Energy Conservation Program: Energy Conservation Standards for Refrigerated Bottled or Canned Beverage Vending Machines
Federal RegisterMay 29, 2009
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket No. EERE-2006-STD-0125]
RIN 1904-AB58
Energy Conservation Program: Energy Conservation Standards for Refrigerated Bottled or Canned Beverage Vending Machines
AGENCY:
Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy.
ACTION:
Notice of proposed rulemaking and notice of public meeting.
SUMMARY:
The Energy Policy and Conservation Act prescribes energy conservation standards for certain commercial and industrial equipment and requires the U.S. Department of Energy (DOE) to administer an energy conservation program for this equipment. In this notice, DOE is proposing new energy conservation standards for refrigerated bottled or canned beverage vending machines. DOE is also announcing a public meeting on its proposed standards.
DATES:
DOE will hold a public meeting on Wednesday, June 17, 2009 from 9 a.m. to 4 p.m. in Washington, DC. DOE must receive requests to speak at the public meeting no later than 4 p.m. Wednesday, June 3, 2009. DOE must receive a signed original and an electronic copy of statements to be given at the public meeting no later than 4 p.m. Wednesday, June 10, 2009.
DOE will accept comments, data, and information regarding the notice of proposed rulemaking (NOPR) before and after the public meeting, but no later than July 28, 2009. See section VII, “Public Participation,” of this NOPR for details. Hada Flowers
ADDRESSES:
The public meeting will be held at the U.S. Department of Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Please note that foreign nationals visiting DOE Headquarters are subject to advance security screening procedures, requiring a 30-day advance notice. If you are a foreign national and wish to participate in the public meeting, please inform DOE as soon as possible by contacting Ms. Brenda Edwards at (202) 586-2945 so that the necessary procedures can be completed.
Any comments submitted must identify the NOPR for beverage vending machines, and provide docket number EERE-2006-STD-0125 and/or RIN number 1904-AB58. Comments may be submitted using any of the following methods:
•
Federal eRulemaking Portal:
http://www.regulations.gov.
Follow the instructions for submitting comments.
•
E-mail:
beveragevending.rulemaking@ee.doe.gov.
Include docket number EERE-2006-STD-0125 and/or RIN 1904-AB58 in the subject line of the message.
•
Postal Mail:
Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-2945. Please submit one signed original paper copy.
•
Hand Delivery/Courier:
Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, 950 L'Enfant Plaza, SW., 6th Floor, Washington, DC 20024. Please submit one signed original paper copy.
For detailed instructions on submitting comments and additional information on the rulemaking process, see section VII, “Public Participation,” of this document.
Docket:
For access to the docket to read background documents or comments received, visit the U.S. Department of Energy, Resource Room of the Building Technologies Program, 950 L'Enfant Plaza, SW., 6th Floor, Washington, DC 20024, (202) 586-2945, between 9 a.m. and 4 p.m. Monday through Friday, except Federal holidays. Please call Ms. Brenda Edwards at the above telephone number for additional information regarding visiting the Resource Room. Please note: DOE's Freedom of Information Reading Room (Room 1E-190 at the Forrestal Building) no longer houses rulemaking materials.
FOR FURTHER INFORMATION CONTACT:
Mr. Charles Llenza, U.S. Department of Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-2192,
Charles.Llenza@ee.doe.gov
or Ms. Francine Pinto, Esq., U.S. Department of Energy, Office of General Counsel, GC-72, 1000 Independence Avenue, SW., Washington, DC 20585-0121, (202) 586-9507,
Francine.Pinto@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
II. Introduction
A. Overview
B. Authority
C. Background
1. History of Standards Rulemaking for Beverage Vending Machines
2. Miscellaneous Rulemaking Issues
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
C. Energy Savings
1. Determination of Savings
2. Significance of Savings
D. Economic Justification
1. Specific Criteria
2. Rebuttable Presumption
IV. Methodology and Discussion of Comments
A. Market and Technology Assessment
1. Definition of Beverage Vending Machine
2. Equipment Classes
B. Engineering Analysis
1. Approach
2. Equipment Analyzed in the Engineering Analysis
3. Analytical Models
4. Engineering Analysis Results
C. Markups to Determine Equipment Price
D. Energy Use Characterization
E. Life-Cycle Cost and Payback Period Analyses
1. Manufacturer Selling Price
2. Increase in Selling Price
3. Markups
4. Installation Costs
5. Energy Consumption
6. Electricity Prices
7. Electricity Price Trends
8. Repair Costs
9. Maintenance Costs
10. Lifetime
11. Discount Rate
12. Payback Period
F. Shipments Analysis
G. National Impact Analysis
1. Base Case and Standards Case Forecasted Efficiencies
2. Annual Energy Consumption, Total Installed Cost, Maintenance Cost, and Repair Costs
3. Escalation of Electricity Prices
4. Electricity Site-to-Source Conversion
H. Life-Cycle Cost Subgroup Analysis
I. Manufacturer Impact Analysis
1. Overview
2. Discussion of Comments
3. Government Regulatory Impact Model Analysis
4. Manufacturer Interviews
5. Government Regulatory Impact Model Key Inputs and Scenarios
J. Utility Impact Analysis
K. Employment Impact Analysis
L. Environmental Assessment
M. Monetizing Carbon Dioxide and Other Emissions Impacts
V. Analytical Results
A. Trial Standard Levels
B. Economic Impacts on Commercial Customers
1. Economic Impacts on Commercial Customers
2. Economic Impacts on Manufacturers
3. National Impact Analysis
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
7. Other Factors
C. Proposed Standard
1. Class A Equipment
2. Class B Equipment
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act/Initial Regulatory Flexibility Analysis
1. Reasons for the Proposed Rule
2. Objectives of and Legal Basis for the Proposed Rule
3. Description and Estimated Number of Small Entities Regulated
4. Description and Estimate of Compliance Requirements
5. Duplication, Overlap, and Conflict with Other Rules and Regulations
6. Significant Alternatives to the Rule
C. Review Under the Paperwork Reduction Act
D. Review Under the National Environmental Policy Act
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
A. Attendance at Public Meeting
B. Procedure for Submitting Requests to Speak
C. Conduct of Public Meeting
D. Submission of Comments
VIII. Approval of the Office of the Secretary
I. Summary of the Proposed Rule
The Energy Policy and Conservation Act (EPCA), as amended, specifies that any new or amended energy conservation standard the U.S. Department of Energy (DOE) prescribes for the equipment covered by this notice shall be designed to “achieve the maximum improvement in energy efficiency * * * which the Secretary determines is technologically feasible and economically justified.” (42 U.S.C. 6295(o)(2)(A), and (v)) Further, the new or amended standard must “result in significant conservation of energy.” (42 U.S.C. 6295(o)(3)(B) and (v)) In accordance with these and other statutory criteria discussed in this notice, DOE proposes to adopt new energy conservation standards for refrigerated bottled or canned beverage vending machines, hereafter referred to as “beverage vending machines.” The proposed standards, shown in Table I-1, would apply to all beverage vending machines manufactured 3 years after publication of the final rule establishing the energy conservation standards and offered for sale in the United States. (42 U.S.C. 6295(v)(4))
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1
This provision was redesignated by EISA, section 316(d)(1), as 42 U.S.C. 6295(v)(3).
Table I-1—Proposed Standard Levels
Equipment class*
Proposed standard level**
Maximum Daily Energy Consumption (MDEC)
kWh/day
A
0.055 × V + 2.56
†
B
0.073 × V + 3.16
††
* See section IV.A.2 of this notice for a discussion of equipment classes.
** “V” is the refrigerated volume (ft
3
) of the refrigerated bottled or canned beverage vending machine, as measured by the American National Standards Institute (ANSI)/Association of Home Appliance Manufacturers (AHAM) HRF-1-2004, “Energy, Performance and Capacity of Household Refrigerators, Refrigerator-Freezers and Freezers.”
†
Trial Standard Level (TSL) 6.
††
TSL 3.
DOE's analyses indicate that the proposed energy conservation standards, trial standard level (TSL) 6 for Class A equipment and TSL 3 for Class B equipment would save a significant amount of energy—an estimated 0.098 quadrillion British thermal units (Btu), or quads, of cumulative energy over 30 years (2012 to 2042). See section V.A for a detailed description of TSLs. The economic impacts on commercial customers (
i.e.,
the average life-cycle cost (LCC) savings) are positive for both equipment classes.
The cumulative national net present value (NPV) of the proposed standards from 2012 to 2042 ranges from $0.105 billion (at a 7-percent discount rate) to $0.273 billion (at a 3-percent discount rate) in 2008$. This is the estimated total value of future operating cost savings minus the estimated increased equipment costs, discounted to 2008$. The benefits and costs of the standards can also be expressed in terms of annualized 2008$ values over the forecast period 2012 through 2042. Using a 7-percent discount rate for the annualized cost analysis, the cost of the standards is estimated to be $11.1 million per year in increased equipment and installation costs, while the annualized benefits are expected to be $20.5 million per year in reduced equipment operating costs. Using a 3-percent discount rate, the annualized cost of the standards is expected to be $9.4 million per year, while the annualized benefits of the standards are expected to be $21.4 million per year. (See section V.B.3 for additional details.) If DOE adopts the proposed standards, it expects manufacturers will lose 22.9 to 25.3 percent of the industry net present value (INPV), which is approximately $13.2 to $14.6 million.
DOE estimates that the proposed standards will have environmental benefits leading to reductions in greenhouse gas emissions (
i.e.,
cumulative (undiscounted) emission reductions) of 5.14 million tons (Mt) of carbon dioxide (CO
2
) from 2012 to 2042.
2
Most of the energy saved is electricity. In addition, DOE expects the energy savings from the proposed standards to eliminate the need for approximately 46 megawatts (MW) of electric generating capacity by 2042. These results reflect DOE's use of energy price projections from the U.S. Energy Information Administration (EIA)'s
Annual Energy Outlook 2009
(
AEO2009
).
3
DOE also estimated that the net present value benefits of the proposed standards from reducing CO
2
emissions would range from $0 to $49.6 million using a 7-percent discount rate and $0 to $96.4 million using a 3-percent discount rate, although the method for developing these estimates is now under review. The net present value benefits of the proposed standards from reducing oxides of nitrogen (NO
X
) emissions would range from $109,000 to $1.13 million using a 7-percent discount rate and from $187,000 to $1.93 million using a 3-percent discount rate. Finally, the net present value benefits of the proposed standards from reducing Hg emissions would range from $0 to $1.0 million using a 7-percent discount rate and $0 to $1.73 million using a 3-percent discount rate.
2
Additionally, the standards would result in emissions reductions for nitrogen oxides (NO
X
) or generate a similar amount of NO
X
emissions allowance credits in areas where such emissions are subject to regulatory or voluntary emissions caps.
3
DOE intends to use EIA's
AEO2009
to generate the results for the final rule. The
AEO2009
Early Release contains reference case energy price forecasts, which shows higher commercial electricity prices at the national level compared with the
AEO2008
on a real (inflation adjusted) basis. If these early release energy prices remain unchanged in the final release, then incorporation of the
AEO2008
forecasts would likely result in reduced payback periods, greater life-cycle cost savings, and greater national net present value for the proposed standards.
?]
DOE proposes that the standards in today's NOPR for Class A and Class B beverage vending machines represent the maximum improvement in energy efficiency that is technologically feasible and economically justified. DOE proposes that the benefits to the Nation of the proposed standards (energy savings, commercial customer average LCC savings, national NPV increase, and emission reductions) outweigh the costs (loss of manufacturer INPV). Furthermore, DOE proposes that the proposed standards are technologically feasible because the technologies required to achieve these levels already exist.
DOE requests comment and further data or information on whether the
energy savings and related benefits of TSL 6 outweigh the costs, including potential manufacturer impacts. DOE seeks comment on the magnitude of the estimated decline in INPV at TSL 6, and what impact this level could have on industry parties, including small businesses. DOE is particularly interested in receiving comments, views, and further data or information from interested parties concerning: (1) Why the private market has not been able to capture the energy benefits proposed in TSL 6; (2) whether and to what extent parties estimate they will be able to transfer costs of implementing TSL 6 on to consumers; (3) whether and to what extent parties estimate distributional chain intermediaries (such as wholesalers or bottlers) will be able to absorb TSL 6 implementation costs and in turn transfer these costs to on-site consumers, who ultimately benefit from the energy gains associated with the proposed standard.
II. Introduction
A. Overview
DOE proposes to set energy conservation standards for beverage vending machines at the levels shown in Table I-1. The proposed standards would apply to equipment manufactured 3 years after publication of the final rule establishing the energy conservation standards and offered for sale in the United States. DOE has tentatively found that the standards would save a significant amount of energy (see section III.C.2) and result in a cleaner environment. In the 30-year period after the new standards become effective, the Nation would tentatively save 0.098 quads (sum of 0.088 quads for Class A machines and 0.010 quads for Class B machines) of primary energy. These energy savings also would tentatively result in significantly reduced emissions of air pollutants and greenhouse gases associated with electricity production by avoiding the emission of 5.14 Mt of CO
2
, up to 0.69 kt of NO
X
, and up to 0.085 tons of Hg. In addition, DOE expects the standards to prevent the construction of 0.046 new 1,000 MW power plants by 2042. In total, DOE tentatively estimates the total net present value to the Nation of these standards to be $0.105 billion (sum of a positive net present value of $0.105 billion for Class A machines and zero [less than $0.5 million] for Class B machines) from 2012 to 2042 in 2008$.
Commercial customers would see benefits from the proposed standards. Although DOE expects the installed cost of the higher efficiency beverage vending machine to be approximately 4.8 percent higher than the average price of machines available today, when weighted by shipments across equipment classes, the energy efficiency gains would result in lower energy costs, saving customers about 19.8 percent per year on their energy bills. Based on DOE's LCC analysis for equipment with known shipments, DOE tentatively estimates that the mean payback period for higher efficiency beverage vending machines would be between 3.8 and 6.0 years depending on equipment class. In addition, when the net results of these equipment price increases and energy cost savings are summed over the lifetime of the higher efficiency equipment, customers could save approximately $49 to $316 (depending on equipment class) compared to their expenditures on today's baseline beverage vending machine.
B. Authority
Title III of EPCA sets forth a variety of provisions designed to improve energy efficiency. Part A of Title III (42 U.S.C. 6291-6309) provides for the Energy Conservation Program for Consumer Products Other Than Automobiles. The amendments to EPCA contained in the Energy Policy Act of 2005 (EPACT 2005), Public Law 109-58, include new or amended energy conservation standards and test procedures for some of these products, and direct DOE to undertake rulemakings to promulgate such requirements. In particular, section 135(c)(4) of EPACT 2005 amends EPCA to direct DOE to prescribe energy conservation standards for beverage vending machines. (42 U.S.C. 6295(v))
Because of its placement in Part A of Title III of EPCA, the rulemaking for beverage vending machine energy conservation standards is bound by the requirements of 42 U.S.C. 6295. However, since beverage vending machines are commercial equipment, DOE intends to place the new requirements for beverage vending machines in Title 10 of the Code of Federal Regulations (CFR), Part 431 (“Energy Efficiency Program for Certain Commercial and Industrial Equipment”), which is consistent with DOE's previous action to incorporate the EPACT 2005 requirements for commercial equipment. The location of the provisions within the CFR does not affect either their substance or applicable procedure, so DOE is placing them in the appropriate CFR part based on their nature or type and will refer to beverage vending machines as “equipment” throughout the notice.
4
The test procedures for beverage vending machines appear at Title 10 CFR 431.293 and 431.294.
4
Because of their placement into 10 CFR 431, beverage vending machines will be referred to as “equipment” throughout this notice.
EPCA provides criteria for prescribing new or amended standards for covered equipment. As indicated above, any new or amended standard for beverage vending machines must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and (v)) But EPCA precludes DOE from adopting any standard that would not result in significant conservation of energy. (42 U.S.C. 6295(o)(3) and (v)) Moreover, DOE may not prescribe a standard for certain equipment if no test procedure has been established for that equipment. (42 U.S.C. 6295(o)(3) and (v)) EPCA also provides that, in deciding whether a standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens after receiving comments on the proposed standard. (42 U.S.C. 6295(o)(2)(B)(i) and (v)) To the greatest extent practicable, DOE must consider the following seven factors:
1. The economic impact of the standard on manufacturers and consumers of the equipment subject to the standard;
2. The savings in operating costs throughout the estimated average life of the covered equipment in the type (or class) compared to any increase in the price, or in the initial charges for, or maintenance expenses of, the equipment likely to result from the imposition of the standard;
3. The total projected amount of energy savings likely to result directly from the imposition of the standard;
4. Any lessening of the utility or the performance of the covered equipment likely to result from the imposition of 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 imposition of the standard;
6. The need for national energy conservation; and
7. Other factors the Secretary considers relevant.
Id
.
Further, the Secretary may not prescribe an amended or new standard if interested parties have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States of any equipment type (or class) with 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) and
(v)) In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii) and 6316(a)), establishes a rebuttable presumption that any standard for covered products 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 (and as applicable, water) savings during the first year that the consumer will receive as a result of the standard,” as calculated under the test procedure in place for that standard. See section III.D.2.
C. Background
1. History of Standards Rulemaking for Beverage Vending Machines
On August 8, 2005, section 135(c)(4) of EPACT 2005 amended section 325 of EPCA, in part, to direct DOE to issue energy conservation standards for the equipment covered by this rulemaking, which would apply to equipment manufactured 3 years after publication of the final rule establishing the energy conservation standards. (42 U.S.C. 6295(v)(1), (2) and (3)
5
) The energy use of this equipment has never been regulated at the Federal level.
5
The relevant statutory provisions were renumbered pursuant to section 316 of the Energy Independence and Security Act of 2007, Public Law 110-140.
Section 135(a)(3) of EPACT 2005 also amended section 321 of EPCA, in part, by adding definitions for terms relevant to this equipment. (42 U.S.C. 6291(40)) EPCA defines “refrigerated bottled or canned beverage vending machine” as “a commercial refrigerator that cools bottled or canned beverages and dispenses the bottled or canned beverages on payment.” (42 U.S.C. 6291(40)) Section 136(a)(3) of EPACT 2005 amended section 340 of EPCA in part by adding a definition for “commercial refrigerator, freezer, and refrigerator-freezer.”
6
6
This definition reads as follows:
“(9)(A) The term `commercial refrigerator, freezer, and refrigerator-freezer' means refrigeration equipment that—
(i) Is not a consumer product (as defined in section 321 [of EPCA; 42 U.S.C. 6291(1)]);
(ii) Is not designed and marketed exclusively for medical, scientific, or research purposes;
(iii) Operates at a chilled, frozen, combination chilled and frozen, or variable temperature;
(iv) Displays or stores merchandise and other perishable materials horizontally, semivertically, or vertically;
(v) Has transparent or solid doors, sliding or hinged doors, a combination of hinged, sliding, transparent, or solid doors, or no doors;
(vi) Is designed for pull-down temperature applications or holding temperature applications; and
(vii) Is connected to a self-contained condensing unit or to a remote condensing unit.”(42 U.S.C. 6311(9)(A))
During the course of this rulemaking, Congress passed the Energy Independence Security Act of 2007 (EISA 2007), which the President signed on December 19, 2007 (Pub. L. 110-140). Section 310(3) of EISA 2007 amended section 325 of EPCA in part by adding subsection 325(gg) (42 U.S.C. 6295(gg)). This subsection requires any new or amended energy conservation standards adopted after July 1, 2010, to incorporate “standby mode and off mode energy use.” (42 U.S.C. 6295(gg)(3)(A)) Because any standards associated with this rulemaking are required by August 2009, the energy use calculations will not include “standby mode and off mode energy use.” To include standby mode and off mode energy use requirements for this rulemaking would take considerable analytical effort and would likely require changes to the test procedure. Given the statutory deadline, DOE has decided to address this requirement when the energy conservation standards for beverage vending machines are reviewed in August 2015. At that time, DOE will consider the need for possible amendment in accordance with 42 U.S.C. 6295(m).
As an initial step to comply with EPCA's mandate to issue standards for beverage vending machines and to commence this rulemaking, on June 28, 2006, DOE published a notice of a public meeting and of the availability of its framework document for this rulemaking. 71 FR 36715. The framework document described the procedural and analytical approaches that DOE anticipated using to evaluate energy conservation standards for beverage vending machines and identified various issues to be resolved in conducting the rulemaking. DOE held a public meeting on July 11, 2006, to present the contents of the framework document, describe the analyses it planned to conduct during the rulemaking, obtain public comment on these subjects, and inform and facilitate interested parties' involvement in the rulemaking. DOE also gave interested parties an opportunity after the public meeting to submit written statements in response to the framework document.
On June 16, 2008, DOE published an advance notice of proposed rulemaking (ANOPR) concerning energy conservation standards for beverage vending machines. 72 FR 34094. In the ANOPR, DOE described and sought comment on its proposed equipment classes for this rulemaking and on the analytical framework, models, and tools (
e.g.,
LCC and national energy savings (NES) spreadsheets) that DOE used to analyze the impacts of energy conservation standards for beverage vending machines. In conjunction with the ANOPR, DOE also published on its Web site the complete ANOPR technical support document (TSD),
7
which included the results of DOE's preliminary (1) Engineering analysis, (2) markups analysis to determine equipment price, (3) energy use characterization, (4) LCC and payback period (PBP) analyses, (5) NES and national impact analyses (NIA), and (6) manufacturer impact analysis (MIA). In the ANOPR, DOE requested comment on these results and on a range of other issues including equipment classes, operating hours of compressors and lighting, refurbishment cycles, LCC baseline levels, base and standards case forecasts, differential impacts of new standards on future shipments by equipment class, selection of candidate standard levels, and the approach to characterizing energy conservation standards for beverage vending machines.
7
See
http://www1.eere.energy.gov/buildings/appliance_standards/commercial/beverage_machines_tsd.html.
DOE held a public meeting in Washington, DC, on June 26, 2008, to present the methodology and results of the ANOPR analyses and solicit oral and written comments. Public comments focused on DOE's assumptions and approach and are addressed in detail in this NOPR.
2. Miscellaneous Rulemaking Issues
a. Consensus Agreement
After the ANOPR, Dixie-Narco stated that it would like the National Automatic Merchandising Association (NAMA) to facilitate and submit a consensus recommendation on behalf of the industry no later than December 15, 2008. Dixie-Narco stated that it would also like the new standards to take effect no later than January 1, 2010. (Dixie-Narco, No. 36 at p. 3)
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A notation in the form “Dixie-Narco, No. 36 at p. 3” identifies a written comment that DOE has received and has included in the docket of this rulemaking. This particular notation refers to (1) A comment submitted by Dixie-Narco, (2) in document number 36 in the docket of this rulemaking, and (3) appearing on page 3 of document number 36.
DOE supports efforts by interested parties to work together to develop and present to DOE recommendations on equipment categories and standard levels. Such recommendations are welcome throughout the standards rulemaking process. However, DOE did
not receive any consensus recommendations before publication of this NOPR. While DOE still encourages a consensus recommendation and will attempt to incorporate it into this rulemaking, any recommendation submitted to DOE during the NOPR comment period will be considered as a public comment.
b. Design Requirements
At the ANOPR public meeting, the Northwest Power and Conservation Council (NPCC) stated that under EISA, the Federal Government can regulate more than one characteristic of equipment, perhaps as a performance standard as well as a prescriptive standard. (NPCC, Public Meeting Transcript, No. 29 at p. 83)
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9
A notation in the form “NPCC, Public Meeting Transcript, No. 29 at p. 83” identifies an oral comment that DOE received during the June 26, 2008, ANOPR Public Meeting. This comment was recorded in the public meeting transcript in the docket for this rulemaking (Docket No. EERE-2006-STD-0125). This particular notation refers to a comment (1) Made during the public meeting by NPCC; (2) recorded in document number 29, which is the public meeting transcript filed in the docket of this rulemaking; and (3) appearing on page 83 of document number 29.
EPCA provides that an “energy conservation standard” must be either (A) “a * * * level of energy efficiency” or “a * * * maximum quantity of energy use,” or (B) for certain specified equipment, “a design requirement.” (42 U.S.C. 6291(6)) Thus, an “energy conservation standard” cannot consist of both a design requirement and a level of efficiency or energy use. Id.
10
Moreover, item (A) above indicates that a single energy conservation standard cannot have measures of both energy efficiency and energy use. Furthermore, EPCA specifically requires DOE to base its test procedure for this equipment on American National Standards Institute (ANSI)/American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard 32.1-2004, “Methods of Testing for Rating Vending Machines for Bottled, Canned or Other Sealed Beverages.” (42 U.S.C. 6293(b)(15)) The test methods in ANSI/ASHRAE Standard 32.1-2004 consist of means to measure energy consumption, not energy efficiency.
10
Beverage vending machines are not one of the specified equipment for which EPCA allows a standard to consist of a design requirement. (42 U.S.C. 6291(6)(B), 6292(a))
For the reasons stated above, DOE does not intend to develop efficiency standards or design requirements for this equipment. Instead, DOE intends to develop standards for maximum levels of energy use for beverage vending machines, and manufacturers could meet these standards with their own design methods.
c. Combination Vending Machines
Combination vending machines have a refrigerated volume for the purpose of cooling and vending “beverages in a sealed container,” and are therefore covered by this rule. However, beverage vending is not their sole function. Combination machines also have non-refrigerated volumes for the purpose of vending other, non-“sealed beverage” merchandise. In the ANOPR, DOE addressed several comments from interested parties regarding combination vending machines. Specifically, these parties were concerned that regulating vending machines that contain both refrigerated and non-refrigerated products could result in confusion about what this rulemaking covers, or could result in manufacturers taking advantage of loopholes to produce equipment that does not meet the standards. In response, DOE stated that that the language used in EPCA to define beverage vending machines is broad enough to include any vending machine, including a combination machine, as long as some portion of that machine cools bottled or canned beverages and dispenses them upon payment. (42 U.S.C. 6291(40)) DOE interprets this language to cover any vending machine that can dispense at least one type of refrigerated bottled or canned beverage, regardless of the other types of vended products (some of which may not be refrigerated). 73 FR 34105-06.
III. General Discussion
A. Test Procedures
On December 8, 2006, DOE published a final rule in the
Federal Register
that incorporated by reference ANSI/ASHRAE Standard 32.1-2004, with two modifications, as the DOE test procedure for this equipment. (71 FR 71340, 71375; 10 CFR 431.294) The first modification specified that in section 6.2, Voltage and Frequency, equipment with dual nameplate voltages must be tested at the lower of the two voltages only. 71 FR 71340, 71355 The second modification specified that (1) any measurement of “vendible capacity” of refrigerated bottled or canned beverage vending machines must be in accordance with the second paragraph of section 5 of ANSI/ASHRAE Standard 32.1-2004, Vending Machine Capacity; and (2) any measurement of “refrigerated volume” of refrigerated bottled or canned beverage vending machines must be in accordance with the methodology specified in section 5.2, Total Refrigerated Volume (excluding subsections 5.2.2.2 through 5.2.2.4) of ANSI/Association of Home Appliance Manufacturers (AHAM) HRF-1-2004, “Energy, Performance and Capacity of Household Refrigerators, Refrigerator-Freezers and Freezers.”
Id.
B. Technological Feasibility
1. General
DOE considers design options technologically feasible if they exist in the marketplace or if research has progressed to the development of a working prototype. “Technologies incorporated in commercially available equipment or in working prototypes will be considered technologically feasible.” 10 CFR part 430, subpart C, appendix A, section 4(a)(4)(i)
In each standards rulemaking, DOE conducts a screening analysis based on information it has gathered regarding all current technology options and prototype designs. In consultation with interested parties, DOE develops a list of design options for consideration in the rulemaking. All technologically feasible design options are candidates in this initial assessment. Early in the process, DOE eliminates from consideration any design option (a) that is not technologically feasible; (b) that is not practicable to manufacture, install, or service; (c) that will have adverse impacts on equipment utility or availability; or (d) for which there are health or safety concerns that cannot be resolved. Chapter 4 of the TSD accompanying this notice contains a description of the screening analysis for this rulemaking.
In the ANOPR, DOE eliminated seven of the technologies considered in the market and technology assessment. Higher efficiency evaporator and condenser fan blades, low-pressure differential evaporators, and defrost mechanisms were eliminated because they are not expected to improve energy efficiency. (73 FR 34108-09) Thermoacoustic refrigeration, magnetic refrigeration, electro-hydrodynamic heat exchangers, and copper rotor motors were eliminated because they are in the research stage. Therefore, they would not be practicable to manufacture, install, or service on the scale necessary to serve the relevant market at the time of the effective date of the standard. Because these technologies are in the research stage, there are also no working prototypes that allow DOE to assess whether they would have any adverse impacts on utility to significant subgroups of customers, result in the unavailability of any types of equipment, or present any significant
adverse impacts on health or safety. (73 FR 34109) DOE believes that all the efficiency levels discussed in today's notice are technologically feasible because there is equipment on the market or there are working prototypes at all of the efficiency levels analyzed. Chapter 4 of the TSD includes a discussion of the technological feasibility of the design options considered in the screening analysis.
2. Maximum Technologically Feasible Levels
In considering whether to adopt new standards for a type or class of beverage vending machines, DOE must “determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible” for such equipment. (42 U.S.C. 6295(p)(1) and (v)) If the standards are not designed to achieve such efficiency or use, the Secretary shall state the reasons for this in the proposed rule.
Id.
The values in Table III-1 represent the energy use levels that would achieve the maximum reductions in energy use that are technologically feasible at this time for beverage vending machines. DOE identified these maximum technologically feasible (“max-tech”) levels for the equipment classes analyzed as part of the engineering analysis (chapter 5 of the TSD). For both equipment classes, DOE applied the most efficient design options available for energy-consuming components.
Table III-1—Max-Tech Energy Use Levels
Equipment class
Max-tech level
kWh/day
A
MDEC = 0.045 × V + 2.42
B
MDEC = 0.068 × V + 2.63
“V” is the refrigerated volume of the refrigerated bottled or canned beverage vending machine, as measured by ANSI/AHAM HRF-1-2004, “Energy, Performance and Capacity of Household Refrigerators, Refrigerator-Freezers and Freezers.”
C. Energy Savings
1. Determination of Savings
DOE used the NES spreadsheet to estimate energy savings. The spreadsheet forecasts energy savings over the period of analysis for TSLs relative to the base case. DOE quantified the energy savings attributable to an energy conservation standard as the difference in energy consumption between the trial standards case and the base case. The base case represents the forecast of energy consumption in the absence of new mandatory efficiency standards. The NES spreadsheet model is described in section IV.G of this notice and in chapter 11 of the TSD accompanying this notice.
The NES spreadsheet model calculates the energy savings in site energy or kilowatt hours (kWh). Site energy is the energy directly consumed at building sites by beverage vending machines. DOE expresses national energy savings in terms of the source energy savings, which are the energy savings used to generate and transmit the energy consumed at the site. Chapter 11 of the TSD contains a table of factors used to convert kWh to Btu. DOE derives these conversion factors, which change with time, from EIA's
AEO2009.
2. Significance of Savings
EPCA prohibits DOE from adopting a standard that would not result in significant additional energy savings. (42 U.S.C. 6295(o)(3)(B) and (v)) While the term “significant” is not defined in the Act, the U.S. Court of Appeals in
Natural Resources Defense Council
v.
Herrington,
768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended significant energy savings to be savings that were not “genuinely trivial.” The estimated energy savings for the trial standard levels considered in this rulemaking range from 0.001 to 0.107 quadrillion Btu (quads); therefore, DOE considers them significant within the meaning of section 325 of the Act.
D. Economic Justification
1. Specific Criteria
As noted earlier, EPCA provides seven factors to be evaluated in determining whether an energy conservation standard is economically justified. The following sections discuss how DOE has addressed each factor thus far in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i) and (v))
a. Economic Impact on Manufacturers and Commercial Customers
DOE uses an annual cash-flow approach in determining the quantitative impacts of a new or amended standard on manufacturers. This includes both a short-term assessment based on the cost and capital requirements between the announcement of a regulation and when the regulation comes into effect, and a long-term assessment. Impacts analyzed include INPV, cash flows by year, and changes in revenue and income. Next, DOE analyzes and reports the impacts on different types of manufacturers, paying particular attention to impacts on small manufacturers. DOE then considers the impact of standards on domestic manufacturer employment, manufacturing capacity, plant closures, and loss of capital investment. Finally, DOE takes into account the cumulative impact of regulations on manufacturers. For a more detailed discussion of the MIA, see chapter 13 of the TSD.
For customers, measures of economic impact are generally the changes in installed price and annual operating costs (
i.e.,
the LCC). Chapter 8 of the TSD presents the LCC of the equipment at each TSL. The LCC is one of the seven factors to be considered in determining the economic justification for a new or amended standard. (42 U.S.C. 6295(o)(2)(B)(i)(II) and (v))
b. Life-Cycle Costs
The LCC is the total customer expense for a piece of equipment over the life of the equipment
(i.e.,
purchase price plus maintenance and operating costs). The LCC analysis compares the life-cycle costs of equipment designed to meet new or amended energy conservation standards with the life-cycle cost of the equipment likely to be installed in the absence of such standards. DOE determines these costs by considering (1) total installed price to the purchaser (including manufacturer selling price (MSP), sales taxes, distribution channel markups as shown in Table IV-3, and installation cost), (2) the operating expenses of the equipment (energy cost and maintenance and repair cost), (3) equipment lifetime, and (4) a discount rate that reflects the real cost of capital and puts the LCC in present value terms.
Recognizing that each type of commercial customer who uses a beverage vending machine is unique, DOE analyzed variability and uncertainty by performing the LCC and PBP calculations for seven types of businesses. Six of these typically purchase and install beverage vending machines in their buildings: office/healthcare (including a large number of firms engaged in financial and other services, medical and dental offices, and nursing homes); retail (including all types of retail stores and food and beverage service facilities); schools (including colleges, universities and large groups of housing facilities owned by State governments, such as prisons); manufacturing facilities and military bases (typically large utility customers that pay industrial rates for their electricity consumption); and “other” (including warehouses, hotels/motels, and assembly buildings). The seventh business type, which is the most common purchaser of the equipment, is a local bottler or vending machine operator that typically has the machine
installed in one of the other six business types, provides vending services, and splits the coin box receipts through a contractual arrangement with the site owner. For a more detailed discussion of the LCC analysis, see chapter 8 of the TSD.
c. Energy Savings
While significant energy conservation is a separate statutory requirement for imposing an energy conservation standard, EPCA requires DOE to consider the total projected energy savings that are expected to result directly from the standard in determining the economic justification of such a standard. (42 U.S.C. 6295(o) (2)(B)(i)(III), and (3), and (v)) DOE used the NES spreadsheet results in its consideration of total projected savings. Section IV.G.1 of this notice discusses the savings figures.
d. Lessening of Utility or Performance of Equipment
In establishing equipment classes, evaluating design options, and assessing the impact of potential standard levels, DOE tried to avoid having new standards for beverage vending machines lessen the utility or performance of the equipment under consideration in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i)(IV) and (v)) None of the proposed trial standard levels considered in this rulemaking involves changes in equipment design or unusual installation requirements that would reduce the utility or performance of the equipment. See chapter 4 and chapter 16 of the TSD for more detail.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition likely to result from standards. It directs the Attorney General to determine in writing the impact, if any, of any lessening of competition likely to result from imposition of a proposed standard. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (ii), and (v)) DOE has transmitted a written request to the Attorney General soliciting a written determination on this issue.
f. Need of the Nation To Conserve Energy
The non-monetary benefits of the proposed standards are likely to be reflected in improvements to the security and reliability of the Nation's energy system, and in reduced reliance on foreign sources of energy. Reductions in the overall demand for energy will reduce the Nation's reliance on foreign sources of energy and increase reliability of the Nation's electricity system. DOE conducted a utility impact analysis to show the reduction in installed generation capacity. Reduced power demand (including peak power demand) generally improves the security and reliability of the energy system.
The proposed standards are likely to result in improvements to the environment. In quantifying these improvements, DOE has defined a range of primary energy conversion factors and associated emission reductions based on the generation that energy conservation standards displaced. DOE reports the environmental effects from each trial standard level for this equipment in the draft environmental assessment in chapter 16 of the TSD. (42 U.S.C. 6295(o)(2)(B)(i)(VI) and (v))
g. Other Factors
EPCA allows the Secretary of Energy, in determining whether a standard is economically justified, to consider any other factors the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII) and (v)) Under this provision, DOE considered LCC impacts on identifiable groups of customers, such as customers of different business types who may be disproportionately affected by any national energy conservation standard. In particular, DOE examined the LCC impact on small businesses (
i.e.,
those with low annual income) that may not be able to afford a significant increase in the purchase price (“first cost”) of beverage vending machines. Some of these customers may retain equipment past its useful life. Large increases in first cost also could preclude the purchase and use of equipment altogether.
2. Rebuttable Presumption
Section 325(o)(2)(B)(iii) of EPCA states that there is 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 level is less than three times the value of the first-year energy (and, as applicable, water) savings resulting from the standard, as calculated under the applicable DOE test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) DOE's LCC and PBP analyses generate values that indicate the cost-effectiveness of products meeting potential energy conservation standards. These values include, but are not limited to, the 3-year payback period contemplated under the rebuttable presumption test discussed above. (See chapter 8 of the TSD that accompanies this notice.) However, DOE routinely conducts a full economic analysis that considers the full range of impacts, including those to the consumer, manufacturer, Nation, and environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this full analysis serve as the basis for DOE to definitively determine the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification).
IV. Methodology and Discussion of Comments
DOE used two spreadsheet tools to determine the impact of energy conservation standards on the Nation. The first spreadsheet calculates LCCs and PBPs of potential new energy conservation standards. The second spreadsheet provides shipments forecasts and then calculates NES and NPV impacts of potential new energy conservation standards. DOE also assessed manufacturer impacts, largely through use of the Government Regulatory Impact Model (GRIM).
Additionally, DOE estimated the impacts that energy conservation standards for beverage vending machines have on utilities and the environment. DOE used a version of EIA's National Energy Modeling System (NEMS) for the utility and environmental analyses. The NEMS model simulates the energy economy of the United States and has been developed over several years by EIA primarily to prepare the
Annual Energy Outlook
(
AEO
). NEMS produces a widely known baseline forecast for the Nation through 2025 and is available on the DOE Web site.
11
The version of NEMS used for efficiency standards analysis is called NEMS-BT
12
and is based on the
AEO2008
version with minor modifications. NEMS offers a sophisticated picture of the effect of standards, since it measures the interactions between the various energy supply and demand sectors and the economy as a whole.
11
http://www.eia.doe.gov/oiaf/aeo/overview.
12
EIA approves use of the name NEMS to describe only an AEO version of the model without any modification to code or data. Because the present analysis entails some minor code modifications and runs the model under various policy scenarios that deviate from AEO assumptions, the name NEMS-BT refers to the model used here. For more information on NEMS, refer to
The National Energy Modeling System: An Overview 1998.
DOE/EIA-0581 (98), February 1998. BT is DOE's Building Technologies Program. NEMS-BT was formerly called NEMS-BRS.
A. Market and Technology Assessment
When beginning an energy conservation standards rulemaking,
DOE develops information that provides an overall picture of the market for the equipment concerned, including the purpose of the equipment, the industry structure, and market characteristics. 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 equipment classes, manufacturers, quantities, and types of equipment sold and offered for sale; retail market trends; and regulatory and non-regulatory programs. See chapter 3 of the TSD for further discussion of the market and technology assessment.
1. Definition of Beverage Vending Machine
EPCA defines the term “refrigerated bottled or canned beverage vending machine” as “a commercial refrigerator that cools bottled or canned beverages and dispenses the bottled or canned beverages on payment.” (42 U.S.C. 6291(40)) Thus, coverage of equipment under EPCA as a beverage vending machine in part depends on whether it cools and dispenses “bottled beverages” and/or “canned beverages.” Based on comments on the framework document, DOE tentatively decided to consider a broader definition for the terms “bottled” and “canned” as they apply to beverage vending machines. Such a definition would avoid unnecessary complications regarding the material composition of the container and eliminate the need to determine whether a particular container is a bottle or a can. A bottle or can in this context refers to “a sealed container for beverages,” so a bottled or canned beverage is “a beverage in a sealed container.” In the ANOPR, DOE sought comment on this broader definition and on whether it is consistent with the intent of EPCA. DOE did not receive any comments on this definition. Therefore, DOE is proposing to define a bottled or canned beverage as “a beverage in a sealed container.”
2. Equipment Classes
When evaluating and establishing energy conservation standards, DOE generally divides covered equipment into equipment classes by the type of energy used, capacity, or other performance-related features that affect efficiency and factors such as the utility of such feature(s). (42 U.S.C. 6295(q)) DOE routinely establishes different energy conservation standards for different equipment classes based on these criteria.
Certain characteristics of beverage vending machines have the potential to affect their energy use and efficiency. Accordingly, these characteristics could be the basis for separate equipment classes for these machines. DOE determined that the most significant criterion affecting beverage vending machine energy use is the method used to cool beverages. DOE divided covered equipment into two equipment classes, Class A and Class B. DOE defines these terms as follows:
• Class A means a refrigerated bottled or canned beverage vending machine that is fully cooled.
• Class B means any refrigerated bottled or canned beverage vending machine not considered to be Class A.
The Class A beverage vending machine equipment class comprises machines that cool product throughout the entire refrigerated volume. Class A machines generally use “shelf-style” vending mechanisms and a transparent (glass or polymer) front. Because the next-to-be-vended product is visible to the customer and any product can be selected by the customer off the shelf, all bottled or canned beverage containers are necessarily enclosed within the refrigerated volume.
In Class B beverage vending machines, cold, refrigerated air is directed at a fraction (or zone) of the refrigerated volume. This cooling method is used to assure that the next-to-be-vended product will be the coolest product in the machine. These machines typically have an opaque front and use a “stack-style” vending mechanism.
B. Engineering Analysis
The engineering analysis develops cost-efficiency relationships to show the manufacturing costs of achieving increased efficiency. DOE has identified the following three methodologies to generate the manufacturing costs needed for the engineering analysis: (1) The design-option approach, which calculates the incremental costs of adding design options to a baseline model that will improve its efficiency; (2) the efficiency-level approach, which provides the relative costs of achieving increases in energy efficiency levels without regard to the particular design options used to achieve such increases; and (3) the cost-assessment (or reverse engineering) approach, which provides “bottom-up” manufacturing cost assessments for achieving various levels of increased efficiency based on detailed cost data for parts and material, labor, shipping/packaging, and investment for models that operate at particular efficiency levels.
1. Approach
In this rulemaking, DOE is adopting a design-option approach, which calculates the incremental costs of adding specific design options to a baseline model. DOE decided on this approach after receiving no response to its ANOPR request for the manufacturer data needed to execute an efficiency-level, approach-based analysis. The design-option approach allows DOE to make its engineering analysis methodologies, assumptions, and results publicly available, allowing advocates, manufacturers, and other interested parties the opportunity to review and comment on this information. Using the design-option approach, cost-efficiency relationship estimates are based on manufacturer or component supplier data or derived from engineering computer simulation models. Chapter 5 of the TSD contains a detailed description of the equipment classes analyzed and analytical models used to conduct the beverage vending machine engineering analysis based on the design-option approach.
2. Equipment Analyzed in the Engineering Analysis
DOE analyzed three beverage vending machines of different sizes for both equipment classes to assess how energy use varies with size. DOE chose a small, medium, and large machine for Class A and Class B beverage vending machines, based on current market offerings. See chapter 3 of the TSD for a detailed description of the Class A and Class B equipment classes.
In the ANOPR, DOE responded to several comments and presented a detailed discussion of its equipment class selection methodology. 73 FR 34103. For the NOPR, DOE increased the physical case dimensions based on a reevaluation of equipment currently on the market, even though the equipment classification methodology has not changed since the ANOPR. The case dimension increases affected the engineering parameters that are a function of case dimension, including wall area, vendible capacity, and refrigerated volume. The changes to refrigerated volume and assumed vendible capacity are summarized in Table IV-1. All changes are described in detail in chapter 5 of the TSD.
Table IV-1—Configurations of the Beverage Vending Machines Analyzed
Class A
Small
Medium
Large
Class B
Small
Medium
Large
Vendible Capacity
number of cans
300
400
500
450
650
800
Refrigerated Volume
ft
3
17
22
34
17
22
26
3. Analytical Models
DOE's design-option-based engineering analysis relies on four analytical models to develop the relationship between cost and increased efficiency: the cost model, baseline model, design-options analysis, and energy consumption model. The cost model estimates the core case cost of a beverage vending machine for each equipment class. The core case cost is the fully absorbed production cost of components that do not consume energy. The baseline model, which defines baseline specifications and incorporates energy consuming components for each equipment class, estimates the energy-consumption and cost of the typical equipment (
i.e.,
units of typical efficiency) on the market today. The design-options analysis develops cost-efficiency input data for a list of potential energy-saving technologies that can be integrated into the baseline model to increase efficiency. The energy consumption model calculates the daily energy consumption (DEC) of beverage vending machines at the various performance levels achieved by implementing these design options. Chapter 5 of the TSD includes a detailed description of each analytical model and its role in calculating the cost-efficiency data results of the engineering analysis.
a. Cost Model
DOE used a cost model to estimate the core case cost (
i.e.,
the fully absorbed production cost of the structure, walls, doors, shelving and fascia of the case, but not the cost of any energy-using components) of beverage vending machines. This model was adapted from a cost model developed for DOE's rulemaking on commercial refrigeration equipment.
13
The approach for commercial refrigeration equipment involved disassembling a self-contained refrigerator, analyzing the materials and manufacturing processes for each component, and developing a parametric spreadsheet to model the cost to fabricate (or purchase) each component and the cost of assembly. Because of the similarities in manufacturing processes between self-contained commercial refrigeration equipment and beverage vending machines, DOE was able to adapt the commercial refrigeration equipment cost model for beverage vending machines by maintaining many of the assumptions about materials and manufacturing processes but modifying the dimensions and types of components specific to beverage vending machines. To confirm the accuracy of the cost model, DOE obtained input from interested parties on beverage vending machine production cost estimates and on other assumptions DOE used in the model. Chapter 5 of the TSD provides details of the cost model.
13
See
http://www.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipment.html
for further detail on and validation of the commercial refrigeration equipment cost model.
Following the ANOPR, DOE received no comments regarding its cost model; therefore, no significant changes were made to the methodology used in the NOPR analysis. Since the ANOPR, all dollar amounts have been updated to 2008$ using the producer price index.
b. Baseline Models
As mentioned above, the engineering analysis calculates the incremental costs for equipment with efficiency levels above a baseline model in each equipment class. DOE defined baseline specifications for each equipment class, including dimensions, numbers of components, operating temperatures, nominal power ratings, and other features needed to calculate energy consumption. The baseline specifications define the energy consumption and cost of the typical equipment (
i.e.,
units of typical efficiency) on the market today, namely beverage vending machines meeting the ENERGY STAR Tier 1 efficiency level. (See chapter 3 of the TSD for further details on the ENERGY STAR criteria.)
DOE established baseline specifications for each equipment class modeled in the engineering analysis by reviewing available manufacturer data, selecting several representative units based on that data, and then aggregating the physical characteristics of the selected units. This process created a representative unit for each equipment class with average characteristics for physical parameters (
e.g.,
volume, wall area), and typical performance for energy-consuming components (
e.g.,
fans, lighting). See chapter 5 of the TSD for these specifications.
DOE received one comment regarding the baseline refrigerant. In the ANOPR, DOE stated that hydrofluorocarbon (HFC) refrigerants would be the basis of its analyses because of the phaseout of hydrochlorofluorocarbons (HCFCs) in 2010,
14
and the volatility and availability issues associated with hydrocarbon (HC) refrigerants and CO
2
. Coca-Cola commented that it is phasing out HFCs and that it should not have any refrigeration equipment with HFC refrigerants by 2012. (Coca-Cola, Public Meeting Transcript, No. 29 at pp. 179-180) The Joint Comment stated that while manufacturers and customers are interested in alternatives to HFC refrigerants, it considers the use of HFC refrigerants a good default assumption with respect to costs and performance. (Joint Comment, No. 34 at p. 2)
14
EPA is phasing out the production and importation of certain HCFC refrigerants (
i.e.,
HCFC-142b and HCFC-22) in new equipment in the United States by January 1, 2010. EPA is phasing out the production and importation of all HCFC refrigerants in new equipment in the United States by January 1, 2015. (42 U.S.C. 7671(d))
While DOE acknowledges the use of some alternative refrigerants (
i.e.,
HCs and CO
2
) elsewhere in the world, the majority of the U.S. beverage vending machine industry uses HFC refrigerants. Since the analysis should be based on the refrigerant most widely used in beverage vending machines, DOE will continue to use HFC refrigerants as the basis for its technical analysis in this rulemaking.
c. Design Options
In the market and technology assessment for the ANOPR, DOE defined an initial list of technologies that could reduce the energy consumption of beverage vending machines. In the screening analysis for the ANOPR, DOE screened out four of these technologies based on four screening criteria: technological feasibility; practicability to manufacture, install and service; impacts on equipment utility or availability; and impacts on health or
safety. 73 FR 34108-09. The remaining technologies became inputs to the ANOPR engineering analysis as design options.
For the NOPR, DOE did not receive any comments suggesting revisions to the list of ANOPR design options. Therefore, the design option inputs remain the same for the NOPR engineering analysis. However, the Joint Comment stated that DOE must document that the energy savings potential of light-emitting diode (LED) lighting has received adequate consideration (Joint Comment, No. 34 at p. 2).
DOE's consideration of LED lighting technology is documented in the Engineering Analysis Spreadsheet and chapter 5 of the TSD. Since the issuance of the ANOPR, DOE has carefully reviewed the LED technology design option and revised the cost and energy usage data for the NOPR. The LED price and energy use updates are adapted from the commercial refrigeration rulemaking.
15
These changes are based on conversations with LED manufacturers and information gathered on existing LED systems for beverage vending machines. As a result of these conversations, DOE better understands how LED lighting can be configured to replace fluorescent systems in order to save energy without sacrificing utility. In certain applications, the focused light from LED systems delivers the same amount of light to the space being illuminated as fluorescent systems and allows for a reduction in the wattage consumed. As a result, overall energy consumption for lighting decreases. Implemented across the installed base of beverage vending machines, LED systems could result in considerable energy savings. Estimates of these savings can be found in chapter 5 of the TSD.
15
See
http://www.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipment.html
for further detail on and validation of the commercial refrigeration equipment LED price and usage data.
d. Energy Consumption Model
The energy consumption model estimates the DEC of beverage vending machines at various performance levels using a design-option approach. The model is specific to the categories of equipment covered under this rulemaking, but is sufficiently generalized to model the energy consumption of both covered equipment classes. For a given equipment class, the model estimates the DEC for the baseline and the energy consumption of several levels of performance above the baseline. The model is used to calculate each performance level separately.
In developing the energy consumption model, DOE made certain assumptions, including general assumptions about the analytical methodology and specific assumptions regarding load components and design options. DOE based its energy consumption estimates on new equipment tested in a controlled-environment chamber under the procedures and conditions specified in ANSI/ASHRAE Standard 32.1-2004, “Methods of Testing for Bottled, Canned, and Other Sealed Beverages.”
16
Manufacturers of beverage vending machines must certify that their equipment complies with Federal standards using this test method, which specifies a certain ambient temperature, humidity, and other requirements. One relevant specification that is absent from ANSI/ASHRAE Standard 32.1-2004 is the operating hours of the display case lighting during a 24-hour period. DOE assumes the operating time to be 24 hours (
i.e.,
that display case lighting is on throughout the 24-hour period) when conducting the analyses for this rulemaking. Chapter 5 of the TSD details these and other beverage vending machine considerations.
16
These test procedures are incorporated by reference at 10 CFR 431.294.
The energy consumption model calculates DEC from two major components: (1) Component energy consumption, and (2) compressor energy consumption (expressed as kWh/day). Component energy consumption is a sum of the direct electrical energy consumption of fan motors, lighting, vend mechanisms, control systems, and coin and bill validators. Compressor energy consumption is calculated from the total refrigeration load, expressed as Btu/h, and a compressor model based on the 10-coefficient compressor model in American Refrigeration Institute (ARI) Standard 540-2004, “Performance Rating of Positive Displacement Refrigerant Compressors and Compressor Units.” The total refrigeration load is a sum of the component heat load and non-electric load. The component heat load is a sum of the heat emitted by evaporator fan motors and lighting affecting refrigerated space. (Condenser fan motors are outside the refrigerated space of a beverage vending machine and do not contribute to the component heat load.) The non-electric load is the sum of: the heat contributed by radiation through glass doors in Class A machines; heat conducted through walls and doors; and sensible and latent loads from warm, moist air infiltration through vend doors and cracks. Chapter 5 of the TSD provides details on component energy consumption, compressor energy consumption, and heat load models.
During the framework public meeting, DOE asked for comments on which normalization metric, vendible capacity, or refrigerated volume would be most appropriate for setting standards for beverage vending machines. Based on public comments, DOE decided to use refrigerated volume in the ANOPR. 73 FR 34105. Following the ANOPR, a comment submitted by the American Council for an Energy-Efficient Economy (ACEEE), Appliance Standards Awareness Project (ASAP), Natural Resources Defense Council (NRDC), and NPCC (hereafter “Joint Comment”) stated that using internal refrigerated volume instead of a 12-ounce can count for rating beverage vending machines is appropriate. (Joint Comment, No. 34 at p. 3).
4. Engineering Analysis Results
The results of the engineering analysis are reported as cost-efficiency data (or “curves”) in the form of DEC (in kWh) versus MSP (in dollars). DOE developed six curves representing the two equipment classes and three representative sizes analyzed in each equipment class. The methodology for developing the curves started with determining the energy consumption for baseline equipment and the full cost of production for this equipment. Above the baseline, DOE implemented design options using the ratio of cost to savings, and implemented only one design option at each engineering level analyzed. Design options were implemented until all available technologies were employed (
i.e.,
at a max-tech level). Table IV-2 shows the engineering analysis results. See TSD chapter 5 for additional detail on the engineering analysis and TSD appendix B for complete cost-efficiency results.
BILLING CODE 6450-01-P
EP29MY09.004
In addition to the design-option efficiency levels above, DOE calculated intermediate efficiency levels to bridge large performance level gaps created by certain design options. For instance, in a representative, medium-sized Class A machine, the LED design option leads to a considerable decrease in energy consumption between efficiency levels 5 and 6. Intermediate efficiency levels are necessary to create an even distribution of performance levels that are achievable without using a specified combination of design options. Chapter 5 of the TSD discusses these intermediate efficiency levels and the methodology behind their selection in more detail.
C. Markups To Determine Equipment Price
This section explains how DOE developed the distribution channel (supply chain) markups to determine installed costs for beverage vending machines (chapter 6 of the TSD). DOE used the supply chain markups it developed (including sales taxes and installation costs), along with the MSPs developed from the engineering analysis, to arrive at the final installed equipment prices for baseline and higher-efficiency beverage vending machines. As explained in the ANOPR, 73 FR 34113, DOE defined three distribution channels for beverage vending machines to describe how the equipment passes from the manufacturer to the customer. For the ANOPR analysis, DOE estimated market shares of 68 percent, 27 percent, and 5 percent for the manufacturer/beverage bottler (distribution channel #1), manufacturer/wholesaler/operator (distribution channel #2), and manufacturer/wholesaler/site owner (distribution channel #3) channels, respectively, for all beverage vending machines, based on market estimates from consultants. That is, 68 percent of all sales were estimated to pass from the manufacturer directly to a bottler; 27 percent were estimated to pass from the manufacturer through a wholesaler to a beverage machine operator; and 5 percent were estimated to pass from the manufacturer through a wholesaler to the owner of the premises where the machine operated. In the latter case, the owner of the premises also owned the beverage vending machine. 73 FR 34113.
Regarding distribution channels for vending machines and the calculation of the overall cost markups, Royal Vendors commented that distribution channel #1 (direct sales to major bottlers) will be around 85 percent to 90 percent (Royal Vendors, No. 29 at p. 39). Dixie-Narco stated its sales percentages through the three distribution channels would be 85 percent, 12 percent and 3 percent, respectively. (Dixie-Narco, No. 29 at p. 40) Both comments gave increased importance to direct sales to major bottlers and deemphasized sales through wholesalers to vending operators and site owners. NPCC asked if the markups would be lower if DOE increased the market share of channel #1 from 68 percent to 80 or 85 percent. (NPCC, No. 29 at p. 52)
For the NOPR, DOE updated its assumptions regarding the percentage breakdown of market distribution through the different channels to determine customer markups for purchasing beverage vending machines. These updates were to increase the fraction of the market through distribution channel #1 to 85 percent and reduce the fraction of the market distribution through other channels in line with manufacturer comments. Table IV-3 provides the revised estimated distribution channel shares (in percentage of total sales) through each of the three distribution channels.
EP29MY09.005
For each step in the distribution channels presented above, DOE estimated a baseline markup and an incremental markup, which are additional amounts added when equipment is sold and installed. A baseline markup is applied for the purchase of baseline equipment. An incremental markup is applied to the incremental increase in MSP for the purchase of higher efficiency equipment.
DOE developed markups for each step of a given distribution channel based on available financial data as described in the ANOPR analysis. 73 FR 34113-14. DOE continued to use the same sources of data for the NOPR analysis, but updated the input assumptions to the most recent data where possible.
Average overall markups in each distribution channel can be calculated using estimates of the shipments of beverage vending machines by distribution of State population. Since markups are not uniform among wholesalers, DOE used the Excel spreadsheet-based Crystal Ball program, which employs Monte Carlo analysis, to reflect this uncertainty in the LCC analysis. Table IV-4 and Table IV-5 show overall baseline and incremental markups for sales within each distribution channel. Chapter 6 of the TSD provides additional detail on markups.
Table IV-4—Overall Average Baseline Markups by Distribution Channel Including Sales Tax
Manufacturer direct
Wholesaler/Distributor
Overall weighted average
Markup
1.000
1.460
1.069
Sales Tax
1.070
1.070
1.070
Overall Markup
1.070
1.562
1.144
Table IV-5—Overall Average Incremental Markups by Distribution Channel Including Sales Tax
Manufacturer direct
Wholesaler/Distributor
Overall weighted average
Markup
1.000
1.200
1.030
Sales Tax
1.070
1.070
1.070
Overall Markup
1.070
1.284
1.102
D. Energy Use Characterization
The energy use characterization estimates the annual energy consumption of beverage vending machines. This estimate is used in the subsequent LCC and PBP analyses (chapter 8 of the TSD) and NIA (chapter 11 of the TSD). DOE estimated the energy use for machines in the two equipment classes analyzed
17
in the engineering analysis (chapter 5 of the TSD) based on the DOE test procedure.
18
DOE assumed all Class A machines to be installed indoors and subject to a constant air temperature of 75 °F and relative humidity of 45 percent, matching test conditions in the DOE test procedure. 73 FR 34114-15. Based on market data and discussions with several beverage vending machine distributors, DOE assumed that 25 percent of Class B machines are placed outdoors and the remaining 75 percent are installed indoors. DOE sought but did not receive comment on this distribution. Thus, DOE maintained the distribution for the NOPR analysis of Class B machines.
17
Class A and Class B vending machines are described in section II.A.2 of the ANOPR. 73 FR 34103-34104.
18
DOE incorporated ANSI/ASHRAE Standard 32.1-2004 by reference, with two modifications, as the DOE test procedure for the beverage vending machines. 71 FR 71340, 71375 (Dec. 8, 2006); 10 CFR 431.294.
In response to the ANOPR, the Edison Electric Institute (EEI) commented that it would be helpful for interested parties if DOE would provide the annual energy usage of Class B machines located outdoors versus machines located indoors (EEI, No. 37 at p. 2). EEI also commented that it would be helpful if DOE collected data on peak kW demands for machines located both indoors and outdoors. Such data would help determine if the new energy conservation standards will have any impact on the peak kW demands based on DEC, especially for equipment located outdoors on hot summer days (EEI, No. 37 at p. 2). EEI further commented that DOE should calculate energy savings separately for indoor and outdoor machines based on actual estimated ambient conditions for the machines (test procedure for indoor machines, climate data for outdoor machines). Also, for outdoor machines, DOE should estimate a percentage of machines that will be affected by solar heat gain because of southern or western exposures (EEI, No. 37 at p. 4).
In response to the EEI request, DOE is including the annual energy usage of Class B machines located outdoors versus machines located indoors in the TSD of today's NOPR. However, DOE does not plan to obtain peak demand data for indoor and outdoor machines. During the ANOPR public meeting, DOE presented the statement that 100 percent of Class A machines were intended to be installed indoors and that, based on
inquiries to distributors, 75 percent of Class B machines appeared to be installed indoors (DOE, No. 29 at pp. 53-54). Interested parties discussed the implications of that assumption, but made no challenge to the assumption itself. Therefore, the vast majority of all beverage vending machines appear to be in conditioned environments. As a result, DOE does not believe that outdoor beverage vending machines will have a significant impact on peak loads for utilities.
During the ANOPR public meeting, participants discussed the impact of refurbished machines, their energy use profile, and energy efficiency upgrades to existing machines based on accounting demands (Coca-Cola, No. 29 at pp. 88-89). Dixie-Narco commented that it has kits listed on the U.S. Environmental Protection Agency (EPA) Web site that upgrade existing machines to meet ENERGY STAR Tier 2 (Dixie-Narco, No. 29 at pp. 90-91).
DOE acknowledges this information, but it does not have the authority to regulate refurbished vending machines. DOE has carefully considered its authority to establish energy conservation standards for rebuilt and refurbished beverage vending machines in light of these comments, and has tentatively concluded that its authority does not extend to rebuilt and refurbished equipment.
Throughout the history of the energy conservation standards program, DOE has not regulated used consumer products or commercial equipment that has been refurbished, rebuilt, or undergone major repairs, since EPCA only covers new covered equipment distributed in commerce.
19
DOE concludes that rebuilt or refurbished beverage vending machines are not new covered equipment under EPCA and, therefore, are not subject to DOE's energy conservation standards or test procedures.
19
As an example, this position was taken and discussed in the distribution transformers final rule, 72 FR 58203.
Regarding the energy consumption model, Coca-Cola commented that moisture removal could account for nearly 12 percent of vending machine energy consumption in a reload situation, which is an intermittent occurrence. (Coca-Cola, No. 29 at p. 32 and No. 29 at p. 65) DOE accounts for the effect of ambient humidity changes on the hourly energy consumption calculation through use of weather files. However, DOE has not modeled a product reload situation because it is an intermittent occurrence and DOE has no information about total reload times or schedules in actual use. A reload of product is not part of the daily energy consumption test required by ASHRAE Standard 32.1-2004, which DOE used as the basis for the energy consumption calculations.
Several commenters discussed the use of lighting controls and their impact on beverage vending machine energy use. Several manufacturers and other interested parties commented that having lighting and/or occupancy controls will help reduce energy consumption, especially when these machines go into “sleep mode.” (Coca-Cola, No. 29 at p. 78; Dixie-Narco, No. 29 at pp. 69-71; EEI, No. 37 at p. 3; Dixie-Narco, No. 36 at pp. 1, 2; PepsiCo, No. 29 at pp. 20-21; and Naval Facilities Engineering Service Center (NFESC), No. 41 at p. 1). PepsiCo stated that it is difficult to determine an average lighting operation time, but that turning the lights off should be encouraged. (PepsiCo, Public Meeting Transcript, No. 29 at p. 74) Coca-Cola stated that beverage vending machines may not incorporate lighting in the near future. (Coca-Cola, Public Meeting Transcript, No. 29 at p. 78) Royal Vendors stated that although automated refrigeration and lighting controls may become more popular, the current methodology is reasonable and consistent for the purposes of this analysis.
Having lighting controls and setting them properly at the factory does reduce beverage vending machine energy consumption when the machine goes into sleep mode. However, DOE does not have the authority to mandate lighting controls and/or occupancy sensors as a design requirement simultaneously with an energy conservation standard due to the definition of “energy conservation standard” in 42 U.S.C. 6291(6). See section II.C.2.c for further detail. Also, the current DOE test procedure does not provide a mechanism to account for the reduction in DEC resulting from lighting controls and/or occupancy sensors in the machines. However, EPCA as amended by EISA 2007 states that “at least once every 7 years, the Secretary shall review test procedures for all covered products * * *.” 42 U.S.C. 6293(b)(1)(A). DOE may consider incorporating a mechanism to account for the reduction in DEC resulting from lighting controls and/or occupancy sensors during its review of the test procedure for beverage vending machines. DOE has not included the impact of these lighting controls as part of the engineering or energy use characterization analyses for this rulemaking and is retaining the assumption of a 24-hour lighting operation period.
NFESC commented that the DOE analysis should not neglect the added electricity load on air-conditioned buildings. (NFESC, No. 41 at p. 3) Specifically, the comment stated that the appropriate question to ask is whether the added electricity required (as building cooling load) represents a significant percentage of the electricity required to operate the beverage vending machine. NEFSC calculations indicated that the added building cooling load electric demand represents an annual addition most probably on the order of 15% to the basic load imposed by operating the vending machine.
DOE acknowledges that it did not account for the additional cooling load imposed by the BVM on the whole building cooling load, and correspondingly, any space cooling energy benefits that come from the reduction of the BVM's electrical load. DOE accepts that such a cooling energy use reduction will likely occur. At the same time, any reduction in BVM energy use will also result in an increase in heating energy use within the buildings. This impact on building heating and cooling loads would only occur for those BVMs located indoors. The relative cooling-energy-use benefit to heating-energy-use penalty is a function of the climate location, building type and size, and the placement of the BVMs within the building. The BVM could be located in uncooled portions of an industrial building, in the entering vestibules in a grocery store or in a supermarket, or in the core of an office building. The relative monetary benefits are also a function of the relative heating and cooling fuel costs. The quantification of the relative benefits impact would have required an extensive whole-building heating and cooling energy use analysis. Such studies of the impacts coming from lighting energy use within buildings have been done in the past. However, lighting tends to have a load profile that correlates with the cooling energy use in buildings. This is less true for BVMs since they operate on a 24-hour basis. Considering both the cooling benefits and the heating penalties from reductions in BVM energy use, DOE believes, that the 15% figure suggested by the NFESC comment overstates the likely benefits. Therefore, DOE determined that an extensive whole-building analysis was not warranted.
As discussed in the engineering analysis above, DOE analyzed the three typical sizes (small, medium, and large vendible capacities), each with a
different refrigerated volume as measured by ANSI/AHAM HRF-1-2004 and shown in Table IV-1.
DOE used the same methodology to calculate the annual energy consumption for Class A and Class B vending machines as described in the ANOPR analysis. 73 FR 34115-16. For Class A vending machines, DOE calculated the annual energy consumption as the product of the average DEC (from the DOE test procedure indoor test condition of 75 °F, 45 percent relative humidity), times 365 days per year, which did not vary by State. For Class B vending machines, DOE used a weighted average between the annual average energy consumption for an outdoor machine and an indoor machine. To calculate a weighted energy use of all Class B machines, DOE added aggregated State-by-State results using data from each of the 237 Typical Meteorological Year 2 (TMY2) weather stations to the annual energy consumption of the remaining 75 percent of Class B machines located indoors.
DOE developed the annual energy consumption for each equipment class at each efficiency level for every State as inputs to the LCC and PBP analyses. Chapter 7 of the TSD shows the annual average energy consumption estimates by equipment class and efficiency level.
E. Life-Cycle Cost and Payback Period Analyses
In response to the requirements of section 325(o)(2)(B)(i) of EPCA (42 U.S.C. 6295(o)(2)(B)(i)), DOE conducted LCC and PBP analyses to evaluate the economic impacts of possible new beverage vending machine standards on individual customers. This section describes the analyses and the spreadsheet model DOE used. TSD chapter 8 provides details of the model and of all inputs to the LCC and PBP analyses.
The effects of standards on individual commercial customers include changes in operating expenses (usually lower) and total installed price (usually higher). The LCC is the total cost for a unit of beverage vending machines, over the life of the equipment, including purchase and installation expense and operating costs (energy expenditures and maintenance). To compute the LCC, DOE summed the installed cost of the equipment and its lifetime operating costs discounted to the time of purchase. The PBP is the change in purchase expense due to a given energy conservation standard divided by the change in first-year operating costs resulting from the standard. Otherwise stated, the PBP is the number of years it would take for the customer to recover the increased costs of a more efficient product through energy savings. DOE measures the changes in LCC and PBP associated with a given energy use standard level relative to a base case forecast of equipment energy use. The base case forecast reflects the market absent mandatory energy conservation standards. DOE believes LCC is a better indicator of economic impacts on consumers.
DOE also analyzed the effect of changes in operating expenses and installed price by calculating the PBP of potential standards relative to a base case. The PBP estimates the amount of time it would take the commercial customer to recover the anticipated, incrementally higher purchase expense of more energy efficient equipment through lower operating costs. The data inputs to the PBP calculation are the purchase expense (otherwise known as the total installed cost or first cost) and the annual operating costs for each selected design. The inputs to the equipment purchase expense were the equipment purchase price and installation price, with appropriate markups. The inputs to the operating costs were the annual energy consumption, electricity price, and repair and maintenance costs. The PBP calculation uses the same inputs as the LCC analysis but, since it is a simple payback, the operating cost is for the year the standards take effect, assumed to be 2012. For each efficiency level analyzed, the LCC analysis required input data for the total installed price of the equipment, operating cost, and discount rate.
DOE calculated the LCC for all customers as if each would purchase a new beverage vending machine in the year the standards take effect for newly manufactured equipment. Section 135(c)(4) of EPACT 2005 amended EPCA to add new subsections 325(v)(2), (3), and (4) (42 U.S.C. 6295(v)(1), (2), and (3)), which directs the Secretary to issue a final rule for refrigerated bottled or canned beverage vending machines no later than August 8, 2009. The energy conservation standard levels in the rule apply to all equipment manufactured 3 years after publication of the final rule. Consistent with EPCA, DOE used these dates in the NOPR analyses.
At the ANOPR public meeting, Dixie-Narco suggested that the industry has made great strides in partnership with the bottlers to reduce the energy consumption by over 50 percent in the last 5 years for both Class A and Class B beverage vending machines. Dixie-Narco stated that a vast majority of the machines will meet ENERGY STAR levels when the new DOE standards go into effect in 2012. (Dixie-Narco, No. 29 at pp. 17-19) The Joint Comment stated that provided DOE can confirm industry's assertion that the market has already shifted to ENERGY STAR Tier 2, DOE should take that level as the baseline rather than ENERGY STAR Tier 1. (Joint Comment, No. 34 at p. 3)
DOE does not agree that it should use ENERGY STAR Tier 2 as the baseline for the present analysis, because not all new products are expected to meet the Tier 2 level by 2012. (PepsiCo, No. 29 at p. 152), though most are expected to meet Tier 2 even without a minimum standard at Tier 2 (Dixie Narco, No. 29 at pp. 150-151; Coca-Cola, No. 29 at p. 149; PepsiCo, No. 29 at p. 149). In other rules, DOE has consistently based the baseline levels for the LCC analysis on products available in the marketplace. DOE used a distribution of efficiency levels based on its assessment of the future market for beverage vending machines when establishing the base case for the NIA. This distribution in the 2012 baseline market includes 10 percent of shipments at approximately the ENERGY STAR Tier 1 efficiency level and 90 percent of shipments at approximately the ENERGY STAR Tier 2 efficiency level. Thus, the baseline market includes efficiency levels at and above the LCC baseline efficiency, which is approximately ENERGY STAR Tier 1.
Regarding equipment lifetime, Dixie-Narco stated that it believes that the life expectancy of beverage vending machines will be 10 to 12 years by 2012. (Dixie-Narco, No. 29 at pp. 17-19) Coca-Cola commented that the lifetime has gone down from 13 years to about 10 years, and that the machine typically undergoes one refurbishment cycle during its life. Coca-Cola uses a financial model to replace or upgrade components or subsystems that need to be changed, which may or may not result in a change in energy profile. (Coca-Cola, No. 29 at pp. 86-87) Coca-Cola further commented that the lifetimes of legacy machines may be extended because of refurbishment and that it upgrades the energy efficiency of existing machines based on account needs and account demands. (Coca-Cola, No. 29 at pp. 88-89) Dixie-Narco stated that it currently has kits listed on the EPA Web site to upgrade existing machines to meet ENERGY STAR Tier 2 level. (Dixie-Narco, No. 29 at pp. 90-91)
Based on the information provided by the manufacturers in this discussion, DOE has changed the input assumptions for the life-cycle cost analysis and the shipment analysis model to reflect the
revised equipment life estimates to 10 years with one refurbishment cycle. The DOE analysis of proposed standard levels does not account for future, unknown energy impacts from refurbishments that may or may not occur during the 10-year equipment life or that provide energy benefits in conjunction with life extension. See chapter 8 of the TSD for further information.
Regarding the electricity prices and forecasts DOE used in the LCC analysis, EEI asked if DOE used Manufacturing Energy Consumption Survey (MECS) data for the beverage vending machines installed in the manufacturing sector. (EEI, No. 29 at p. 104) EEI recommended that DOE use EIA data for industrial electricity prices, as a large number of beverage vending machines are located in industrial facilities.
During the ANOPR public meeting, EEI asked if DOE considered separately the summer and winter energy usage of some of the outdoor machines, as summer use may be greater and at a higher commercial rate than winter use in certain climates. (EEI, No. 29 at p. 106) In its written comment, EEI recommended that DOE use seasonal rates and MECS data. (EEI, No. 37 at p. 3)
DOE used the EIA industrial electricity prices for averaging State-by-State electricity prices for the percentage of machines located in industrial, manufacturing, and government facilities for the ANOPR and NOPR analyses. DOE did not use seasonal variation in commercial electricity rates in its LCC analysis because seasonal variation in electricity rates differs throughout the country and even by utility, significantly complicating the analysis. The impact of higher energy consumption on the relatively small fraction of beverage vending machines located outdoors in the summer compared to winter was deemed to be of little impact on Class B equipment and of no impact on Class A equipment.
Regarding electricity price forecasts, the Joint Comment suggested that DOE use the most recent EIA
AEO
high price case for energy price forecasts
20
and include the cost and value of peak electricity demand in the analysis. (Joint Comment, No. 34 at p. 3) ACEEE asked DOE to review EIA
AEO
price applicability and offered to provide a list of alternative price forecasts. (ACEEE, No. 29 at pp. 107-108)
20
EIA high and low price cases are based on EIA's assumed average world price for oil and the adjustments of the economy and the energy sector to that key assumption. In the high price case in
AEO2008,
the average electricity price in 2030 was about 2.2 percent higher than in the reference case. Since the supplemental tables for the AEO 2009 were not yet available, DOE used the ratio of high and low price cases from
AEO2008
to scale the
AEO2009
reference case. See chapter 8 of the TSD for additional information.
DOE updated its NOPR analysis to use the
AEO2009
reference case scenario for the base electricity price and electricity price forecasts into the future. The NOPR provides a sensitivity analysis based on the
AEO
high and low price scenarios. DOE continued to use the
AEO
forecasts, as it has done for other rules, and did not explore alternative electricity price forecasts. DOE believes that analyzing the results using the high-price and low-price scenarios provides sufficient insight into the likely range of electricity price impacts. DOE has no evidence that alternative scenarios are better predictors of future electricity costs.
Regarding future climate change legislation and its impact on the price of electricity, the Joint Comment suggested including the value of carbon emissions in the LCC and NPV analyses. (Joint Comment, No. 34 at p. 3)
The intent of Federal carbon control legislation, and the ensuing cost of carbon mitigation to electricity generators, is as yet too uncertain to incorporate into the energy price forecasts that DOE uses. The costs of carbon mitigation to electricity generators resulting from the regional programs are also very uncertain over the forecast period for this rulemaking. Even so, EIA did include the effect of the Northeast Regional Greenhouse Gas Initiative (RGGI) in its
AEO2009
Early Release energy price forecasts. Western Climate Initiative (WCI) did not provide sufficient detail for EIA to model the impact of the WCI on energy price forecasts. Therefore, the energy price forecasts used in today's final rule do include the impact of one of the two regional cap-and-trade programs to the extent possible. In addition, the Nation will benefit from reduction of carbon emissions as part of a national impact. Because of the range of possible values of emissions reductions, DOE shows them separately in order to take the impact into consideration. Putting the values into the overall NPV calculation will bury the effects. DOE believes it is important for the decision maker to be fully aware of the economic impacts of a proposed energy conservation standard. For these reasons, DOE will continue to report the results of the monetization of the value of carbon emissions in the Environmental Assessment (section V.B.6).
In the discussion of discount rates, Royal Vendors commented that Coca-Cola and PepsiCo purchase approximately 90 percent of all beverage vending machines. (Royal Vendors, No. 32 at p. 1) Royal Vendors and Dixie-Narco made similar remarks about the size of the market purchases by these two entities in a discussion of distribution channels. (Royal Vendors and Dixie-Narco, Public Meeting Transcript, No. 29 at pp. 39-40) In accordance with the comments regarding distribution channels, DOE modified the mix of commercial customers so that bottlers represent 85 percent of commercial customers. DOE also used the same 85 percent weight of bottlers to develop the discount rate distribution among beverage vending machine purchasers.
During the ANOPR public meeting, Coca-Cola commented that beverage vending machine maintenance costs are approximately $90 per year, energy upgrade costs vary based on the kit used, and a remanufacturing cycle costs around $500 to $600. (Coca-Cola, No. 29 at pp. 113-116) DOE received no other comments on this issue.
DOE has updated its maintenance cost assumptions to more closely reflect Coca-Cola's comments. This resulted in a minor decrease in assumed annual maintenance cost from $165 in the ANOPR analysis to $154 in the NOPR analysis.
Also during the ANOPR public meeting, participants discussed how the energy cost benefits should be reflected in the LCC analysis. Coca-Cola stated that energy subsidy contracts are pre-negotiated as part of the location contract based on considerations such as volume of throughput and length of the contract. (Coca-Cola, No. 29 at pp. 125-126) Any kind of energy subsidy machine owners pay to locate their machines on-site is pre-negotiated as part of the location contract. Also, energy cost reductions due to the use of higher efficiency equipment would be reflected in a reduced subsidy paid to the site. However, no market data have been provided to DOE that would allow computation of the actual allocation of energy cost benefits for the site owner and the vending machine owner. To account for such energy cost benefits for purposes of computing life cycle cost and payback period, DOE assumes that operating cost savings due to energy cost savings are transferred to the owner/operator of the beverage vending machine through the location contract. This is analytically equivalent to assuming that energy subsidies are reduced by the amount of the energy cost reductions.
Table IV-6 summarizes the inputs and key assumptions DOE used to calculate the economic impacts of
various energy consumption levels on customers. Equipment price (which includes Manufacturer's Selling Price, markups, and sales taxes), installation price, and baseline and higher efficiency all affect the installed cost of the equipment. Annual equipment energy consumption, electricity prices, electricity price trends, and repair and maintenance costs affect the operating cost. The effective date of the standard, discount rate, and lifetime of equipment all affect the calculation of the present value of annual operating cost savings from a proposed standard. Table IV-6 also shows how DOE modified these inputs and key assumptions for the NOPR analysis.
Table IV—6 Summary of Inputs and Key Assumptions Used in the LCC and PBP Analyses
Input
ANOPR description
Changes for NOPR
Baseline Efficiency Level
Energy savings (changes in equipment energy consumption) and energy cost savings are compared to a pre-selected baseline efficiency level (in this case Level 1). Baseline MSP and equipment energy consumption depend on the baseline efficiency level
No changes.
Higher Efficiency Levels
A certain number of higher efficiency levels are pre-selected up to the max-tech level for LCC and PBP analyses. These higher efficiency levels affect MSP and equipment energy consumption
No changes.
Baseline Manufacturer Selling Price
Price charged by manufacturer to either a wholesaler or large customer for baseline equipment
No changes.
Standard-Level Manufacturer Selling Price Increases
Incremental change in manufacturer selling price for equipment at each of the higher efficiency levels
No changes.
Markups and Sales Tax
Associated with converting the manufacturer selling price to a customer price (chapter 6 of TSD)
Distribution of sales among market channels changed based on comments on the ANOPR. Sales tax rates updated to January 2009.
Installation Price
Cost to the customer of installing the equipment including labor, overhead, and any miscellaneous materials and parts. The total installed cost equals the customer equipment price plus the installation price
Installation price updated to 2008$.
Equipment Energy Consumption
Site energy use associated with the use of beverage vending machines, which includes only the use of electricity by the equipment itself
Updated to reflect results of the energy analysis.
Electricity Prices
Average commercial electricity price ($/kWh) in each State and for seven classes of commercial and industrial customers, as determined from EIA data for 2003 converted to 2007$
Average commercial electricity price ($/kWh) in each State and for seven classes of commercial and industrial customers, as determined from EIA data for 2003, updated to 2008 prices.
Electricity Price Trends
Reflects the
AEO2007
reference case forecast future electricity prices
Reflects the
AEO2009
reference case to forecast future electricity prices.
Maintenance Costs
Labor and material costs associated with maintaining the beverage vending machines (
e.g.,
cleaning heat exchanger coils, checking refrigerant charge levels, lamp replacement) included annualized costs of two refurbishment cycles
Updated basic maintenance cost to 2008$. Based on industry comment on the ANOPR, included an updated annualized cost of one refurbishment/remanufacturing cycle.
Repair Costs
Labor and material costs associated with repairing or replacing components that have failed
Updated costs to 2008$.
Equipment Lifetime
Age at which the beverage vending machine is retired from service (estimated to be 14 years)
Based on industry comment on the ANOPR, reduced average service life to 10 years, with 15 years as a maximum.
Discount Rate
Rate at which future costs are discounted to establish their present value to beverage vending machine purchasers
Updated discount rates for all classes of purchasers based on weighted average cost of capital figures from 2008.
Rebound Effect
Rebound effect was not taken into account in the LCC analysis
No change.
Analysis Period
The time span over which DOE calculated the LCC (
i.e.,
2012-2042)
No change.
The following sections contain brief discussions of the methods underlying each input and key assumption in the LCC analysis.
1. Manufacturer Selling Price
The “baseline MSP” is the price manufacturers charge to either a wholesaler/distributor or very large customer for beverage vending machines meeting baseline efficiency levels. DOE developed the baseline MSPs using a cost model (detailed in chapter 5 of the TSD). DOE used the
efficiency level closest to ENERGY STAR Tier 1 as the baseline in the NOPR analysis. The baseline efficiency level represents the least efficient equipment likely to be sold in 2012.
DOE developed MSPs for the two equipment classes consisting of three possible equipment sizes. Not all covered equipment sizes have shipments of more than a few percent of the total.
21
(See chapter 10 of the TSD.) DOE estimated the MSPs for Class A and Class B equipment at the three representative rated volumes between the baseline efficiency level and up to seven more efficient levels. See chapter 5 of the TSD for details.
21
Comments received at the ANOPR stage from interested parties indicated that small volume machines were never more than about 10 percent of the total (Royal Vendors, No. 29, p. 141); that small machines are financially unattractive (Coca-Cola, No. 29, p. 141); and that shipments range from 10 percent medium to 100 percent medium machines, depending on the manufacturer, with the rest being large (Royal Vendors, No. 29, pp. 141-142).
2. Increase in Selling Price
The standard level MSP increase is the change in MSP associated with producing equipment at lower energy consumption levels to meet higher standards. DOE developed MSP increases associated with decreasing equipment energy consumption (or higher efficiency) levels in the engineering analysis. See chapter 5 of the TSD for details. DOE developed MSP increases as a function of equipment energy consumption for each equipment class.
3. Markups
As discussed earlier, overall markups are based on one of three distribution channels for beverage vending machines. The distribution channels defined in the ANOPR were also used for the NOPR analysis, but DOE modified the relative fractions of shipments through each distribution channel based on input from interested parties. Based on input received by DOE, site owners purchase approximately 5 percent of equipment from wholesaler/distributors, vending machine operators purchase 10 percent of equipment from wholesaler/distributors, and beverage bottler/distributors purchase 85 percent of equipment directly from manufacturers. See chapter 10 of the TSD for details.
4. Installation Costs
DOE derived installation costs for beverage vending machines from the U.S. Bureau of Labor Statistics (BLS) data.
22
BLS provides median wage rates for installation, maintenance, and repair occupations that reflect the labor rates for each State. These data allow DOE to compute State labor cost indices relative to the national average for these occupations. DOE incorporated these cost indices into the analysis to capture variations in installation cost by location. DOE calculated the installation cost by multiplying the number of person-hours by the corresponding labor rate as reported by Foster-Miller, Inc.
23
Foster-Miller data are more specific to the beverage vending machine industry and service calls, and were used whenever possible. DOE decided that the installation costs (including overhead and profit) represent the total installation costs for baseline equipment. Because data were not available to indicate how installation costs vary by class or efficiency, DOE considered installation costs to be fixed and independent of equipment cost or efficiency. Although the LCC spreadsheet allows for alternative scenarios, DOE did not find a compelling reason to change its basic premise for the NOPR analysis. See chapter 8 of the TSD for details.
22
Bureau of Labor Statistics, Occupational Employment and Wage Estimates (May 2007). Available at
http://www.bls.gov/oes/oes_dl.htm.
23
Foster-Miller, Inc. “Vending Machine Service Call Reduction Using the VendingMiser.” Report BAY-01197. Foster-Miller, Inc., Waltham, MA. February 18,2002.
As described earlier, the total installed cost is the sum of the equipment purchase price and installation price. DOE derived the customer equipment purchase price for any given efficiency level by multiplying the baseline MSP by the baseline markup and adding to it the product of the incremental MSP and incremental markup. Because MSPs, markups, and sales taxes can differ depending on location, the resulting total installed cost for a particular efficiency level will not be a single-point value, but a distribution of values. DOE used a Monte-Carlo analysis
24
to determine this distribution of values. See chapter 8 of the TSD for details.
24
The Monte-Carlo analysis is a numerical simulation approach using random values from known statistical distributions.
5. Energy Consumption
DOE based its estimate of the annual electricity consumption of beverage vending machines on the energy use characterization described in section IV.D. DOE did not change the ANOPR methodology. See chapters 7 and 8 of the TSD for details.
6. Electricity Prices
Electricity prices are necessary to convert the electric energy savings into energy cost savings. Because of the wide variation in electricity consumption patterns, wholesale costs, and retail rates across the country, it is important to consider regional differences in electricity prices. DOE divided the continental United States into the 50 States and the District of Columbia. DOE used reported average effective commercial electricity prices which are the average commercial prices in each state, multiplied times a factor that adjusts the price to account for the fact that different types of commercial customers historically have higher or lower prices than average. (See chapter 8 of the TSD for details.) Effective commercial prices were estimated for four of the six building types. Lower industrial electricity prices were assumed to apply to the manufacturing plants and Federal facilities. State level commercial and industrial prices were collected from the EIA publication, “State Energy Consumption, Price, and Expenditure Estimates (SEDS).”
25
The latest available prices from this source are for 2008. See chapter 8 of the TSD for details.
25
http://www.eia.doe.gov/emeu/states/_seds.html.
Different kinds of businesses use electricity in different amounts at different times of the day, week, and year, and therefore face different effective prices. To make this adjustment, DOE used the 2003 CBECS data set to identify the average prices that the four kinds of commercial businesses in this analysis pay compared with the average prices all commercial customers pay. (DOE assumed manufacturing and Federal facilities pay the average industrial price.) Once the building type prices are adjusted, the resulting estimated prices paid become the electricity prices used in the analysis. To obtain a weighted average national price, the prices paid by each building in each state are weighted by the estimated sales of beverage vending machines in each state to each prototype building type (U.S. Census Bureau 2002, 2004a-2004c). The state/building type weights are the probabilities that a given beverage vending machine shipped will be operated within a given price. For evaluation purposes, the prices and weights can be depicted as a cumulative probability distribution. The effective prices range from approximately 5 cents per kWh to approximately 30 cents per kWh. This approach includes regional
variations in energy prices and provides for estimated electricity prices suitable for the target market, yet reduces the overall complexity of the analysis. Chapter 8 of the TSD describes the development and use of State-average electricity prices by building type in more detail.
7. Electricity Price Trends
The electricity price trend provides the relative change in electricity prices until 2030. Estimating future electricity prices is difficult, especially considering that many States are attempting to restructure the electricity supply industry. DOE uses the most recent
AEO
reference case to forecast energy prices for standards rulemakings. DOE applied the
AEO2009
reference case as the default scenario and extrapolated the trend in values from 2020 to 2030 of the forecast to establish prices for 2030 to 2042. This method of extrapolation is in line with methods the EIA uses to forecast fuel prices for the Federal Energy Management Program (FEMP). DOE intends to update its analysis for the final rule to reflect the
AEO2009
electricity price forecasts when final versions are available.
8. Repair Costs
The repair cost is the cost to the customer of replacing or repairing beverage vending machine components that have failed. DOE based the annualized repair cost for baseline efficiency equipment on the report “Vending Machine Service Call Reduction Using the VendingMiser,”
26
and adjusted the cost to 2008 prices. Because data were not available to indicate how repair costs vary with equipment efficiency, DOE considered two scenarios: (1) repair costs that varied in direct proportion with the manufacturer price of the equipment, and (2) repair costs that did not increase with efficiency.
26
Foster-Miller, Inc. “Vending Machine Service Call Reduction Using the VendingMiser.” Report BAY-01197. Foster-Miller, Inc. Waltham, MA. February 18, 2002.
DOE used the first scenario as the default annualized repair cost scenario in the LCC and PBP analyses. Spreadsheets can be used to calculate LCC and PBP based on the second scenario as well. See chapter 8 of the TSD for details.
9. Maintenance Costs
DOE estimated annualized maintenance costs for beverage vending machines from data provided by Coca-Cola at the ANOPR public meeting. Coca-Cola estimated that average equipment maintenance costs are $98.20 (2008$) for preventive maintenance for both beverage vending machine classes. In addition to routine maintenance, industry contacts stated that most beverage vending machines are fully refurbished every 5 years at an average cost of approximately $550. DOE calculated the annual cost of refurbishment by assuming one refurbishment (in year five), and then annualizing the present value of the cost using the discount rate that applied to the business type owning the beverage vending machine. DOE added the two maintenance cost components to produce an overall annual maintenance cost of approximately $154 (2008$). Because data are not available on how maintenance costs vary with equipment efficiency, DOE held maintenance costs constant even as equipment efficiency increased. See chapter 8 of the TSD for details.
10. Lifetime
DOE defined lifetime as the age when a beverage vending machine unit is retired from service. DOE based the lifetime on comments it received during the ANOPR. DOE concluded that a typical lifetime is 10 years and a maximum lifetime is 15 years. Beverage vending machine equipment is typically replaced when buildings are renovated about every 10 years, which is before the equipment would have physically worn out. As a result, there is a used-equipment market for these products. Because the salvage value to the original purchaser is very low, DOE did not take this value into account in the LCC analysis. Chapter 3 of the TSD contains a discussion of equipment life.
11. Discount Rate
The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE derived discount rates for the LCC analysis by estimating the cost of capital for companies that purchase beverage vending machines. The cost of capital is commonly used to estimate the present value of cash flows to be derived from a typical company project or investment. For most companies, the cost of capital is the weighted average of the cost to the company of equity and debt financing. DOE estimated the cost of equity financing with the Capital Asset Pricing Model (CAPM), which is among the most widely used models to estimate such costs. CAPM considers the cost of equity to be proportional to the amount of systematic risk for a company. The cost of equity financing tends to be high when a company faces a large degree of systematic risk and low when the company faces a small degree of systematic risk.
27
27
Aswath Damodaran, Leonard N. Stern School of Business, New York University. Available at
http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html.
Accessed December 15, 2008. See also the Investopedia Web site definition of Beta, the measure of such volatility:
http://www.investopedia.com/terms/b/beta.asp.
Accessed April 1, 2009.
To estimate the weighted average cost of capital (WACC; defined as the weighted average cost of debt and equity financing) of purchasers, DOE used a sample of companies involved in the six ownership categories, according to their type of activity. DOE sought financial information for all firms in the full sample involved in the seven types of businesses drawn from a database of 7,460 U.S. companies on the Damodaran Online Web site.
28
In cases where one or more of the variables needed to estimate the discount rate was missing or could not be obtained, DOE discarded the firm from the analysis. Overall, it discarded about 36 percent of the firms in the full database for this reason, resulting in a final count of 4,139 firms. This WACC approach for determining discount rates accounts for the current tax status of individual firms on an overall corporate basis. DOE did not evaluate the marginal effects of increased costs, and thus depreciation due to more expensive equipment, on the overall tax status. See chapter 8 of the TSD for details.
28
Aswath Damodaran, Leonard N. Stern School of Business, New York University. Available at
http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html.
Accessed December 15, 2008.
DOE used the final sample of 4,139 companies to represent beverage vending machine purchasers. For each company in the sample, DOE derived the cost of debt, percent debt financing, and systematic company risk from information on the Damodaran Online Web site. Damodaran estimated the cost of debt financing from the long-term government bond rate (4.39 percent) and the standard deviation of the stock price. DOE then determined the weighted average values for the cost of debt, range of values, and standard deviation of WACC for each category of the sample companies. Deducting expected inflation from the cost of capital provided estimates of real discount rate by ownership category.
The above methodology yielded the following average after-tax discount rates, weighted by the percentage shares of total purchases of beverage vending machines: (1) 5.54 percent for bottlers and distributors, (2) 6.25 percent for manufacturing facilities, (3) 4.81 percent for office and health care businesses, (4)
6.00 percent for retail stores, (5) 2.35 percent for schools and colleges, (6) 3.03 percent for military bases, and (7) 5.23 percent for all other types of businesses.
29
See chapter 8 of the TSD for details.
29
These discount rates are what private companies pay as beverage vending machine purchasers. Government agencies use 3-percent and 7-percent discount rates for economic calculations.
12. Payback Period
The PBP is the amount of time it takes the customer to recover the incrementally higher purchase cost of more energy efficient equipment as a result of lower operating costs. Numerically, the PBP is the ratio of the increase in purchase cost (
i.e.,
from a less efficient design to a more efficient design) to the decrease in annual operating expenditures. This type of calculation is known as a “simple” PBP because it does not take into account changes in operating cost over time or the time value of money; that is, the calculation is done at an effective discount rate of 0 percent.
The equation for PBP is
PBP = ΔIC/ΔOC
Where:
PBP = payback period in years,
ΔIC = difference in the total installed cost between the more efficient standard level equipment (energy consumption levels 2, 3, etc.) and the baseline (energy consumption level 1) equipment, and
ΔOC = difference in annual operating costs.
The data inputs to the PBP analysis are the total installed cost of the equipment to the customer for each energy consumption level and the annual (first-year) operating costs for each energy consumption level. The inputs to the total installed cost are the equipment price and installation cost. The inputs to the operating costs are the annual energy cost, annual repair cost, and annual maintenance cost. The PBP uses the same inputs as the LCC analysis, except that electricity price trends and discount rates are not required. Since the PBP is a “simple” (undiscounted) payback, the required electricity cost is only for the year in which new energy conservation standards take effect—in this case, 2012. The electricity price used in the PBP calculation of electricity cost was the price projected for 2012, expressed in 2008$, but not discounted to 2008. Discount rates are not used in the PBP calculation.
As discussed in section III.D.2, section 325(o)(2)(B)(iii) of EPCA states that there is 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 level is less than three times the value of the first-year energy (and, as applicable, water) savings resulting from the standard, as calculated under the applicable DOE test procedure. However, as stated in section III.D.2, DOE does not rely on the rebuttable presumption payback criteria when examining potential standard levels, but does consider it as part of a full analysis that includes all seven relevant statutory criteria under 42 U.S.C. 6295(o)(2)(B)(i).
F. Shipments Analysis
DOE developed forecasts of the number of units shipped for the base case and standards cases and included those forecasts in the NES spreadsheet. The shipments portion of the spreadsheet forecasts shipments of beverage vending machines from 2012 to 2042. DOE developed shipments forecasts for the two equipment classes by accounting for the shipments replacing the existing stock of beverage vending machines in new commercial floor spaces and old equipment removed through demolitions. Chapter 10 of the TSD provides additional details on shipments forecasts.
The shipments analysis is a description of beverage vending machine stock flows as a function of year and age. The shipment analysis treats each of the two classes of equipment independently, such that future shipments in any one class are unaffected by shipments in the other equipment class. In addition, the relative fraction of shipments in each equipment class compared to all beverage vending machine shipments is assumed to be constant over time. DOE recognizes that a business or a beverage vending machine owner can choose to use different classes of beverage vending machines to sell the same product if the equipment is in the required temperature range and is suitable for the environment in which the equipment will be placed. The decision to adopt one equipment class over another within the same temperature range will depend on first costs, operating costs, machine location (
e.g.,
outdoors versus indoors), and the perceived ability to merchandise product.
DOE received many comments on the shipment analysis and assumptions in the ANOPR. Many comments addressed the declining size of the beverage vending machine market. Royal Vendors estimate that the current beverage vending machine stock is about 2.3 or 2.5 million units. Further, Royal Vendors commented that the population of machines is decreasing and that replacements purchased are less than “normal shrinkage.” (Royal Vendors, No. 32 at p. 1) Dixie-Narco stated that a significant number of machines are being pulled out of the marketplace, partly because of the number of locations (particularly schools) that no longer allow vending machines. (Dixie-Narco, No. 29 at p. 44) Coca-Cola said that it has removed between 200,000 and 250,000 beverage vending machines since 2006 and that future shipments will only be replacements. (Coca-Cola, No. 29 at p. 140) PepsiCo agreed that the number of machines is decreasing and it doesn't see this trend reversing anytime soon. (PepsiCo, No. 29 at pp. 43-44) It attributed this, in part, to the “very high cost” of vandalism. NAMA also noted that there has been a decline in beverage vending machine sales over the last 5 or 6 years. NAMA attributed this to the removal of vending machines from school districts. (NAMA, No. 29 at pp. 48-49) The Joint Comment recommended that DOE conduct an independent annual sales forecast of equipment, stating that it was not clear why school district soda bans would result in the removal of vending machines rather than replacing sodas with healthier beverages in existing machines. (Joint Comment, No. 34 at p. 2) EEI suggested that DOE obtain data to monitor the downward trend in shipments and incorporate any observed reductions of the market into the analysis. (EEI, No. 37 at p. 2) EPA offered to share aggregated shipment data of ENERGY STAR qualified equipment with DOE. (EPA, No. 29 at p. 48)
DOE also received input on sales of new and replacement equipment. Royal Vendors stated that the overall current stock is approximately 90 percent Class B machines and 10 percent Class A machines, of which it builds large and medium Class A machines. However, trends are changing. In the future, the overall stock will more closely resemble ratios of 60/40 or 50/50 between Class A and Class B machines. (Royal Vendors, No. 29 at p. 139 and No. 29 at pp. 163-167). This data was also confirmed by data from The Cadmus Group (2006).
30
30
Cadmus Group. 2006. “Saving Energy in Vending Machines: Opportunities for the Regional Technical Forum.” Presentation for the Northwest Power Conservation Council. Available at
http://www.nwcouncil.org/energy/rtf/meetings/2006/2006_09.
Accessed on January 5, 2009.
DOE has updated its shipments model for the NPV analysis to reflect the comments it received. The model now reflects that there is zero growth in the number of vending machines and that new machines will only replace old and
retired machines. DOE also updated its shipments analysis model to reflect more closely comments on the breakdown of shipments between equipment classes as well as the different sizes.
Dixie-Narco commented that it currently has kits listed on the EPA Web site to upgrade existing machines to meet ENERGY STAR Tier 2. (Dixie-Narco, No. 29 at pp. 90-91) DOE accepts the comment and has assumed that a high percentage of the machines shipped in 2012 in the base case shipment forecast will meet ENERGY STAR Tier 2 levels even without energy conservation standards.
The results of the shipments analysis are driven primarily by historical shipments data for the two equipment classes of beverage vending machines under consideration. The model estimates that, in each year, the existing stock of beverage vending machines either ages by one year or is worn out and replaced. In addition, new equipment can be shipped into new commercial building floor space and old equipment can be removed through demolitions. DOE chose to analyze all efficiency levels analyzed in the LCC in the NIA. DOE determined shipments forecasts for all levels analyzed in the NIA and NPV analysis.
Because several different types of businesses own beverage vending machines and use them in a variety of locations, machines are divided into several market segments. Table IV-7 gives the business locations and the approximate size of the market segments from 2002 to 2005.
Table IV—7 Market Segments for the Beverage Vending Machines (2004-2007)
Percent of machines
Business Location:
Manufacturing
36.2
Offices
19.5
Retail
8.0
Schools/Colleges
13.0
Health Care
6.2
Hotels/Motels
3.6
Restaurants/Bars/Clubs
0.7
Correctional Facilities
2.1
Military Bases
3.0
Other
7.8
Total
100.0
Ownership:
Bottlers and Vendors
95.0
Business Owned
5.0
—Manufacturing
1.5
—Offices and Health Care
1.4
—Retail/Restaurants/Bars/Clubs
0.8
—Schools, Colleges, and Public Facilities (including Correctional)
0.8
—Military Bases
0.4
—Other (including hotels/motels)
0.1
—Site Owned
5.0
Total
100.0
Table IV-8 shows the forecasted shipments of the three typical sizes of beverage vending machines for Class A and Class B units for selected years and cumulatively between 2012 and 2042. As equipment purchase price increases with higher efficiency levels, a drop in shipments could occur relative to the base case. On the other hand, as annual energy consumption is reduced, equipment sales could increase due to more frequent installations and use of beverage vending machines by retailers. DOE has no information to calibrate either relationship. Therefore, although the spreadsheet allows for changes in projected shipments in response to efficiency increases or energy consumption decreases, DOE presumed for the NOPR analysis that shipments would not change in response to the changing TSLs. Table IV-8 also shows the cumulative shipments for the 31-year period between 2012 and 2042 for all beverage vending machines. Comments from the ANOPR public meeting indicated that there has been a substantial decrease in shipments since 2000 and that future shipments are not expected to increase for the foreseeable future. These shipments are entirely for replacements, but the stock of beverage vending machines has also been declining at a significant rate. DOE has estimated a current level of shipments of about 90,000 units per year. This rate is consistent with observed declines in stock, expected retirement rates based on stated stock lifetimes, and extra removals due to vandalism and other causes, as stated by interested parties. Consistent with public comment, these shipment rates (which equals replacements) are assumed to be constant through 2042, which results in a continuing decline in the stock of beverage vending machines from recent levels of about 2.4 million units to a level of about 944,000 units by 2020, at which point the stock stabilizes. Chapter 10 of the TSD provides additional details on the shipments analysis.
Table IV—8 Forecasted Shipments for Beverage Vending Machines (Baseline Efficiency, Level 1) for Selected Years
[Thousands of units shipped]
Equip. class
Size
Thousands of units shipped
2012
2015
2020
2025
2030
2035
2040
2042
Cumulative shipments*
2012-2042
A
L
12.4
12.4
12.4
12.4
12.4
12.4
12.4
12.4
383.6
A
M
37.1
37.1
37.1
37.1
37.1
37.1
37.1
37.1
1,150.9
A
S
B
L
10.1
10.1
10.1
10.1
10.1
10.1
10.1
10.1
313.9
B
M
30.4
30.4
30.4
30.4
30.4
30.4
30.4
30.4
941.6
B
S
* The cumulative shipments do not equal the totals across each row because all years from 2012 to 2042 are included in the calculation.
G. National Impact Analysis
The NIA assesses future NES and the national economic impacts of different efficiency levels of beverage vending machines. The analysis measures economic impacts using the NPV metric (
i.e.,
future amounts discounted to the present) of total commercial customer costs and savings expected to result from new standards at specific efficiency levels. For the NOPR analysis,
DOE used the same spreadsheet model used in the ANOPR to calculate the energy savings and the national economic costs and savings from new standards, but with updates to specific input data.
Unlike the LCC analysis, the NES spreadsheet does not use distributions for inputs or outputs. DOE examined sensitivities by applying different scenarios. DOE used the NES spreadsheet to calculate national energy savings and NPV using the annual energy consumption and total installed cost data from the LCC analysis and estimates of national shipments for the two equipment classes. DOE forecasted the energy savings, energy cost savings, equipment costs, and NPV of benefits for both beverage vending machine classes from 2012 to 2057. The forecasts provided annual and cumulative values for all four output parameters.
DOE calculated the NES by subtracting energy use under a standards scenario from energy use in a base case (no new standards) scenario. Energy use is reduced when a unit of beverage vending machine in the base case efficiency distribution is replaced by a more efficient unit. Energy savings from this replacement for each equipment class are the same national average values as calculated in the LCC and PBP spreadsheet on a per-unit basis. Table IV-9 shows key inputs to the NIA. In the NIA analysis for the NOPR, DOE did not include a rebound effect. As the ANOPR discussed, a rebound effect occurs when a piece of equipment that is made more efficient is used more intensively, so that the expected energy savings from the efficiency improvement do not fully materialize. Because beverage vending machines operate on a 24-hour basis to maintain adequate conditions for the merchandise being retailed, a rebound effect resulting from increased refrigeration energy consumption seemed unlikely. Thus, DOE did not account for a rebound effect in the LCC analysis. There were no comments on this issue. Chapter 11 of the TSD provides additional information about the NES spreadsheet.
On the topic of shipments by efficiency levels, Coca-Cola commented that, essentially, all machines will be in the same efficiency class, which is the optimal point between price and performance. (Coca-Cola, No. 29 at p. 148) PepsiCo stated that every machine it approves for purchase must meet ENERGY STAR Tier 2. This includes purchases by PepsiCo bottlers as well. (PepsiCo, No. 29 at p. 149) Dixie-Narco stated that vending distributors (or operators and independent bottlers) do not mandate ENERGY STAR Tier 2, but that they are only a small part of the business. (Dixie-Narco, No. 29 at pp. 150-152) USA Technologies commented that much of the industry is already meeting Tier 2 and that 80 to 90 percent of the machines sold are probably at the Tier 2 levels (USA Technologies, No. 29 at pp. 101-102).
DOE understands that the major bottlers that purchase over 85 percent of the new machines require ENERGY STAR Tier 2, which went into effect on July 1, 2007. Therefore, most of the machines that will be purchased in 2012 when the new standards take effect are expected to meet Tier 2 levels. In response to the input received, DOE has changed the distribution of efficiency levels to reflect an estimate of 90 percent of the market meeting ENERGY STAR Tier 2 levels by 2012 in the base case market efficiency distribution. DOE does not have information on how the distribution of efficiency levels might change over the analysis period (2012 to 2042) and therefore assumed that the distribution in 2012 remained constant. See section IV.G.1 for more details.
Regarding the period of the rulemaking analysis, EEI commented that DOE should consider using a 20-year analytical timeframe if typical machines only have a 10-year lifetime and the analysis covers “two lifetimes.”
The Department of Energy's appliance standards program is conducted pursuant to Title III, Parts A and A-1 of EPCA (42 U.S.C. 6291-6317). The program includes consumer products, such as refrigerators and freezers, central air conditioners and central air conditioning heat pumps, furnaces and water heaters, and certain commercial and industrial equipment, including electric motors and commercial heating and air conditioning equipment and water heaters.
EPCA directs DOE to conduct a series of rulemakings to consider whether to amend the existing energy conservation standards. EPCA also directs DOE to set any new standard such that the maximum improvement in energy efficiency is achieved that is technologically feasible and economically justified. In addition, the amount of energy saved must be significant. (42 U.S.C. 6296(o)(2)) DOE calculates the net present value (NPV) of new or amended standards to estimate the impacts of standards on the nation. In performing the NPV analysis for the first energy conservation standards rulemakings, DOE selected a 30-year analysis period, beginning on the effective date of the standard, because it closely matched the lifetime of the longest lived products among the products being considered for standards. Matching the lifetime of the longest lived products allows for a full turnover of the stock.
31
In subsequent years, for the next few rulemakings, DOE used the same analysis end-date as the initial rulemakings, but with the appropriate start-of-standard date, resulting in a shorter analysis period. Then, in the 1990's rulemakings, DOE found that using the same end-date of the analysis would result in analyses that could not capture the full impact of amended standards. As a result, DOE determined it was necessary to change the end-date of the analyses. DOE settled on the 30-year analysis period, which allows DOE to capture the full life of any product that was shipped in the first year in which that standard became effective. Because products have varying lifetimes, DOE uses a 30-year analysis period to maintain a consistent time frame to compare the energy savings and economic impacts from all the standards rulemakings. For consistency and for ease in comparing results across rulemakings, DOE settled on a 30-year analysis period for subsequent rulemakings.
31
Refrigerators have an average lifetime of 19 years, and, based on industry data (Technical Support Document: Energy Efficiency Standards for Consumer Products: Refrigerators, Refrigerator-freezers, & Freezers, July 1995) on when refrigerators are retired, DOE estimates the refrigerators are retired as early as 13 years and as late as 24 years (
i.e.,
vintaging). DOE rounded up 24 years to 30 years in order to end the analysis on a decade.
DOE believes that using a 30-year analysis period is appropriate. In order to compare energy savings for residential product classes or commercial equipment classes across appliance rulemakings where the various products and equipment classes have different lifetimes, DOE must use at least the lifetime of the longest-lived product or equipment type for assessment, since the annual energy consequences of improving the longest-lived residential products or commercial equipment would not be known until all of the market for such product or equipment consisted of improved units. That would not happen until the last of the pre-standard equipment is retired. Thirty years is a practical estimate for that event for short- and long-lived equipment.
To compare economic costs and savings for products or equipment using discounted present value, it is common in economics to use the stream of benefits and costs over the lifetime of the equipment. In DOE energy conservation standards rulemakings, the outer limit for economic benefits and costs is established at the last year of life
of the oldest equipment purchased during the 30-year period used for energy savings comparisons.
There are also economic consequences for choosing different time periods over which to compare rules. As an example, consider two different time periods that could be used to compare two rules, one for 30-year equipment and one for 20-year equipment with identical costs and savings, but a shorter 20-year lifetime. If the 30-year period comparison period were shortened to 20 years to compare the two rules there would be significant consequences for NPV. Approximately one-third of the (undiscounted) savings from equipment with a 30-year life would be not counted, and the value of the savings would be reduced by about 15 percent at a 7 percent discount rate and by about 24 percent at a 3 percent discount rate. In addition, the investment required for shorter-life equipment that would have been required with a 30-year comparison would be ignored if the lifetime of the shorter-lived equipment is used to compare rulemakings. Therefore, DOE believes the 30-year analytical period enables it to fully capture the impacts of standards on the nation as well as to compare the relative economic impacts of different rulemakings. DOE will continue to use the 30-year analytical timeframe for this rulemaking. DOE will consider changes to the analytical period in other rulemakings, where appropriate; such as rulemakings for products with significantly shorter lifetimes (both average life and the life of the oldest product when retired).
On the topic of site-to-source energy conversion factor, EEI commented that DOE should account for the fact that more than 29 States now have renewable portfolio standards that will increase the amount of zero emissions and zero Btu electricity production sources by 2010, 2015, 2020, or 2025. These factors will reduce the overall heat rate faster than the
AEO
forecast, and DOE should not use fossil fuel power plant heat rates as a “proxy” for renewable electricity generation stations (EEI, No. 37 at p. 3).
DOE will continue to use
AEO2009
base electricity price and the price projections as long as no other credible and publicly available data that could be used to generate or revise the site-to-source energy conversion factors are made available to DOE.
32
32
DOE is committed to using the latest
AEO
forecast that is appropriate for its analysis. For example, if an updated
AEO
forecast is available for the final rule analysis, DOE will use that forecast. However, if an updated AEO forecast is published after the final rule analysis is completed, but before the final rule is published, the analysis will remain unchanged. DOE may conduct some sensitivity analyses, if appropriate, to determine if its conclusions would change based on the updated
AEO
forecast.
Table IV-9—Summary of National Energy Savings and Net Present Value Input
Input
ANOPR Description
Changes for NOPR
Shipments
Annual shipments from shipments model (chapter 9 of the ANOPR TSD, Shipments Analysis)
No growth in shipments; based on industry comments on the ANOPR, all shipments are replacements.
Effective Date of Standard
2012
No change.
Base Case Efficiencies
Distribution of base case shipments by efficiency level
Efficiency mix changed based on industry comment.
Standards Case Efficiencies
Distribution of shipments by efficiency level for each standards case. Standards case annual market shares by efficiency level remain constant over time for the base case and each standards case
No change.
Annual Energy Consumption per Unit
Annual weighted-average values are a function of energy consumption level per unit, which are established in chapter 7 of the ANOPR TSD, Energy Use Characterization
No change.
Total Installed Cost per Unit
Annual weighted-average values are a function of energy consumption level (see chapter 8 of the ANOPR TSD)
No change.
Repair Cost per Unit
Annual weighted-average values increase with manufacturer's cost (chapter 8 of the ANOPR TSD)
No change.
Maintenance Cost per Unit
Annual weighted-average value equals $165.44 (chapter 8 of the ANOPR TSD)
Annual weighted-average value equals $154 (chapter 8 of the TSD).
Escalation of Electricity Prices
EIA
AEO2007
forecasts (to 2030) and extrapolation beyond 2030 (chapter 8 of the ANOPR TSD)
Updated to
AEO2009
forecasts.
Electricity Site-to-Source Conversion
Conversion varies yearly and is generated by DOE/EIA's NEMS* model (a time-series conversion factor that includes electric generation, transmission, and distribution losses)
Conversion varies yearly and is generated by DOE/EIA's NEMS model. Calculated marginal rates by year.
Discount Rate
3% and 7% real
No change.
Present Year
Future costs are discounted to 2008
Future costs are discounted to 2009
Rebound Effect
As explained in the LCC inputs section, DOE does not anticipate unit energy consumption to rebound above the levels used in the LCC analysis and passed to the NIA analysis. Further, the shipments model develops shipment projections to meet historical market saturation levels. The shipment model does not adjust shipments as a function of unit energy consumption levels, because DOE has no information with which to calibrate such a relationship
No change.
1. Base Case and Standards Case Forecasted Efficiencies
Components of DOE's estimates of NES and NPV are the energy efficiencies of shipped equipment that DOE forecasts over time for the base case (without new standards) and for each standards case. The forecasted efficiencies represent the distribution of energy efficiency of the equipment under consideration that is shipped over the forecast period (
i.e.,
from the assumed effective date of a new standard to 30 years after the standard becomes effective).
The average annual energy consumption of the BVMs shipped in a given year depends on the per-unit energy consumption of BVM equipment at each efficiency level and the mix of efficiency levels of new units that is shipped in each year. Per-unit energy consumption at each efficiency level is determined in the energy use characterization. (See chapter 7 of the TSD.) The standards affect the mix of annual shipments by efficiency level as briefly described below. (See chapter 11 for details.)
Because no published data were available on market shares broken down by efficiency level, DOE developed estimates based on comments from interested parties at the ANOPR public meeting. These comments concerned approximate market shares of current shipments by equipment class and size, and approximate shipments by efficiency level for the base case (
i.e.,
without new standards).
DOE developed base case efficiency forecasts based on the estimated market shares by equipment class and efficiency level. Because there are no historical data to indicate how equipment efficiencies or relative equipment class preferences have changed over time, DOE assumed that forecasted market shares would remain frozen at the 2012 efficiency level until the end of the forecast period (30 years after the effective date or 2042).
For its estimate of standards case forecasted efficiencies, DOE used a “roll-up” scenario to establish the market shares by efficiency level for the year that standards become effective (
i.e.,
2012). Information available to DOE suggests that equipment shipments with efficiencies in the base case that did not meet the standard levels under consideration would roll up to meet the new standard levels. Also, DOE assumed that all equipment efficiencies in the base case that were above the standard levels under consideration likely would not be affected.
2. Annual Energy Consumption, Total Installed Cost, Maintenance Cost, and Repair Costs
The difference in shipments by equipment efficiency level between the base case and standards case was the basis for determining the reduction in per-unit annual energy consumption that could result from new standards. The beverage vending machine stock in a given year is the total number of beverage vending machines shipped from earlier years that survive in the given year. The NES spreadsheet model tracks the number of beverage vending machines shipped each year and estimates the total beverage vending machine stock for each year. The annual energy consumption by efficiency level for each equipment class comes from the LCC analysis on a per-unit basis. Similarly, the total installed, maintenance, and repair costs for each efficiency level for each equipment class analyzed in the LCC are on a per-unit basis. Using the total estimated shipments and total estimated stock by equipment class and efficiency level, DOE calculates the annual energy consumption for the beverage vending machine stock in each year, the maintenance and repair costs associated with the equipment stock, and the total installed costs associated with new shipments in each year based on the standards scenario and associated distribution of shipments by efficiency level.
As explained above, DOE assumes that all Class A machines and 75 percent of Class B machines are installed indoors and that 25 percent of Class B machines are located outdoors. To calculate a weighted energy use for all Class B machines, DOE added aggregated results based on State-by-State TMY2 weather station data to the annual energy consumption of the remaining 75 percent of Class B machines that are located indoors. DOE further aggregated energy consumption at the State level to arrive at the national average energy consumption, using the 2000 Census population data.
33
Table IV-10 presents the national average annual energy consumption figures for the three different sizes of Class B machines.
33
The U.S. Census Bureau,“2000 Census,”
http://factfinder.census.gov/servlet/GCTTable?_bm=y&-geo_id=01000US&-_box_head_nbr=GCT-PH1&-context=gct&-ds_name=DEC_2000_SF1_U&-tree_id=4001&-format=US-9.
Accessed March 25, 2007.
Table IV-10—National Average Annual Energy Consumption for Class B Machines, by Efficiency Levels
Size
Annual energy consumption (all locations, kWh)
Level 1
(Baseline)
Level 2
Level 3
Level 4
Level 5
Level 6
Level 7
Large
2019
1890
1842
1760
1746
1561
1526
Medium
1925
1799
1731
1658
1645
1463
1431
Small
1724
1606
1505
1505
1495
1313
1285
Table IV-11 shows annual energy consumption for each size of Class A machine. National average energy consumption figures are identical to State energy consumption figures. These national average annual energy consumption figures are used in the subsequent LCC, PBP, and NES analyses.
Table IV-11—Annual Energy Consumption for Class A Machines, All Sizes and All Locations, by Efficiency Levels
Size
Average annual energy consumption (all locations, kWh)
Level 1
(Baseline)
Level 2
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Large
2464
2267
2099
1916
1785
1679
1610
1438
Medium
2383
2011
1916
1734
1529
1442
1383
1252
Small
2227
1924
1734
1551
1442
1361
1307
1186
DOE's energy use characterization assumes that there are no controls limiting display lighting or compressor operation in a beverage vending machine to certain hours of the day. As a result, the display lighting or compressor operation would not be affected by occupancy patterns in the building. However, using occupancy sensors and other controllers might reduce a vending machine's energy requirements during long periods of non-use, such as overnight and weekends. This occupancy controller option is often used when de-lamping a vending machine is not advisable (
i.e.,
when a vending machine does not have a captive audience or when de-lamping results in reduced vending sales revenues). Controllers can either be added on or enabled in certain beverage vending machines. See section IV.D for additional discussion of lighting controls and occupancy sensors. See chapter 7 in the TSD.
3. Escalation of Electricity Prices
DOE uses the most recent
AEO
reference case to forecast energy prices for standard rulemakings. DOE used the
AEO2009
reference case forecasts for future electricity prices, extended out to the end of the analysis period. DOE extrapolated the trend in values from 2020 to 2030 of the forecast to establish prices for the remainder of the analysis period. DOE intends to update its analysis for the final rule to reflect the
AEO2009
electricity price forecasts when final versions of these price forecasts are available.
4. Electricity Site-to-Source Conversion
The site-to-source conversion factor is a multiplier used for converting site energy, expressed in kWh, into primary or source energy, expressed in quadrillion Btu (quads). The site-to-source conversion factor accounts for losses in electricity generation, transmission, and distribution. For the ANOPR, DOE used site-to-source conversion factors based on U.S. average values for the commercial sector, calculated from
AEO2008,
Table A5. The average conversion factors vary over time because of projected changes in electricity generation sources (
i.e.,
the power plant types projected to provide electricity to the country). For the NOPR, DOE developed marginal site-to-source conversion factors that relate the national electrical energy savings at the point of use to the fuel savings at the power plant. These factors use the NEMS model and the examination of the corresponding energy savings from standards scenarios considered in DOE's utility impact analysis (chapter 14 of the TSD). The conversion factors vary over time because of projected changes in electricity generation sources and power plant dispatch scenarios. DOE used average U.S. conversion factors in the ANOPR because the utility impact analysis that is used to determine marginal conversion factors appropriate to efficiency standards for beverage vending machines occurs in the NOPR stage of the analysis.
To estimate NPV, DOE calculated the net impact each year as the difference between total operating cost savings (including electricity, repair, and maintenance cost savings) and increases in total installed costs (including MSP, sales taxes, distribution channel markups, and installation costs). DOE calculated the NPV of each TSL over the life of the equipment using three steps. First, DOE determined the difference between the equipment costs under the TSL and the base case to calculate the net equipment cost increase resulting from the TSL. Second, DOE determined the difference between the base case operating costs and the TSL operating costs to calculate the net operating cost savings from the TSL. Third, DOE determined the difference between the net operating cost savings and the net equipment cost increase to calculate the net savings (or expense) for each year. DOE then discounted the annual net savings (or expenses) for beverage vending machines purchased on or after 2012 to the reference year 2009, and summed the discounted values to determine the NPV of a TSL. An NPV greater than zero shows net savings (
i.e.,
the TSL would reduce overall customer expenditures relative to the base case in present value terms). An NPV less than zero (
i.e.,
negative value) indicates that the TSL would result in a net increase in customer expenditures in present value terms.
H. Life-Cycle Cost Subgroup Analysis
In analyzing the potential impact of new or amended standards on commercial customers, DOE evaluates the impact on identifiable groups (
i.e.,
subgroups) of customers, such as
different types of businesses that may be disproportionately affected by an energy conservation standard. The subgroup used to perform this evaluation was manufacturing and/or industrial facilities that purchase their own vending machines. This customer subgroup is likely to include owners of high-cost vending machines because they have the highest capital costs and face the lowest electricity prices of any customer subgroup. These two conditions make it likely that this subgroup will have the lowest life-cycle cost savings of any major customer group.
The Joint Comment suggested that DOE focus its customer subgroup analysis on life-cycle costs rather than first-cost impacts. (Joint Comment, No. 34 at p. 6) DOE agrees with the Joint Comment and will continue in this rulemaking to focus the customer LCC subgroup analysis on examination of the life-cycle cost impacts. There will likely be first-cost increases with higher standard levels but also increased energy savings over the lifetime of the equipment. By examining LCC, DOE considers both impacts simultaneously for the designated subgroup in the LCC subgroup analysis, just as it does for the entire customer base in the LCC analysis.
DOE determined the impact on this beverage vending machine customer subgroup using the LCC spreadsheet model. DOE conducted the LCC and PBP analyses for beverage vending machine customers. The standard LCC and PBP analyses (described in section IV.E) include various types of businesses that own and use beverage vending machines. The LCC spreadsheet model allows for the identification of one or more subgroups of businesses, which can then be analyzed by sampling only each subgroup. The results of DOE's LCC subgroup analysis are summarized in section V.B.1.b and described in detail in chapter 12 of the TSD.
I. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impact of energy conservation standards on beverage vending machine manufacturers, and to calculate the impact of such standards on domestic manufacturing employment and capacity. The MIA has both quantitative and qualitative aspects. The quantitative part of the MIA primarily relies on the GRIM, an industry-cash-flow model customized for this rulemaking. The GRIM inputs are data characterizing the industry co
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