, DOE notes that the addition of a PC C-5-BI is warranted as the application of bottom-mounted freezer and icemaker on a built-in cooler with refrigerator-freezer provides consumers the utility of storage compartments at freezing, fresh food, and cooler temperature levels, whereas the current classes combine a cooler compartment with either a freezer or fresh food compartment, but not both. In addition, establishing separate classes of this configuration both with and without automatic icemaking addresses the unique utility of icemaking that may be

included as part of the product. As a result of this additional utility, the application of a bottom-mounted freezer and icemaker constitutes a performance related feature.

Given the indication from the Joint Agreement that such a product class standard would be beneficial in its implementation, the classification of a bottom-mounted freezer and icemaker as performance related features, and the recommendation's consistency with the other adopted standards, DOE is adopting a PC C-5-BI standard in this direct final rule.

See section V of this document for more information regarding the TSL configuration and discussion of the adopted level for this product class. See chapter 5 of the direct final rule TSD for more discussion regarding the addition of this product class.

2. Technology Options

In the preliminary market analysis and technology assessment, DOE identified 36 technology options initially determined to improve the efficiency of MREFs, as measured by the DOE test procedure. In this direct final rule, DOE considered the technology options listed in Table IV.2, consistent with the table of technology options presented in the March 2023 NOPR. 88 FR 19382, 19395-19396. Chapter 3 of the direct final rule TSD includes a detailed list and descriptions of all technology options identified for MREFs.

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B. 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 sum, 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. The reasons for eliminating any technology are discussed in the following sections.

The subsequent sections include DOE's evaluation of each technology option against the screening analysis criteria and whether DOE determined that a technology option should be excluded (“screened out”) based on the screening criteria.

1. Screened-Out Technologies

In this direct final rule, DOE screened out the technologies presented in Table IV.3 on the basis of technological feasibility, practicability to manufacture, install, and service, adverse impacts on utility or availability, adverse impacts on health and safety, and/or unique-pathway proprietary technologies. Chapter 4 of the direct final rule TSD includes a detailed description of the screening analysis for each of these technology options.

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2. Remaining Technologies

Through a review of each technology, DOE concludes that all of the other identified technologies listed in section IV.B.2 of this document met all five screening criteria to be examined further as design options in DOE's direct final rule analysis. In summary, DOE did not screen out the following technology options:

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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, and service and do not result in adverse impacts on consumer utility, product availability, health, or safety). For additional details, see chapter 4 of the direct final rule TSD.

C. Engineering Analysis

The purpose of the engineering analysis is to establish the relationship between the efficiency and cost of MREFs. There are two elements to consider in the engineering analysis; the selection of efficiency levels to analyze (

i.e.,

the “efficiency analysis”) and 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/equipment at efficiency levels above the baseline. 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 (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).

The approach used for this direct final rule to define the efficiency levels for analysis is largely the same as the approach DOE had used for the March 2023 NOPR analysis.

For its analysis in this direct final rule, DOE used a combined efficiency level and design option approach to directly analyze five products classes: freestanding compact coolers, freestanding coolers, and combination cooler classes C-13A, C-3A, and C-9. First, an efficiency-level approach was used to establish an analysis tied to existing products on the market. Several products from the cooler class (compact and standard size) and one product from the combination cooler class (C-13A) were used in physical teardowns. Additional analyses were conducted on classes C-3A and C-9; however, a lack of physical teardown products for these classes led DOE to rely heavily on adjusted analyses from the consumer refrigerator, refrigerator-freezer, and freezers (“RF”) classes 3 and 9, respectively. Then, a design option approach was used to extend the analysis through “built-down” efficiency levels and “built-up” efficiency levels where there were gaps in the range of efficiencies of products that were reverse engineered. As discussed in the section that follows, DOE applied its direct analyses of freestanding products to the corresponding built-in product classes. DOE's direct analysis informed the adopted standards for those product classes that were not directly analyzed. See section 5.4.1 of the direct final rule TSD for more discussion on DOE's efficiency analysis.

a. Built-in Classes

In this direct final rule analysis, DOE used the freestanding MREF classes as proxies for built-in classes. DOE conducted analysis of the current market for miscellaneous refrigeration products and found that built-in and freestanding products occupy the same range of efficiencies, and DOE did not identify any unique characteristic that would inhibit efficiency improvements for built-in products relative to freestanding products based on a review on the market. As a result, DOE chose to apply its freestanding products analyses to built-in classes.

In response to the March 2023 NOPR, AHAM and Sub-zero Group Inc. (“Sub-zero”) argued that freestanding product classes are not a proxy for built-in product classes and DOE should evaluate them separately. (AHAM, No. 31 at p. 6; Sub-zero, No. 30 at p. 1) AHAM and Sub-zero stated that built-in products have constraints, such as incorporation into kitchen designs and needing to be flush with cabinetry, that affect that the technology options for achieving higher efficiency levels. (AHAM, No. 31 at pp. 6-7; Sub-zero, No. 30 at p. 2) AHAM and Sub-Zero also stated that different testing requirements for built-ins (

e.g.,

two inches or less of rear clearance for freestanding products as opposed to no rear clearance for built-in products) creates inherent design differences between the freestanding and built-in products.

Id.

AHAM and Sub-zero encouraged DOE to revise its analysis to separately analyze freestanding and built-in products, contending that these products are fundamentally different. (AHAM, No. 31 at p. 7; Sub-zero, No. 30 at p. 2)

As discussed in section IV.C.1.c of this document, the efficiency levels analyzed for this direct final rule represent a percentage reduction in energy use below the currently applicable standard for each product class. DOE's analysis of the freestanding product classes as a proxy for the built-in product classes does not presume that the two product types have the same nominal costs at each higher efficiency level, but rather reflects that

incremental

design changes associated with reducing energy use on a percentage basis—relative to the currently applicable standard for each respective product type—are substantially similar between freestanding and built-in products. To reflect the inherent design differences between built-in products compared to free-standing products, as described by commenters, DOE applied a $30, $50, or $150 adder (depending on product size) to the baseline costs for the built-in product classes compared to their freestanding counterparts.

See

chapter 5 of the direct final rule TSD for further details regarding the engineering analysis conducted for each product class.

b. Baseline Efficiency/Energy Use

For each product class, DOE generally selects a baseline model as a reference point for each class, and measures changes resulting from potential energy conservation standards against the baseline. The baseline model in each product class represents the characteristics of a product/equipment 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. When selecting units for the analysis, DOE selects units at baseline from various manufacturers for each directly analyzed product class.

For this direct final rule, DOE chose baseline efficiency levels represented by the current Federal energy conservation standards, expressed as maximum annual energy consumption as a function of the product's adjusted volume. The baseline levels differ for coolers and combination coolers to account for design differences; all coolers share the same baseline level,

i.e.,

the baseline is the same function of adjusted volume for both freestanding and built-in models, for both compact and standard-size models. The current standards incorporate an allowance of a constant 84 kWh/yr icemaker adder for product classes with automatic icemakers, consistent with the current test procedure, which requires adding this amount of annual energy use to the products tested performance if the product has an automatic icemaker. DOE adjusted the baseline energy usage levels for each class to account for the planned revision in the test procedure to reduce the icemaker energy use adder to 28 kWh/yr.

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See the October 12, 2021, test procedure final rule for refrigeration products for more information regarding the adoption of the 28 kWh/yr icemaker adder. 86 FR 56790.

DOE directly analyzed a sample of market representative models from within five product classes from multiple manufacturers. Directly analyzed classes include three different AV coolers (AVs of 3 ft

3

, 5 ft

3

, and 15 ft

3

) and three combination cooler classes (C-13A, C-9 and C-3A). In conducting these analyses, eight teardown units were used in construction of cost curves, and their characteristics were determined in large part by testing and reverse-engineering. Further information on the design characteristics of specific analyzed baseline models is summarized in section 5.4.1 of the direct final rule TSD.

c. Higher 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.

For this direct final rule, DOE analyzed up to five incremental efficiency levels beyond the baseline for each of the analyzed product classes. The efficiency levels begin at EL 1, which was 10 percent more efficient than the current MREF energy conservation standards. For the compact coolers analysis, DOE extended the efficiency levels in steps of 10 percent of the current energy conservation standard up to EL 4 at 40 percent; for full-size coolers, EL 4 is analyzed at 35 percent. For combination coolers (excluding C-9) efficiency levels above EL 1 are in steps of roughly 5 percent up to EL 4. Finally, EL 5 represents maximum technology (“max-tech”), which uses design option analysis to extend the analysis beyond EL 4 by using all applicable design options, including max efficiency variable-speed compressors and maximum practical use of vacuum-insulated panels (“VIPs”). For compact coolers, max tech stands at either 59 percent or 50 percent for the two directly analyzed AVs—3.1 ft

3

and 5.1 ft

3

respectively; full-size coolers max-tech stands at 38 percent. For combination coolers C-13A and C-3A, max tech stands at 28 percent and 24 percent, respectively.

DOE conducted analysis for product class C-9 starting with analysis for a class 9 upright freezer with comparable total refrigerated volume. In its analysis, DOE concluded that application of all of the design options being considered at max-tech would be required for the product to be compliant with the current energy conservation standards. Currently, the Compliance Certification Database (“CCD”) includes only one product that is certified as C-9—an LG product certified with energy use 17 percent below the standard. DOE did not purchase, test, and reverse-engineer this product, in-part because of the limited product offering and expected insignificant potential for energy savings for the class. Thus, DOE is relying primarily on its analysis of the RF product class 9 freezer, to suggest that opportunities for energy savings are likely limited and likely not cost-effective, even if improved efficiency is technically feasible. DOE has not analyzed efficiency levels beyond baseline for this product class in this direct final rule but has taken into consideration all design options applied at max-tech in its analysis.

DOE notes the current Energy Star specifications correspond to EL 1 for freestanding full-size coolers (10 percent), EL 2 for freestanding compact coolers (20 percent), and EL 3 for both classes of built-in coolers (30 percent).

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29

See EnergyStar, “Refrigerators & Freezers Key Product Criteria,” Available at

www.energystar.gov/products/appliances/refrigerators/key_product_criteria

(last accessed July 14, 2023).

The efficiency levels analyzed beyond the baseline are shown in Table IV.5 as follows.

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d. Variable-Speed Compressor Supply Chain

In response to the March 2023 NOPR, AHAM suggested that DOE evaluate the robustness of the supply chains for variable-speed compressors (“VSCs”) while considering the growing demand given more stringent standards for cooling appliances, including both air conditioning and refrigeration. (AHAM, No. 31 at p. 5)

In considering this comment and comments provided in response to the RF rulemaking, DOE interviewed relevant compressor manufacturers to gather information regarding the level of VSC implementation that would be required at the efficiency levels analyzed in this direct final rule, the current and predicted supply of VSCs into the U.S. market, the predicted time to ramp up production of VSCs, and pricing of VSCs and components. None of the compressor manufacturers interviewed expressed any concerns regarding the ability to ramp-up VSC capacity in response to more stringent MREF standards. Compressor manufacturers additionally noted that any previous bottlenecks in the VSC supply chain are no longer a factor at this time, and that they have been modifying sourcing strategies to ensure a reliable supply of VSCs going forward. DOE concluded from these interviews that compressor manufacturers will be able to readily meet any increased demand for VSCs as a result of the adopted standards within the 5-year

timeframe between publication of this direct final rule and the compliance date. DOE further notes that the amended standards adopted in this final rule reflect the recommendations of the Joint Agreement, of which AHAM was a signatory.

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, 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 (for example, for tightly integrated products such as fluorescent lamps, which are infeasible to disassemble and for which parts diagrams are unavailable) or cost-prohibitive and 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 primarily physical teardowns. Where possible, physical teardowns were used to provide a baseline of technology options and pricing for a specific product class at a specific EL. Then with technology option information, DOE estimated the cost of various design options including compressors, VIPs, and insulation, by extrapolating the costs from price surveys. With specific costs for technology options, DOE was then able to “build-up” or “build-down” from the various teardown models to finish the cost-efficiency curves. DOE used this approach to calibrate the analysis to certified or measured energy use of specific available models where possible, while allowing a broader range of potential efficiency levels to be considered.

The resulting bill of materials provides the basis for the manufacturer production cost (“MPC”) estimates.

To account for manufacturers' non-production costs and profit margin, DOE applies a 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 corporate annual reports and Securities and Exchange Commission (“SEC”) 10-K reports

30

filed by publicly traded manufacturers in primarily engaged in appliance manufacturing and whose combined product range includes MREFs. DOE then compared the manufacturer markups derived from the financials to the manufacturer markups estimated in the October 2016 Direct Final Rule. 81 FR 75194, 75224-75225. See chapter 12 of the direct final rule TSD for additional detail on the manufacturer markup.

30

U.S. Securities and Exchange Commission, Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Available at

www.sec.gov/edgar/search/

(last accessed January 30, 2024).

3. Cost-Efficiency Results

The results of the engineering analysis are reported as cost-efficiency data (or “curves”) in the form of AEU (in kWh) versus MPC (in dollars), which form the basis for subsequent analyses.

DOE developed estimates of MPCs for each unit in the teardown sample, and also performed additional modeling for each of the teardown samples, to extend the analysis to cover the range of efficiency levels appropriate for a representative product. To estimate the MPCs necessary to achieve higher efficiency levels, in particular those beyond the highest-efficiency products in the test sample, DOE considered design options that were most likely to be considered and implemented by manufacturers to achieve the higher efficiency levels. Based on input from manufacturers and an understanding of the markets, DOE then estimated the costs associated with those design options to determine the MPCs at each of the analyzed efficiency levels.

The resulting weighted average incremental design option by efficiency level and cost curves for each directly analyzed product class are (

i.e.,

the additional costs manufacturers would likely incur by producing miscellaneous refrigeration products at each efficiency level compared to the baseline) are provided in Tables IV.6 and IV.7 as follows. See chapter 5 of the direct final rule TSD for additional detail on the engineering analysis and formulation of cost curves.

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D. 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.

For MREFs, DOE identified two distribution channels: (1) manufacturers to retailers to consumers, and (2) manufacturers to wholesalers to dealers/retailers to consumers. The parties involved in the distribution channel are retailers, wholesalers, and dealers.

DOE developed baseline and incremental markups for each actor in the distribution chain. 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.

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31

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.

DOE relied on economic data from the U.S. Census Bureau to estimate average baseline and incremental markups. Specifically, DOE used the 2017 Annual Retail Trade Survey for the “electronics and appliance stores” sector to develop retailer markups,

32

and the 2017 Annual Wholesaler Trade Survey for the “household appliances, and electrical and electronics goods merchant wholesalers” sector to estimate wholesaler markups.

33

For the wholesaler to dealer/retailer channel, DOE assumed that the dealer markups are half of the retailer markups in the retailer channel.

32

U.S. Census Bureau,

Annual Retail Trade Survey.

2017. Available at

www.census.gov/programs-surveys/arts.html.

33

U.S. Census Bureau,

Annual Wholesale Trade Survey.

2017. Available at

www.census.gov/awts.

For this direct final rule, DOE considered comments it had received regarding the markups analysis conducted for the March 2023 NOPR. The approach used for this direct final rule is largely the same as the approach DOE had used for the March 2023 NOPR analysis.

In response to the March 2023 NOPR, AHAM commented on DOE's reliance on the concept of incremental markups, stating that it is based on discredited theory, and it is in contradiction to empirical evidence provided by AHAM during a 2014 proposed rulemaking for energy conservation standards for residential dishwashers. (AHAM, No. 31 at p. 9)

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 due to higher efficiency standards, is unlikely to be viable over time in a reasonably competitive market like household appliance retailers. The Herfindahl-Hirschman Index (“HHI”) reported by the 2017 Economic Census indicates that the household appliance stores sector (NAICS 443141) is a highly competitive marketplace.

34

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 selling 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.

34

2017 Economic Census, Selected sectors: Concentration of largest firms for the U.S. Available at

www.census.gov/data/tables/2017/econ/economic-census/naics-sector-44-45.html.

The Herfindahl-Hirschman Index value can be found by navigating to the “Concentration of largest firms for the U.S.” table and then filtering the industry code to NAICS 443141.The Herfindahl-Hirschman Index reported for the largest 50 firms in household appliance stores sector, is 123.8. Generally, a market with an HHI value of under 1,000 is considered to be competitive.

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 and isolate the effect of amended standards from other factors. Obtaining data on markup practices in the situation described previously is very challenging. Hence, DOE continues to maintain that its assumption that standards do not facilitate a sustainable increase in profitability is reasonable.

Chapter 6 of the direct final rule TSD provides details on DOE's development of markups for MREFs.

E. Energy Use Analysis

The purpose of the energy use analysis is to determine the annual energy consumption of MREFs at different efficiencies in representative U.S. households, and to assess the energy savings potential of increased MREF efficiency. The energy use analysis estimates the range of energy use of MREFs 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 energy savings and the savings in consumer operating costs that could result from adoption of amended or new standards.

DOE determined a range of annual energy use of MREFs as a function of unit volume. As shown in Table IV.8, DOE developed distributions of adjusted volume of product classes with more than one representative unit base on the capacity distributions reported in the TraQline® wine chiller data spanning from 2020 Q1 to 2022 Q1.

35

DOE also developed a sample of households that use MREFs based on the TraQline wine chiller data (see section IV.F of this document for details). For each volume and considered efficiency level, DOE derived the energy consumption as measured by the DOE MREF test procedure at appendix A.

35

TraQline is a market research company that specialized in tracking consumer purchasing behavior across a wide range of products using quarterly online surveys.

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For this direct final rule, DOE considered comments it had received regarding the energy use analysis conducted for the March 2023 NOPR. The approach used for this direct final rule is largely the same as the approach DOE had used for the March 2023 NOPR analysis.

In response to the March 2023 NOPR, AHAM commented that DOE relies heavily on the EIA's Residential Energy Consumption Survey (“RECS”) data for estimating energy use and how consumption varies at the household level. Specifically, AHAM expressed concern that the use of RECS data to estimate energy consumption at the household level may introduce “outlier values,” resulting in uncertainty and inaccuracies (AHAM, No. 31 at p. 11) In this direct final rule, as well as in the March 2023 NOPR, DOE did not tie the energy consumption of MREFs to RECS survey data. 87 FR 35678. No household or demographic information from RECS was used in the energy use analysis for MREFs. Instead, as mentioned above, DOE used the TraQline wine chiller data to develop a sample of households representing MREF purchasers and derived the energy consumption of MREFs as measured by the DOE MREF test procedure. DOE further notes that AHAM is a party to the Joint Agreement and is supportive of the recommended standards adopted in this direct final rule.

Chapter 7 of the direct final rule TSD provides details on DOE's energy use analysis for MREFs.

F. 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 MREFs. 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:

□ The 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.

□ The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a more-efficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost 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 MREFs 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 this direct final rule, DOE considered comments it had received regarding the LCC analysis conducted for the March 2023 NOPR. The LCC approach used for this direct final rule is largely the same as the approach DOE had used for the March 2023 NOPR analysis.

During the May 2, 2023, public meeting, Edison Electric Institute (“EEI”) questioned the cost-effectiveness of the proposed TSL (TSL 4), due to the high percentage of consumers experiencing a net LCC cost and the simple payback period results ranging from 6.8 to 8 years, and urged DOE to consider selecting another TSL that may be more cost-effective for consumers. (May 2, 2023, Public Meeting Transcript, No. 33 at pp. 5-6). In response, DOE notes that when deciding whether a proposed standard is economically justified, DOE determines whether the benefits of the standard exceed its burdens by considering the seven statutory factors discussed in section II.A of this document. DOE considered the seven statutory factors when evaluating the Recommended TSL in the Joint Agreement. As discussed in section V.C.1 of this document, overall, the LCC savings would be positive for all MREF product classes, and, while 43.7 percent of MREF consumers would experience a net cost, slightly more than half of MREF consumers would experience a net benefit (52.9 percent). DOE provides a detailed comparative discussion and rigorous justification on the adopted

TSL (the Recommended TSL) in section V.C.1 of this document.

For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of MREF purchasers. As stated previously, DOE developed purchaser samples based on TraQline wine chiller survey data. The survey panel is weighted against the U.S. Census based on their demographic characteristics to make the sample representative of the U.S. population. The wine chiller survey asked respondents about the product features of the wine chillers they recently purchased, as well as the purchasing channel of the products. To account for the more recent MREF consumers, DOE used the last 2 years of survey data (2020 Q1 to 2022 Q1) to construct the household sample used in this direct final rule.

For each sample purchaser, DOE determined the energy consumption for the MREFs and the appropriate energy price. By developing a representative sample of purchasers, the analysis captured the variability in energy consumption and energy prices associated with the use of MREFs.

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—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. DOE created distributions of values for product lifetime, discount rates, and sales taxes, with probabilities attached to each value, to account for their uncertainty and variability.

The computer model DOE uses to calculate the LCC 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 MREF user samples. The model calculated the LCC for products at each efficiency level for 10,000 MREF purchasers 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 calculation reveals that a consumer is not impacted by the standard level. By accounting for consumers who already purchase more-efficient products, DOE avoids overstating the potential benefits from increasing product efficiency.

DOE calculated the LCC for consumers of MREFs as if each were to purchase a new product in the first year of required compliance with amended standards. As discussed earlier in this document, the compliance date of amended standards is January 31, 2029, for TSL 4 (the Recommended TSL detailed in the Joint Agreement). For all other TSLs considered in this direct final rule, standards apply to MREFs manufactured 5 years after the date on which any amended standard is published. (42 U.S.C. 6295(l)(2)) Therefore, DOE used 2029 as the first year of compliance with any amended standards for MREFs for all TSLs.

Table IV.9 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the direct final rule TSD and its appendices.

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In response to the March 2023 NOPR, AHAM commented that should be conducting a purchase decision analysis in its LCC model to reflect the actual conditions and expectations of the purchaser rather than relying on an outcome modeling approach. (AHAM, No. 31 at pp. 8-9) In the current setup of LCC analysis, DOE is not explicitly modeling the purchase decision made by purchasers when the standard becomes effective. DOE's analysis is intended to model the range of individual outcomes likely to result from a hypothetical amended energy

conservation standard at various levels of efficiency. DOE does not discount the consumer decision theory established in the broad behavioral economics field but rather notes that its methodological decision was made after considering the existence of various systematic market failures and their implication in rational versus actual purchase behavior. Furthermore, the outcome of the LCC is not considered in isolation, but in the context of the broader set of analyses, including the NIA. Moreover, the type of data required to facilitate a robust consumer choice modeling of a specific household appliance at the individual household level is currently lacking and AHAM did not provide much data. DOE further notes that AHAM is a party to the Joint Agreement and is supportive of the recommended standard adopted in this direct final rule.

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.

Economic literature and historical data suggest that the real costs of many products may trend downward over time according to “learning” or “experience” curves. Experience curve analysis implicitly includes factors such as efficiencies in labor, capital investment, automation, materials prices, distribution, and economies of scale at an industry-wide level.

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In the experience curve method, the real cost of production is related to the cumulative production or “experience” with a manufactured product. As MREFs use similar technologies to RF, DOE applied the same experience curve developed for RF to MREFs. DOE used inflation-adjusted historical Producer Price Index (“PPI”) data for “household refrigerator and home freezer manufacturing” from the Bureau of Labor Statistics' (“BLS”) spanning the time period between 1981 and 2022,

37

along with the cumulative production of RF to derive the experience curve. The estimated learning rate (defined as the fractional reduction in price expected from each doubling of cumulative production) is 39.4 ± 1.9 percent.

36

Taylor, M. and Fujita, K.S. Accounting for Technological Change in Regulatory Impact Analyses:

The Learning Curve Technique.

LBNL-6195E. Lawrence Berkeley National Laboratory, Berkeley, CA. April 2013. Available at

escholarship.org/uc/item/3c8709p4#page-1.

37

Household refrigerator and home freezer manufacturing PPI series ID: PCU3352203352202. Available at

www.bls.gov/ppi/.

DOE included variable-speed compressors as a technology option for higher efficiency levels. To develop future prices specific for that technology, DOE applied a different price trend to the controls portion of the variable-speed compressor, which represents part of the price increment when moving from an efficiency level achieved with the highest efficiency single-speed compressor to an efficiency level with variable-speed compressor. DOE used PPI data on “semiconductors and related device manufacturing” between 1967 and 2022 to estimate the historic price trend of electronic components in the control.

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The regression, performed as an exponential trend line fit, results in an R-square of 0.99, with an annual price decline rate of 6.3 percent. See chapter 8 of the TSD for further details on this topic.

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Semiconductors and related device manufacturing PPI series ID: PCU334413334413. Available at

www.bls.gov/ppi/.

In response to the March 2023 NOPR, AHAM commented that there is no theoretical underpinning for the implementation of an experience or learning curve and the functional form it should take. In addition, AHAM stated that the data that DOE used merely represents an empirical relationship, and a clear connection between the actual products in question and the data used needs to be made. AHAM noted that there is little reason to support the concept that price learning through manufacturing efficiencies should extend beyond the labor and materials in the product itself, and that such a relationship should not hold for other cost components. (AHAM, No. 31 at p. 10)

DOE notes that there is considerable empirical evidence of consistent price declines for appliances in the past few decades. Several studies examined retail prices of a wide range of household appliances during different periods of time and showed that prices had been steadily falling while efficiency had been increasing, for example Dale,

et al.

(2009)

39

and Taylor,

et al.

(2015).

40

As mentioned in Taylor and Fujita (2013),

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Federal agencies have adopted different approaches to account for “the changing future compliance costs that might result from technological innovation or anticipated behavioral changes.” Given the limited data availability on historical manufacturing costs broken by different components, DOE utilized the PPI published by the BLS as a proxy for manufacturing costs to represent the analyzed product as a whole.

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While products may experience varying degrees of price learning during different product stages, given that MREFs share similar cooling technologies with RF, DOE applied the same learning rate developed for RF to MREFs. DOE modeled the average learning rate based on the full historical PPI series for “household refrigerator and home freezer manufacturing” to capture the overall price evolution in relation to the cumulative shipments. DOE also conducted sensitivity analyses that are based on a particular segment of the PPI data to investigate the impact of alternative product price projections (low price learning and high price learning) in the NIA of this direct final rule. DOE further notes that AHAM is a party to the Joint Agreement and is supportive of the recommended standard adopted in this direct final rule.

39

Dale, L., C. Antinori, M. McNeil, James E. McMahon, and K.S. Fujita. Retrospective evaluation of appliance price trends. Energy Policy. 2009. 37 pp. 597-605.

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Taylor, M., C.A. Spurlock, and H.-C. Yang. Confronting Regulatory Cost and Quality Expectations. An Exploration of Technical Change in Minimum Efficiency Performance Standards. 2015. Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States). Report No. LBNL-1000576. (last accessed June 30, 2023.) Available at

www.osti.gov/biblio/1235570/

(last accessed June 30, 2023).

41

Taylor, M. and K.S. Fujita. Accounting for Technological Change in Regulatory Impact Analyses: The Learning Curve Technique. 2013. Lawrence Berkeley National Lab (LBNL), Berkeley, CA (United States). Report No. LBNL-6195E. Available at

https://escholarship.org/uc/item/3c8709p4

(last accessed March 24, 2024).

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PPI is a proxy for manufacturing costs as certain effects (such as market structure and competitive effects) could influence PPI in a way that would not be reflected in manufacturing costs.

2. Installation Cost

Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the product. DOE is not aware of any data that suggest the cost of installation changes as a function of efficiency for MREFs. DOE therefore assumed that installation costs are the same regardless of EL and do not impact the LCC or PBP. As a result, DOE did not include installation costs in the LCC and PBP analysis.

3. Annual Energy Consumption

For each sampled consumer, DOE determined the energy consumption for MREFs at different efficiency levels using the approach described previously in section IV.E of this document.

4. Energy Prices

Because marginal electricity price more accurately captures the incremental savings associated with a change in energy use from higher efficiency, it provides a better representation of incremental change in consumer costs than average electricity prices. Therefore, DOE applied average electricity prices for the energy use of the product purchased in the no-new-standards case, and marginal electricity prices for the incremental change in energy use associated with the other efficiency levels considered.

DOE derived electricity prices in 2022 using data from EEI Typical Bills and Average Rates reports. Based upon comprehensive, industry-wide surveys, this semi-annual report presents typical monthly electric bills and average kilowatt-hour costs to the customer as charged by investor-owned utilities. For the residential sector, DOE calculated electricity prices using the methodology described in Coughlin and Beraki (2018).

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Coughlin, K. and B. Beraki.2018. Residential Electricity Prices: A Review of Data Sources and Estimation Methods. Lawrence Berkeley National Lab. Berkeley, CA. Report No. LBNL-2001169. Available at

https://ees.lbl.gov/publications/residential-electricity-prices-review.

DOE's methodology allows electricity prices to vary by sector, region, and season. In the analysis, variability in electricity prices is chosen to be consistent with the way the consumer economic and energy use characteristics are defined in the LCC analysis. See chapter 8 of the direct final rule TSD for details.

To estimate energy prices in future years, DOE multiplied the 2022 energy prices by the projection of annual average price changes from the Reference case in

AEO2023,

which has an end year of 2050.

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To estimate price trends after 2050, the 2046-2050 average was used for all years.

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EIA. Annual Energy Outlook 2023. Available at

www.eia.gov/outlooks/aeo/

(last accessed November 29, 2023).

5. Maintenance and Repair Costs

Repair costs are associated with repairing or replacing product components that have failed in an appliance; maintenance costs are associated with maintaining the operation of the product. Typically, small incremental increases in product efficiency entail no, or only minor, changes in repair and maintenance costs compared to baseline efficiency products. DOE is not aware of any data that suggest the cost of repair or maintenance for MREFs changes as a function of efficiency. DOE therefore assumed that these costs are the same regardless of EL and do not impact the LCC or PBP. As a result, DOE did not include maintenance and repair costs in the LCC and PBP analysis.

6. Product Lifetime

For MREFs, DOE used lifetime estimates from products that operate using the same refrigeration technology: covered refrigerators and refrigerator-freezers, based on the Refrigerators, Refrigerator-Freezers, and Freezers direct final rule analysis. 89 FR 3026 (January 17, 2024). DOE estimated a maximum lifetime of 40 years for all product classes and an average lifetime of 10.6 years for compact coolers and 14.6 years for full-size coolers. The weighted average lifetime over the sample population, considering the market distribution, was 12.6 years. DOE also assumed that the probability function for the annual survival of MREFs would take the form of a Weibull distribution. See chapter 8 of the direct final rule TSD for a more detailed discussion.

7. Discount Rates

In the calculation of LCC, DOE applies discount rates appropriate to households to estimate the present value of future operating cost savings. DOE estimated a distribution of discount rates for MREFs based on consumer financing costs and the opportunity cost of consumer funds.

DOE applies weighted average discount rates calculated from consumer debt and asset data, rather than marginal or implicit discount rates.

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The LCC analysis estimates net present value over the lifetime of the product, so the appropriate discount rate will reflect the general opportunity cost of household funds, taking this time scale into account. Given the long-time horizon modeled in the LCC, the application of a marginal interest rate associated with an initial source of funds is inaccurate. Regardless of the method of purchase, consumers are expected to continue to rebalance their debt and asset holdings over the LCC analysis period, based on the restrictions consumers face in their debt payment requirements and the relative size of the interest rates available on debts and assets. DOE estimates the aggregate impact of this rebalancing using the historical distribution of debts and assets.

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The implicit discount rate is inferred from a consumer purchase decision between two otherwise identical goods with different first cost and operating cost. It is the interest rate that equates the increment of first cost to the difference in net present value of lifetime operating cost, incorporating the influence of several factors: transaction costs; risk premiums and response to uncertainty; time preferences; interest rates at which a consumer is able to borrow or lend. The implicit discount rate is not appropriate for the LCC analysis because it reflects a range of factors that influence consumer purchase decisions, rather than the opportunity cost of the funds that are used in purchases.

To establish residential discount rates for the LCC analysis, DOE identified all relevant household debt or asset classes in order to approximate a consumer's opportunity cost of funds related to appliance energy cost savings. It estimated the average percentage shares of the various types of debt and equity by household income group using data from the Federal Reserve Board's triennial Survey of Consumer Finances

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(“SCF”) starting in 1995 and ending in 2019. Using the SCF and other sources, DOE developed a distribution of rates for each type of debt and asset by income group to represent the rates that may apply in the year in which amended standards would take effect. DOE assigned each sample household a specific discount rate drawn from one of the distributions. The average rate across all types of household debt and equity and income groups, weighted by the shares of each type, is 4.2 percent. See chapter 8 of the direct final rule TSD for further details on the development of consumer discount rates.

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U.S. Board of Governors of the Federal Reserve System. Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019. Available at

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

(last accessed November 29, 2023).

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

To accurately estimate the share of consumers that would be affected by a potential energy conservation standard at a particular efficiency level, DOE's LCC analysis considered the projected distribution (market shares) of product efficiencies under the no-new-standards case (

i.e.,

the case without amended or new energy conservation standards).

For this direct final rule, DOE is using the efficiency distribution by product class as provided by AHAM in response to a notice of public meeting and availability of the preliminary technical support document for MREFS. 87 FR 3229 (Jan. 21, 2022) (See AHAM, No. 18, pp. 2-5) DOE understands that this approach inherently assumes that the rest of the MREF market has a similar distribution of efficiencies. However, due to lack of efficiency data from non-AHAM members, DOE has no reason to question that assumption. DOE also assumed that the current distribution of product efficiencies would remain constant in 2029, and during the

analysis period, in the no-new-standards case.

The estimated market shares for the no-new-standards case for MREFs are shown in Table IV.10. See chapter 8 of the direct final rule TSD for further information on the derivation of the efficiency distributions.

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The LCC Monte Carlo simulations draw from the efficiency distributions and randomly assign an efficiency to the MREF purchased by each sample household in the no-new-standards case. The resulting percent shares within the sample match the market shares in the efficiency distributions.

9. Payback Period Analysis

The payback period is the amount of time (expressed in years) it takes the consumer to recover the additional installed cost of more-efficient products, compared to baseline products, through energy cost savings. Payback periods that exceed the life of the product mean that the increased total installed cost is not recovered in reduced operating expenses.

The inputs to the PBP calculation for each efficiency level are the change in total installed cost of the product and the change in the first-year annual operating expenditures relative to the baseline. DOE refers to this as a “simple PBP” because it does not consider changes over time in operating cost savings. The PBP calculation uses the same inputs as the LCC analysis when deriving first-year operating costs.

As noted previously, EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the first year's energy savings resulting from the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE determined the value of the first year's energy savings by calculating the energy savings in accordance with the applicable DOE test procedure, and multiplying those savings by the average energy price projection for the year in which compliance with the amended standards would be required.

G. Shipments Analysis

DOE uses projections of annual product shipments to calculate the national impacts of potential amended or new energy conservation standards on energy use, NPV, and future manufacturer cash flows.

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The shipments model takes an accounting approach, tracking market shares of each product class and the vintage of units in the stock. Stock accounting uses product shipments as inputs to estimate the age distribution of in-service product stocks for all years. The age distribution of in-service product stocks is a key input to calculations of both the NES and NPV, because operating costs for any year depend on the age distribution of the stock.

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DOE uses data on manufacturer shipments as a proxy for national sales, as aggregate data on sales are lacking. In general, one would expect a close correspondence between shipments and sales.

DOE defined two broad MREF product categories (coolers and combination cooler refrigeration products) and developed models to estimate shipments for each category. DOE used various data and assumptions to develop the shipments for each product class considered in this rulemaking.

Given the limited available data sources on historical shipments of coolers, DOE assumed a constant penetration rate of 13.3 percent in the U.S. households throughout the analysis period based on online surveys

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to estimate the annual shipments starting from 2016.

49 50

DOE multiplied the estimated penetration by the total number of households from the

AEO2023,

and then determined the number of new shipments by dividing the total stock by the mean product lifetime. DOE projected the annual shipments by incorporating the lifetime distributions by product class and assuming that the growth of new sales is consistent with the housing

projections from

AEO2023.

To estimate shipments prior to 2016, DOE assumed a flat historical shipment trend at the 2016 level. With even more limited available data sources on historical shipments of combination cooler refrigeration products, DOE estimated total shipments of combination cooler refrigeration products in 2014 to be 36,000 units, based on feedback from manufacturers from the October 2016 Direct Final Rule. DOE assumed sales would increase in line with the increase in the number of households in

AEO2023.

Finally, DOE incorporated the 2021 shipment data provided by AHAM (see AHAM, No. 18 at pp. 3, 5)

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to re-calibrate total shipments for each product class considered in this rulemaking.

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DOE also reviewed the recent release of the EIA 2020 RECS (“RECS 2020”), which identified wine chillers in representative U.S. households. DOE found that the penetration rate of wine chillers in RECS 2020 is significantly lower compared to that estimated by DOE for MREFs based on previous market surveys. Due to the uncertainty on the breakdown of MREFs between wine chillers and other miscellaneous refrigeration applications in the U.S. market, DOE continued to use the 13.3 percent penetration rate for MREFs in this direct final rule. However, DOE also modeled an alternative shipments scenario based on the lower penetration rate of MREFs in American homes derived from the RECS 2020 data. For more details on this alternative scenario and the resulting NES and NPV results, see chapter 9 and appendix 10C of the direct final rule TSD, respectively.

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Greenblatt, J.B., S.J. Young, H.-C. Yang, T. Long, B. Beraki, S.K. Price, S. Pratt, H. Willem, L.-B. Desroches, and S.M. Donovan. U.S. Residential Miscellaneous Refrigeration Products: Results from Amazon Mechanical Turk Surveys. 2014. Lawrence Berkeley National Laboratory: Berkeley, CA. Report No. LBNL-6537E.

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Donovan, S.M., S.J. Young, and J.B. Greenblatt. Ice-Making in the U.S.: Results from an Amazon Mechanical Turk Survey. Lawrence Berkeley National Laboratory. Report No. LBNL-183899.

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This shipments information was provided by AHAM in a confidential document. The reference points to the public version of this document, where confidential business information is redacted.

DOE used the efficiency distributions by product class to match the data submitted by AHAM. DOE also assumed that the market share of each product class (in relation to the total MREF shipments) matched the market shares provided by AHAM. To estimate total MREF shipments, DOE utilized the AHAM shipments data and AHAM-member information and reviewed the TraQline data from 2020 Q1 to 2022 Q1 to estimate non-AHAM-member shipments.

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Based on this approach, DOE's estimate of the MREF shipments for the whole market was consistent with the total number of shipments estimated using DOE's approach discussed earlier and used in the March 2023 NOPR. Hence, DOE continued using the same approach to develop the total MREF shipments in this direct final rule but incorporated the product class breakdown provided by AHAM to re-distribute the total shipments by product class.

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DOE also collected and reviewed manufacturer interview data but was unable to collect a representative sample that would allow it to estimate non-AHAM-member shipments data.

H. National Impact Analysis

The NIA assesses the NES and the NPV from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels.

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(“Consumer” in this context refers to consumers of the product being regulated.) DOE calculates the NES and NPV for the potential standard levels considered based on projections of annual product shipments, along with the annual energy consumption and total installed cost data from the energy use and LCC analyses. For the present analysis, DOE projected the energy savings, operating cost savings, product costs, and NPV of consumer benefits over the lifetime of MREFs sold from 2029 through 2058.

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The NIA accounts for impacts in the United States and U.S. territories.

DOE evaluates the impacts of new or amended standards by comparing a case without such standards with standards-case projections. The no-new-standards case characterizes energy use and consumer costs for each product class in the absence of new or amended energy conservation standards. DOE compares the no-new-standards case with projections characterizing the market for each product class if DOE adopted new or amended standards at specific energy efficiency levels (

i.e.,

the TSLs or standards cases) for that class. For the standards cases, DOE considers how a given standard would likely affect the market shares of products with efficiencies greater than the standard.

DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses typical values (as opposed to probability distributions) as inputs.

Table IV.11 summarizes the inputs and methods DOE used for the NIA analysis for this direct final rule. Discussion of these inputs and methods follows the table. See chapter 10 of the direct final rule TSD for further details.

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1. Product Efficiency Trends

A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.F.8 of this document describes how DOE developed an energy efficiency distribution for the no-new-standards case (which yields a shipment-weighted average efficiency) for each of the considered product classes for the year of anticipated compliance with an amended standard.

For the standards cases, DOE used a “roll-up” scenario to establish the

shipment-weighted efficiency for the year that standards are assumed to become effective (2029). In this scenario, the market shares of products in the no-new-standards case that do not meet the standard under consideration would “roll up” to meet the new standard level, and the market share of products above the standard would remain unchanged.

In the absence of data on trends in efficiency, DOE assumed no efficiency trend over the analysis period for both the no-new-standards and standards cases. For a given case, market shares by efficiency level were held fixed to their 2029 distribution.

2. National Energy Savings

The NES analysis involves a comparison of national energy consumption of the considered products between each potential standards case (“TSL”) and the case with no new or amended energy conservation standards. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-new-standards case and for each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy (

i.e.,

the energy consumed by power plants to generate site electricity) using annual conversion factors derived from

AEO2023.

Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis.

Use of higher-efficiency products is sometimes associated with a direct rebound effect, which refers to an increase in utilization of the product due to the increase in efficiency. DOE did not find any data on the rebound effect specific to MREFs that would indicate that consumers would alter their utilization of their product due to an increase in efficiency. MREFs are typically plugged in and operate continuously; therefore, DOE assumed a rebound rate of 0. DOE did not receive any comments regarding this assumption in response to the March 2023 NOPR.

In 2011, in response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in which DOE explained its determination that EIA's National Energy Modeling System (“NEMS”) is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector

54

that EIA uses to prepare its

Annual Energy Outlook.

The FFC factors incorporate losses in production and delivery in the case of natural gas (including fugitive emissions) and additional energy used to produce and deliver the various fuels used by power plants. The approach used for deriving FFC measures of energy use and emissions is described in appendix 10B of the direct final rule TSD.

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For more information on NEMS, refer to

The National Energy Modeling System: An Overview 2009,

DOE/EIA-0581(2009), October 2009. Available at

www.eia.gov/analysis/pdfpages/0581(2009)index.php

(last accessed November 29, 2023).

3. Net Present Value Analysis

The inputs for determining the NPV of the total costs and benefits experienced by consumers are (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. DOE calculates net savings each year as the difference between the no-new-standards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the projection period.

As discussed in section IV.F.1 of this document, DOE developed MREF price trends based on an experience curve calculated using historical PPI data. DOE applied the same trends to project prices for each product class at each considered efficiency level including baseline. By 2058, which is the end date of the projection period, the average price of single-speed compressor MREFs is projected to drop 33.2 percent and the average price of MREFs with a variable-speed compressor is projected to drop about 33.8 percent relative to 2029.

To evaluate the effect of uncertainty regarding the price trend estimates, DOE investigated the impact of different product price projections on the consumer NPV for the considered TSLs for MREFs. In addition to the default price trend, DOE considered high and low-price-decline sensitivity cases. For the single-speed compressor MREFs and the non-variable- speed controls portion of MREFs, DOE estimated the high- price- decline and the low- price- decline scenarios based on household refrigerator and home freezer PPI data limited to the period between the period 1981-2008 and 2009-2022, respectively. For the variable-speed controls portion of MREFs, DOE estimated the high price decline and the low- price- decline scenarios based on an exponential trend line fit of the semiconductor PPI between the period 1994-2022 and 1967-1993, respectively. The derivation of these price trends is described in Chapter 8 and the results of these sensitivity cases are given in appendix 10C of the direct final rule TSD.

The energy cost savings are calculated using the estimated energy savings in each year and the projected price of the appropriate form of energy. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the projection of annual national-average residential energy price changes in the Reference case from

AEO2023,

which has an end year of 2050. To estimate price trends after 2050, the 2046-2050 average was used for all years. As part of the NIA, DOE also analyzed scenarios that used inputs from variants of the

AEO2023

Reference case that have lower and higher economic growth. Those cases have lower and higher energy price trends compared to the Reference case. The resulting consumer NPV for the low-economic growth scenario, combined with the low-price-decline scenario is up to 24% lower compared to the Reference case scenario, while the consumer NPV for the high-economic growth scenario combined with the high-price-decline scenario is up to 12% higher compared to the Reference case. See appendix 10C of the direct final rule TSD for more details.

In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. For this direct final rule, DOE estimated the NPV of consumer benefits using both a 3-percent and a 7-percent real discount rate. DOE uses these discount rates in accordance with guidance provided by the Office of Management and Budget (“OMB”) to Federal agencies on the development of regulatory analysis.

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The discount rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflect a consumer's perspective. The 7-percent real value is an estimate of the average before-tax rate of return to private capital in the U.S. economy. The 3-percent real value represents the “social rate of time preference,” which is the rate at which society discounts future consumption flows to their present value.

55

United States Office of Management and Budget.

Circular A-4: Regulatory Analysis.

September 17, 2003. Section E. Available at

https://www.whitehouse.gov/wp-content/uploads/

legacy_drupal_files/omb/circulars/A4/a-4.pdf

(last accessed November 10, 2023).

I. Consumer Subgroup Analysis

In analyzing the potential impact of new or amended energy conservation standards on consumers, DOE evaluates the impact on identifiable subgroups of consumers that may be disproportionately affected by a new or amended national standard. The purpose of a subgroup analysis is to determine the extent of any such disproportional impacts. DOE evaluates impacts on particular subgroups of consumers by analyzing the LCC impacts and PBP for those particular consumers from alternative standard levels. For this direct final rule, DOE analyzed the impacts of the considered standard levels on senior-only households. Low-income consumers were not considered in the subgroup analysis, as MREFs are not products generally used by this subgroup. Based on the TraQline wine chiller data, less than 4 percent of MREF owners are below the Federal household income threshold for poverty. The analysis used a subset of the TraQline consumer sample composed of households that meet the criteria for this subgroup. DOE used the LCC and PBP computer model to estimate the impacts of the considered efficiency levels on senior-only households. Chapter 11 in the direct final rule TSD describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview

DOE performed an MIA to estimate the financial impacts of amended energy conservation standards on manufacturers of MREFs and to estimate the potential impacts of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects and includes analyses of projected industry cash flows, the INPV, investments in research and development (“R&D”) and manufacturing capital, and domestic manufacturing employment. Additionally, the MIA seeks to determine how amended energy conservation standards might affect manufacturing employment, capacity, and competition, as well as how standards contribute to overall regulatory burden. Finally, the MIA serves to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers.

The quantitative part of the MIA primarily relies on the GRIM, an industry cash flow model with inputs specific to this rulemaking. The key GRIM inputs include data on the industry cost structure, unit production costs, product shipments, manufacturer markups, and investments in R&D and manufacturing capital required to produce compliant products. The key GRIM outputs are the INPV, which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital, and the impact on domestic manufacturing employment. The model uses standard accounting principles to estimate the impacts of more-stringent energy conservation standards on a given industry by comparing changes in INPV and domestic manufacturing employment between a no-new-standards case and the various standards cases (

i.e.,

“TSLs”). To capture the uncertainty relating to manufacturer pricing strategies following amended standards, the GRIM estimates a range of possible impacts under different manufacturer markup scenarios.

The qualitative part of the MIA addresses manufacturer characteristics and market trends. Specifically, the MIA considers such factors as a potential standard's impact on manufacturing capacity, competition within the industry, the cumulative impact of other DOE and non-DOE regulations, and impacts on manufacturer subgroups. The complete MIA is outlined in chapter 12 of the direct final rule TSD.

DOE conducted the MIA for this rulemaking in three phases. In Phase 1 of the MIA, DOE prepared a profile of the MREF manufacturing industry based on the market and technology assessment and publicly-available information. This included a top-down analysis of MREF manufacturers that DOE used to derive preliminary financial inputs for the GRIM (

e.g.,

revenues; materials, labor, overhead, and depreciation expenses; selling, general, and administrative expenses (“SG&A”); and R&D expenses). DOE also used public sources of information to further calibrate its initial characterization of the MREF manufacturing industry, including corporate annual reports filed by publicly traded manufacturers in primarily home appliance manufacturing and MREFs, the U.S. Census Bureau's

Annual Survey of Manufactures

(“

ASM

”),

56

and reports from D&B Hoovers.

57

56

U.S. Census Bureau,

Annual Survey of Manufactures.

“Summary Statistics for Industry Groups and Industries in the U.S. (2021).” Available at

www.census.gov/programs-surveys/asm/data.html

(last accessed July 5, 2023).

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The D&B Hoovers login is available at

app.dnbhoovers.com

(last accessed November 29, 2023).

In Phase 2 of the MIA, DOE prepared a framework industry cash-flow analysis to quantify the potential impacts of amended energy conservation standards. The GRIM uses several factors to determine a series of annual cash flows starting with the announcement of the standard and extending over a 30-year period following the compliance date of the standard. These factors include annual expected revenues, costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. In general, energy conservation standards can affect manufacturer cash flow in three distinct ways: (1) creating a need for increased investment, (2) raising production costs per unit, and (3) altering revenue due to higher per-unit prices and changes in sales volumes.

In addition, during Phase 2, DOE developed interview guides to distribute to manufacturers of MREFs in order to develop other key GRIM inputs, including product and capital conversion costs, and to gather additional information on the anticipated effects of energy conservation standards on revenues, direct employment, capital assets, industry competitiveness, and subgroup impacts.

In Phase 3 of the MIA, DOE conducted structured, detailed interviews with representative manufacturers. During these interviews, DOE discussed engineering, manufacturing, procurement, and financial topics to validate assumptions used in the GRIM and to identify key issues or concerns. As part of Phase 3, DOE also evaluated subgroups of manufacturers that may be disproportionately impacted by amended standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash flow analysis. Such manufacturer subgroups may include small business manufacturers, low-volume manufacturers, niche players, and/or manufacturers exhibiting a cost structure that largely differs from the industry average. DOE identified one subgroup for a separate impact analysis:

small business manufacturers. The small business subgroup is discussed in chapter 12 of the direct final rule TSD.

2. Government Regulatory Impact Model and Key Inputs

DOE uses the GRIM to quantify the changes in cash flow due to new or amended standards that result in a higher or lower industry value. The GRIM uses a standard, annual discounted cash-flow analysis that incorporates manufacturer costs, markups, shipments, and industry financial information as inputs. The GRIM models changes in costs, distribution of shipments, investments, and manufacturer margins that could result from an amended energy conservation standard. The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, beginning in 2024 (the base year of the analysis) and continuing to 2058. DOE calculated INPVs by summing the stream of annual discounted cash flows during this period. For manufacturers of MREFs, DOE used a real discount rate of 7.7 percent, which was derived from industry financials and then modified according to feedback received during manufacturer interviews.

The GRIM calculates cash flows using standard accounting principles and compares changes in INPV between the no-new-standards case and each standards case. The difference in INPV between the no-new-standards case and a standards case represents the financial impact of the new or amended energy conservation standard on manufacturers. As discussed previously, DOE developed critical GRIM inputs using a number of sources, including publicly available data, results of the engineering analysis, results of the shipments analysis, and information gathered from industry stakeholders during the course of manufacturer interviews. The GRIM results are presented in section V.B.2 of this document. Additional details about the GRIM, the discount rate, and other financial parameters can be found in chapter 12 of the direct final rule TSD.

a. Manufacturer Production Costs

Manufacturing more efficient products is typically more expensive than manufacturing baseline products due to the use of more complex components, which are typically more costly than baseline components. The changes in the MPCs of covered products can affect the revenues, gross margins, and cash flow of the industry. For its analysis in this direct final rule, DOE used a combined efficiency level and design option approach. First, an efficiency-level approach was used to establish an analysis tied to existing products on the market. A design option approach was then used to extend the analysis through “built-down” efficiency levels and “built-up” efficiency levels where there were gaps in the range of efficiencies of products that were reverse engineered.

For a complete description of the MPCs, see section IV.C of this document and chapter 5 of the direct final rule TSD.

b. Shipments Projections

The GRIM estimates manufacturer revenues based on total unit shipment projections and the distribution of those shipments by efficiency level. Changes in sales volumes and efficiency mix over time can significantly affect manufacturer finances. For this analysis, the GRIM uses the NIA's annual shipment projections derived from the shipments analysis from 2024 (the base year) to 2058 (the end year of the analysis period). See section IV.G of this document and chapter 9 of the direct final rule TSD for additional details.

c. Product and Capital Conversion Costs

New or amended energy conservation standards could cause manufacturers to incur conversion costs to bring their production facilities and product designs into compliance. DOE evaluated the level of conversion-related expenditures that would be needed to comply with each considered efficiency level in each product class. For the MIA, DOE classified these conversion costs into two major gro

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