Energy Conservation Program: Energy Conservation Standards for Certain Consumer Products (Dishwashers, Dehumidifiers, Microwave Ovens, and Electric and Gas Kitchen Ranges and Ovens) and for Certain Commercial and Industrial Equipment (Commercial Clothes Washers)
Federal RegisterNov 9, 2009
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket Number EERE-2006-STD-0127]
RIN 1904-AB93
Energy Conservation Program: Energy Conservation Standards for Certain Consumer Products (Dishwashers, Dehumidifiers, Microwave Ovens, and Electric and Gas Kitchen Ranges and Ovens) and for Certain Commercial and Industrial Equipment (Commercial Clothes Washers)
AGENCY:
Office of Energy Efficiency and Renewable Energy, Department of Energy.
ACTION:
Supplemental notice of proposed rulemaking and notice of public meeting.
SUMMARY:
On October 17, 2008, the U.S. Department of Energy (DOE) issued a notice of proposed rulemaking (NOPR) in which DOE proposed amendments to the energy conservation standards for several residential products and commercial equipment, including commercial clothes washers (CCWs). DOE decided to conduct additional, supplemental rulemaking analyses for CCWs to address certain alleged data problems. Today's document details these supplemental analyses and proposes revised CCW standard levels for consideration.
DATES:
DOE will hold a public meeting on November 16, 2009, from 9 a.m. to 5 p.m., in Washington, DC. DOE must receive requests to speak at the public meeting and receive a signed original and an electronic copy of statements to be given at the public meeting before 4 p.m., November 13, 2009.
DOE will accept comments, data, and information regarding the supplemental notice of proposed rulemaking (SNOPR) received not later than December 9, 2009. See section VII, “Public Participation,” of today's supplemental notice for details.
ADDRESSES:
The public meeting will be held at the U.S. Department of Energy, Forrestal Building, 1E-245, 1000 Independence Avenue, SW., Washington, DC 20585. (Please note that foreign nationals visiting DOE Headquarters are subject to advanced security screening procedures. If you are a foreign national and wish to participate in the workshop, please inform DOE of this fact 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 SNOPR for Energy Conservation Standards for Home Appliance Products, and provide docket number EERE-2006-STD-0127 and/or regulatory information number (RIN) 1904-AB93. Comments may be submitted using any of the following methods:
1.
Federal eRulemaking Portal: http://www.regulations.gov
. Follow the instructions for submitting comments.
2.
E-mail: home_appliance.rulemaking@ee.doe.gov
. Include docket number EE-2006-STD-0127 and/or RIN number 1904-AB93 in the subject line of the message.
3.
Postal Mail:
Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Please submit one signed original paper copy.
4.
Hand Delivery/Courier:
Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, Room 1J-018, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-2945. 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 today's supplemental notice for details.
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., Suite 600, Washington, DC 20585-0121, (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.
FOR FURTHER INFORMATION CONTACT:
Mr. Stephen Witkowski, U.S. Department of Energy, Energy Efficiency and Renewable Energy, Building Technologies Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-7463. E-mail:
Stephen.Witkowski@ee.doe.gov
.
Ms. Francine Pinto, Esq. or Ms. Betsy Kohl, Esq., U.S. Department of Energy, Office of General Counsel, GC-71/72, 1000 Independence Avenue, SW., Washington, DC 20585-0121. Telephone: (202) 586-5000. E-mail:
Francine.Pinto@hq.doe.gov
,
Elizabeth.Kohl@hq.doe.gov
.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of the Proposed Rule
II. Introduction
A. Consumer Overview
B. Authority
C. Background
1. Current Standards
2. History of Standards Rulemaking
D. Test Procedures
E. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Life-Cycle Costs
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need of the Nation to Conserve Energy
g. Other Factors
2. Rebuttable Presumption
III. Methodology and Revisions to the Analyses Employed in the October 2008 Proposed Rule
A. Equipment Classes
B. Technology Assessment
C. Engineering Analysis
1. Efficiency Levels
a. Revised Efficiency Levels
b. Technological Feasibility of the Revised Top-Loading Max-Tech Level
2. Manufacturing Costs
D. Life-Cycle Cost and Payback Period Analysis
1. Equipment Prices
2. Installation Cost
3. Annual Energy Consumption
4. Energy and Water Prices
a. Energy Prices
b. Water and Wastewater Prices
5. Repair and Maintenance Costs
6. Equipment Lifetime
7. Discount Rates
8. Effective Date of the Amended Standards
9. Equipment Energy Efficiency in the Base Case
10. CCW Split Incentive
11. Rebound Effect
12. Inputs to Payback Period Analysis
13. Rebuttable-Presumption Payback Period
E. National Impact Analysis—National Energy Savings and Net Present Value Analysis
1. General
2. Shipments
a. New Construction Shipments
b. Replacements and Non-replacements
c. Purchase Price, Operating Cost, and Income Impacts
3. Other Inputs
a. Base-Case Forecasted Efficiencies
b. Standards-Case Forecasted Efficiencies
c. Annual Energy Consumption
d. Site-to-Source Conversion
e. Energy Used in Water and Wastewater Treatment and Delivery
f. Total Installed Costs and Operating Costs
g. Discount Rates
h. Effects of Standards on Energy Prices
F. Consumer Subgroup Analysis
G. Manufacturer Impact Analysis
H. Employment Impact Analysis
I. Utility Impact Analysis
J. Environmental Assessment
K. Monetizing Carbon Dioxide and Other Emissions Impacts
IV. Discussion of Other Comments
A. Proposed TSLs for Commercial Clothes Washers
B. Proposed Standards for Commercial Clothes Washers
V. Analytical Results
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable-Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
b. Impacts on Employment
c. Impacts on Manufacturing Capacity
d. Impacts on Subgroups of Manufacturers
3. National Impact Analysis
a. Significance of Energy Savings
b. Net Present Value
c. Impacts on Employment
4. Impact on Utility or Performance of Equipment
5. Impact of Any Lessening of Competition
6. Need of the Nation to Conserve Energy
C. Proposed Standards
1. Overview
2. Conclusion
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act
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
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Summary of the Proposed Rule
The Energy Policy and Conservation Act
1
(EPCA), as amended, provides that any amended energy conservation standard DOE prescribes, including those for CCWs, 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 6316(a)) Furthermore, any new or amended standard must “result in significant conservation of energy.” (42 U.S.C. 6295(o)(3)(B) and 6316(a)) In accordance with these and other statutory criteria discussed in this notice, DOE proposes in today's SNOPR to amend the energy conservation standards for CCWs and raise efficiency levels as shown in Table I.1. The standards would apply to all CCWs manufactured in, or imported into, the United States 3 years after the publication of the final rule in the
Federal Register.
1
42 U.S.C. 6291
et seq
.
Table I.1—Existing and Proposed Energy Conservation Standards for Commercial Clothes Washers
Existing energy conservation standards (effective January 1, 2007)
Equipment class
Standards
Proposed energy conservation standards
Equipment class
Standards
Commercial clothes washers
1.26 Modified Energy Factor/9.5 Water Factor
Top-loading commercial clothes washers
1.6 Modified Energy Factor/8.5 Water Factor.
Front-loading commercial clothes washers
2.00 Modified Energy Factor/5.5 Water Factor.
DOE estimates that the energy conservation standards proposed in today's SNOPR would save a significant amount of energy—an estimated 0.10 quadrillion British thermal units (Btu), or quads, of cumulative energy over 30 years (2013-2043). This amount is equivalent to 2 days of U.S. gasoline use. In addition, today's proposed standards for CCWs save over 143 billion gallons of cumulative water consumption over 30 years (2013-2043).
The cumulative national net present value (NPV) of total consumer costs and savings of today's proposed standards from 2013 to 2043, in 2008 dollars (2008$), ranges from $0.4 billion (7-percent discount rate) to $0.9 billion (3-percent discount rate). This is the estimated total value of future operating-cost savings minus the estimated increased equipment costs, discounted to the present year (2009). DOE estimates the CCW industry net present value (INPV) to be approximately $62 million in 2008$. If DOE adopts today's proposed standards, manufacturers expect a decline of between 7.8 percent and 11.4 percent of the INPV, which is approximately $5 to $7 million. However, the NPV for consumers (at the 7-percent discount rate) would exceed industry losses due to energy efficiency standards by at least 80 times.
DOE believes that the impacts of standards on consumers would be positive for CCWs, even though the standards may increase some initial costs. DOE estimates that today's proposed modified energy factor (MEF) and water factor (WF) standards for CCWs would increase the retail price by $214 per unit for top-loading washers and $23 for front-loading washers, but the operating cost savings outweigh these price increases, resulting in positive economic impacts to CCW consumers.
DOE's analyses indicate that the energy savings resulting from today's proposed standards would have benefits to utilities and to the environment. The energy saved is in the form of electricity and natural gas, and DOE expects the energy savings from today's proposed standards to eliminate the need for approximately 18 megawatts (MW) of generating capacity by 2043. This result reflects DOE's use of energy price projections from the U.S. Energy Information Administration (EIA)'s April 2009 release of the
Annual Energy Outlook 2009
(
AEO 2009
) reflecting provisions of the American Recovery and Reinvestment Act of 2009 (ARRA 2009; Pub. L. 111-5). DOE intends to use the most recently available version of EIA's
AEO
to generate the results for the final rule.
In addition, today's proposed standards would have environmental benefits, which would be estimated to result in cumulative (undiscounted) greenhouse gas emission reductions of 5.1 million tons (Mt) of carbon dioxide (CO
2
) from 2013 to 2043. DOE estimates that the range of the monetized value of
CO
2
emission reductions based on global estimates of the value of CO
2
is $13 million to $140 million at a 7-percent discount rate and $28 million to $303 million at a 3-percent discount rate. The standards for CCWs would also result in 3.04 kilotons (kt) of nitrogen oxides (NO
X
) emissions reductions from 2013 to 2043. The standards for CCWs would also possibly result in power plant mercury (Hg) emissions reductions of up to 0.03 t from 2013 to 2043.
The benefits and costs of today's proposed standards can also be expressed in terms of annualized (2008$) values from 2013-2043. Estimates of annualized values are shown in Table I.2. The annualized monetary values are the sum of the annualized national economic value of operating savings benefits (energy, maintenance and repair), expressed in 2008$, plus the monetary values of the benefits of carbon dioxide emission reductions, otherwise known as the Social Cost of Carbon (SCC) expressed as $19 per metric ton of carbon dioxide, in 2007$. The $19 value is a central interim value from a recent interagency process. Although this $19 value represents emissions that are valued in 2007$, the monetary benefits of cumulative emissions reductions are reported in 2008$ so that they can be compared with the other costs and benefits in the same dollar units. The derivation of this value is discussed in section V.B.6. Although summing the value of operating savings to the values of CO
2
reductions provides a valuable perspective, please note the following: 1) the national operating savings are domestic U.S. consumer monetary savings found in market transactions while the CO
2
value is based on a range of estimates of imputed marginal social cost of carbon from $5 to $55 per metric ton (2007$), which are meant to reflect the global benefits of carbon dioxide reductions; and 2) the assessments of operating savings and CO
2
savings are performed with different computer models, leading to different time frames for analysis. The present value of national operating savings is measured for the period 2013-2065 (31 years from 2013 to 2043 inclusive, plus the lifetime of the longest-lived equipment shipped in the 31st year), then converted the annualized equivalent for the 31 years. The value of CO
2
, on the other hand is meant to reflect the present value of all future climate related impacts, even those beyond 2065.
Using a 7-percent discount rate for the annualized cost analysis, the combined cost of the standards established in today's notice for CCWs is $23.4 million per year in increased equipment and installation costs, while the annualized benefits are $60.6 million per year in reduced equipment operating costs and $5.1 million in CO
2
reductions, for a net benefit of $42.2 million per year. Using a 3-percent discount rate, the cost of the standards established in today's final rule is $22.7 million per year in increased equipment and installation costs, while the benefits of today's standards are $72.8 million per year in reduced operating costs and $5.9 million in CO
2
reductions, for a net benefit of $56.0 million per year.
Table I.2—Annualized Benefits and Costs for Commercial Clothes Washers
Category
Primary estimate
(AEO reference case)
Low estimate
(low growth case)
High estimate
(high growth case)
Units
Year
dollars
Disc
(in
percent)
Period covered
Benefits
Annualized Monetized
60.6
54.9
66.6
2008
7
31
(millions$/year)
72.8
65.3
80.4
2008
3
31
Annualized Quantified
0.14 CO
2
(Mt)
0.14 CO
2
(Mt)
0.14 CO
2
(Mt)
NA
7
31
0.087 NO
X
(kt)
0.087 NO
X
(kt)
0.087 NO
X
(kt)
NA
7
31
0.001 Hg (t)
0.001 Hg (t)
0.001 Hg (t)
NA
7
31
0.16 CO
2
(Mt)
0.16 CO
2
(Mt)
0.16 CO
2
(Mt)
NA
3
31
0.094 NO
X
(kt)
0.094 NO
X
(kt)
0.094 NO
X
(kt)
NA
3
31
0.001 Hg (t)
0.001 Hg (t)
0.001 Hg (t)
NA
3
31
CO
2
Monetized Value (at $19/Metric Ton, millions$/year)
5.1
5.1
5.1
2008
7
31
5.9
5.9
5.9
2008
3
31
Total Monetary Benefits
65.7
59.9
71.6
2008
7
31
(millions$/year)*
78.7
71.2
86.3
2008
3
31
Qualitative
Costs
Annualized Monetized
23.4
21.9
24.6
2008
7
31
(millions$/year)
22.7
20.9
23.9
2008
3
31
Qualitative
Net Benefits/Costs
Annualized Monetized, including Carbon Benefits* (million$/year)
42.2
38.1
47.0
2008
7
31
56.0
50.3
62.4
2008
3
31
Qualitative
*Per the above discussion, this represents a simplified estimate that includes both 2007$ and 2008$.
In sum, today's proposed standards represent the maximum improvement in energy and water efficiency that is technologically feasible and economically justified. DOE found that the benefits of today's proposed standards (energy and water savings, consumer average life-cycle cost (LCC) savings, national NPV increase, and emissions reductions) outweigh the costs (loss of INPV and LCC increases for some consumers). DOE has concluded that the standards proposed in today's SNOPR are economically justified and technologically feasible, particularly since units achieving these standard levels are already commercially available. DOE notes that it considered higher efficiency levels as trial standard levels (TSLs), and is still considering them in this rulemaking; however, DOE tentatively believes that the burdens of the higher efficiency levels (loss of INPV and LCC increases for some consumers) outweigh the benefits (energy savings, LCC savings for some consumers, national NPV increase, and emissions reductions). After reviewing public comments on this SNOPR, DOE may ultimately decide to adopt one of the other TSLs or another value in between.
II. Introduction
A. Consumer Overview
DOE is proposing in today's SNOPR energy conservation standard levels for CCWs as shown in Table I.1 above. These proposed standards would apply to equipment manufactured or imported 3 years after the date the final rule is published in the
Federal Register
.
2
2
DOE anticipates publishing a final rule for commercial clothes washer energy conservation standards by January 1, 2010, pursuant to the requirements of the Energy Policy Act of 2005 (EPACT 2005; Pub. L. 109-058), which would make any amended standards effective on January 1, 2013.
DOE research suggests that commercial consumers will see benefits from today's proposed standards even though DOE expects the purchase price of the high efficiency CCWs to increase (by 2 to 28 percent) from the average price of this equipment today. However, the energy efficiency gains are expected to result in lower energy and water costs, saving consumers $53 to $103 per year on their energy and water bills, again depending on the equipment class. When these savings are summed over the lifetime of the equipment, consumers are expected to save an average of $20 to $190, depending on the equipment class, utility costs, and other factors. DOE estimates that the payback period for the more efficient, higher-priced equipment will range from 0.2 to 5.6 years, depending on the equipment class.
B. Authority
Title III of EPCA sets forth a variety of provisions designed to improve energy efficiency. Part A-1 of Title III (42 U.S.C. 6311-6317) establishes an energy conservation program for “Certain Industrial Equipment,” which deals with a variety of commercial and industrial equipment (referred to hereafter as “covered equipment”) including CCWs. (42 U.S.C. 6312; 6313(e)) EPCA sets both energy and water efficiency standards for CCWs, and authorizes DOE to amend both. (42 U.S.C. 6313(e))
Section 136(a) and (e) of the Energy Policy Act of 2005 (EPACT 2005; Pub. L. 109-058) added CCWs as equipment covered under EPCA and established standards for such equipment that is manufactured on or after January 1, 2007.
3
(42 U.S.C. 6311(1) and 6313(e)) These amendments to EPCA also require that DOE issue a final rule by January 1, 2010, to determine whether these standards should be amended. (EPACT 2005, section 136(e); 42 U.S.C. 6313(e)) If amended standards are justified, they would become effective no later than January 1, 2013. (
Id
.)
3
Under the statute, a CCW must have a modified energy factor (MEF) of at least 1.26 and a water factor (WF) of not more than 9.5.
It is pursuant to the authority set forth above that DOE is conducting the present rulemaking for CCWs. The following discusses some of the key provisions of EPCA relevant to this standards-setting rulemaking.
Under EPCA, the overall program consists of the following core elements: (1) Testing; (2) labeling; and (3) Federal energy conservation standards. The Federal Trade Commission (FTC) is responsible for labeling equipment covered by part A, and DOE implements the remainder of the program. Under 42 U.S.C. 6293 and 6314, EPCA authorizes DOE, subject to certain criteria and conditions, to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of covered equipment. The test procedures for CCWs appear at 10 CFR part 430, subpart B, appendix J1 (pursuant to 10 CFR 431.154).
EPCA provides criteria for prescribing new or amended standards for covered products and equipment.
4
As indicated above, any new or amended standard must be designed to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and 6316(a)) The statute also provides that, in deciding whether a standard is economically justified, DOE must, after receiving comments on the proposed standard, determine whether the benefits of the standard exceed its burdens by considering, to the greatest extent practicable, the following seven factors:
4
The EPCA provisions discussed in the remainder of this subsection directly apply to covered products, and also apply to certain covered equipment, such as CCWs, by virtue of 42 U.S.C. 6316(a). Note that the term “product” is used generally to refer to consumer appliances, while “equipment” is used generally to refer to commercial units.
(1) The economic impact of the standard on manufacturers and consumers of the products or equipment subject to the standard;
(2) The savings in operating costs throughout the estimated average life of the covered products or equipment in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the imposition of the standard;
(3) The total projected amount of energy (or, as applicable, water) savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the covered products or 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 and water conservation; and
(7) Other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i) and 6316(a))
Furthermore, EPCA contains what is commonly known as an “anti-backsliding” provision. (42 U.S.C. 6295(o)(1)) This provision prohibits the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product or equipment. Also, the Secretary may not prescribe an amended or a new standard if the Secretary finds that interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States of any product type (or class) with performance characteristics, features, sizes, capacities, and volume that are substantially the same as those generally available in the United States at the time of the Secretary's finding. (42 U.S.C. 6295(o)(4))
In addition, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii)), establishes a
rebuttable presumption that a standard is economically justified if the Secretary finds that “the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy (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. (42 U.S.C. 6295(o)(2)(B)(iii)) See Section II.G.2.
In promulgating a standard for a type or class of covered product or equipment that has two or more subcategories, DOE must specify a different standard level from that which applies generally to such type or class of products or equipment “for any group of covered products which have the same function or intended use, if * * * covered products within such group—(A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard” than applies or will apply to the other products. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies such a different standard for a group of equipment, DOE must consider “such factors as the utility to the consumer of such a feature” and other factors DOE deems appropriate.
Id.
Any rule prescribing such a standard must include an explanation of the basis on which such higher or lower level was established. (42 U.S.C. 6295(q)(2))
Federal energy conservation requirements generally supersede State laws or regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)-(c)) DOE can, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions of EPCA found in 42 U.S.C. 6297(d). Specifically, States that regulate an energy conservation standard for a type of covered product for which there is a Federal energy conservation standard may petition the Secretary for a DOE rule that allows the State regulation to become effective with respect to such covered product. (42 U.S.C. 6297(d)(1)(A)) DOE must prescribe a rule granting the petition if the Secretary finds that the State has established by a preponderance of the evidence that its regulation is needed to meet “unusual and compelling State or local energy * * * interests.” (42 U.S.C. 6297(d)(1)(B))
C. Background
1. Current Standards
EPCA, as amended by EPACT 2005, prescribes energy conservation standards for CCWs manufactured on or after January 1, 2007. (42 U.S.C. 6313(e)) These standards require that CCWs have an MEF of at least 1.26 cubic feet of capacity (ft
3
) per kilowatt-hour (kWh) and a WF of not more than 9.5 gallons of water (gal) per ft
3
. (
Id.;
10 CFR 431.156)
2. History of Standards Rulemaking
To initiate the current rulemaking to consider energy conservation standards, on March 15, 2006, DOE published on its Web site a document titled,
Rulemaking Framework for Commercial Clothes Washers and Residential Dishwashers, Dehumidifiers, and Cooking Products
(Framework Document).
5
71 FR 15059 (March 27, 2006). The Framework Document described the procedural and analytical approaches that DOE anticipated using to evaluate energy conservation standards for these products, and identified various issues to be resolved in conducting the rulemaking. DOE held a public meeting on April 27, 2006, to present the Framework Document, to describe the analyses it planned to conduct during the rulemaking, to receive comments from interested parties, and to inform and facilitate interested parties' involvement in the rulemaking. DOE received 11 written comments in response to the Framework Document after the public meeting.
5
This document is available on the DOE Web site at:
http://www1.eere.energy.gov/buildings/appliance_standards/commercial/clothes_washers.html.
On December 4, 2006, DOE posted two spreadsheet tools for this rulemaking on its Web site.
6
The first tool calculates LCC and payback periods (PBPs) and included spreadsheets for: (1) Dishwashers; (2) dehumidifiers; (3) cooktops; (4) ovens; (5) microwave ovens; and (6) CCWs. The second tool—the national impact analysis (NIA) spreadsheets—calculate the impacts on shipments and the national energy savings (NES) and NPV at various candidate standard levels for: (1) Dishwashers; (2) dehumidifiers; (3) cooktops and ovens; (4) microwave ovens; and (5) CCWs.
6
These spreadsheets are available on the DOE Web site at:
http://www1.eere.energy.gov/buildings/appliance_standards.
DOE published the advance notice of proposed rulemaking (ANOPR) for this rulemaking on November 15, 2007 (November 2007 ANOPR) (72 FR 64432), and held a public meeting on December 13, 2007, to present and seek comment on the November 2007 ANOPR analytical methodology and results. The November 2007 ANOPR included background information on the history and conduct of this rulemaking. 72 FR 64432, 64438-39 (Nov. 15, 2007) In the November 2007 ANOPR, DOE described and sought further comment on the analytical framework, models, and tools (
e.g.,
LCC and NIA spreadsheets) it was using to analyze the impacts of energy conservation standards for these products. In conjunction with the November 2007 ANOPR, DOE also posted on its Web site the complete November 2007 ANOPR technical support document (TSD). The TSD included the results of a number of DOE's preliminary analyses, including: (1) The market and technology assessment; (2) screening analysis; (3) engineering analysis; (4) energy and water use determination; (5) markups analysis to determine equipment price; (6) LCC and PBP analyses; (7) shipments analysis; (8) NIA; and (9) manufacturer impact analysis (MIA). In the November 2007 ANOPR and at the public meeting, DOE invited comment in particular on the following issues concerning CCWs: (1) Product classes; (2) horizontal-axis designs; (3) technologies unable to be analyzed and exempted product classes, including potential limitations of existing test procedures; (4) per-cycle energy consumption; (5) consumer prices; (6) repair and maintenance costs; (7) efficiency distributions in the base case; (8) shipments forecasts; (9) base-case and standards-case forecasted efficiencies; and (10) TSLs. 72 FR 64432, 64512-14 (Nov. 15, 2007).
On October 17, 2008, DOE published a NOPR (October 2008 NOPR) in the
Federal Register
, in which it proposed amended energy conservation standards for certain products and equipment, including CCWs. 73 FR 62034. The energy conservation standards proposed in the October 2008 NOPR for CCWs are shown in Table II.1.
Table II.1—Commercial Clothes Washer Energy Conservation Standards Proposed in the October 2008 NOPR
Equipment
Modified energy
factor, ft
3
/kWh
Water factor,
gal/ft
3
Top-loading CCWs
1.76
8.3
Front-loading CCWs
2.0
5.5
In the October 2008 NOPR, DOE described and sought further comment on the analytical framework, models, and tools (
e.g.,
LCC and NIA spreadsheets) it was using to analyze the impacts of energy conservation standards for this equipment. In conjunction with the October 2008 NOPR, DOE also posted on its Web site the complete technical support document (TSD), which along with the October 2008 NOPR, is available at
http://www1.eere.energy.gov/buildings/appliance_standards/.
The TSD included the results of a number of DOE's analyses, including: (1) The market and technology assessment; (2) screening analysis; (3) engineering analysis; (4) energy and water use determination; (5) markups analysis to determine equipment price; (6) LCC and PBP analyses; (7) shipments analysis; (8) NES and national impact analyses; and (9) MIA. In the October 2008 NOPR and at the public meeting held on November 13, 2008 (referred to as the “November 2008 public meeting”), DOE invited comment in particular on the following issues concerning CCWs: (1) The efficiency levels; (2) DOE's determination of the maximum technologically feasible (max-tech) efficiency levels for top-loading and front-loading CCWs; (3) the magnitude of possible equipment class shifting to front-loading CCWs; (4) the analysis and data relevant to the price elasticity of demand for calculating the anticipated energy and water savings at different TSLs; (5) the analysis of consumer knowledge of the Federal ENERGY STAR program and its potential as a resource for increasing knowledge of the availability and benefits of energy efficient appliances in the home appliance consumer market; (6) discount rates other than 7 percent and 3 percent real to discount future emissions reductions; (7) data that might enable DOE to test for market failures or other specific problems for CCWs; and (8) the determination of anticipated environmental impacts of the standards proposed in the October 2008 NOPR, particularly with respect to the methods for valuing the expected CO
2
and NO
X
emissions savings. 73 FR 62034, 62133 (Oct. 17, 2008).
The October 2008 NOPR also included background information, in addition to that set forth above, on the history and conduct of this rulemaking. 73 FR 62034, 62040-62041 (Oct. 17, 2008). DOE presented the methodologies and results for the October 2008 NOPR analyses at the November 2008 public meeting. Comments presented by interested parties during this meeting and submitted in response to the October 2008 NOPR concerning the accuracy of the stated max-tech CCW efficiency level led to a thorough investigation of CCW efficiencies and today's SNOPR. DOE subsequently tested the max-tech unit at an independent test facility, revised the max-tech level, updated the analysis, and is publishing the SNOPR to allow interested parties to comment on the revised efficiency level proposals.
DOE expects to issue a final rule in this rulemaking no later than January 1, 2010, as required by EPCA, as amended by EPACT 2005 (42 U.S.C. 6313(e)). Based on this schedule, the estimated effective date of any amended energy conservation standards for this equipment would be January 1, 2013, 3 years after the final rule is published in the
Federal Register.
D. Test Procedures
EPCA directs DOE to use the same test procedures for CCWs as those established by DOE for residential clothes washers (RCWs). (42 U.S.C. 6314(a)(8)) 73 FR 62034, 62043-62044 (Oct. 17, 2008). While DOE believes commercial laundry practices likely differ from residential practices,
7
DOE concluded in the October 2008 NOPR that the existing clothes washer test procedure (at 10 CFR part 430, subpart B, appendix J1) adequately accounts for the efficiency rating of CCWs, and that DOE's methods for characterizing energy and water use in the October 2008 NOPR analyses adequately accounted for the consumer usage patterns specific to CCWs.
7
CCWs are typically used more frequently and filled with a larger load than RCWs.
In response to the October 2008 NOPR, Alliance Laundry Systems (Alliance), GE Consumer & Industrial (GE), and AHAM agreed with DOE's conclusion that the DOE clothes washer test procedure is adequate for rating CCWs. (Alliance, Public Meeting Transcript, No. 40.5 at p. 22; Alliance, No. 45 at p. 1; GE, No. 48 at p. 4; AHAM, Public Meeting Transcript, No. 40.5 at pp. 26-27; AHAM, No. 47 at p.4)
8
DOE did not receive any comments objecting to the use of the DOE clothes washer test procedure for CCWs. Therefore DOE continues to consider the existing DOE test procedure adequate to measure energy and water consumption of CCWs.
8
A notation in the form “Alliance, No. 45 at p. 1” identifies a written comment (1) made by Alliance Laundry Systems (Alliance), (2) recorded in document number 45 that is filed in the docket of this rulemaking (Docket No. EE-2006-STD-0127), maintained in the Resource Room of the Building Technologies Program, and (3) which appears on page 1 of document number 45.
E. Technological Feasibility
1. General
DOE considers a design option to be technologically feasible if it is in use by the respective industry or if research has progressed to the development of a working prototype. Therefore, in each standards rulemaking, DOE conducts a screening analysis, based on information it has gathered regarding existing technology options and prototype designs. In consultation with manufacturers, design engineers, and other interested parties, DOE develops a list of design options for consideration in the rulemaking. Once DOE has determined that a particular design option is technologically feasible, it further evaluates each design option in light of the following three additional criteria: (a) Practicability to manufacture, install, and service; (b) adverse impacts on product utility or availability; or (c) adverse impacts on health or safety. 10 CFR part 430, subpart C, appendix A, section 4(a)(3) and (4). All design options that pass these screening criteria are candidates for further assessment in the engineering and subsequent analyses in the NOPR (or SNOPR) stage.
DOE published a list of evaluated CCW technologies in the November 2007 ANOPR. 72 FR 64432, 64458 (Nov. 15, 2007). For the reasons described in
the November 2007 ANOPR and in chapter 4 of the SNOPR TSD, DOE is not considering the following design options, as they do not meet one or more of the screening criteria: bubble action, electrolytic disassociation of water, ozonated laundering, reduced thermal mass, suds saving, and ultrasonic washing. In this supplemental notice, DOE has not screened out any additional technology options that were retained in the October 2008 NOPR analyses. No comments were received objecting to the technology options which were screened out in the October 2008 NOPR. 73 FR 62034, 62052 (Oct. 17, 2008).
Therefore, DOE believes all of the efficiency levels evaluated in this notice, which are based upon the retained design options, are technologically feasible. For more detail on DOE's method for developing CCW technology options and the process for screening these options, refer to the chapters 3 and 4 of the SNOPR TSD.
2. Maximum Technologically Feasible Levels
When DOE considers an amended or new standard for a type (or class) of equipment such as front-loading or top-loading CCWs, it 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)(2) and 6316(a)) For the October 2008 NOPR, DOE determined the max-tech efficiency levels for front-loading and top-loading CCWs in the engineering analysis, based on published MEF and WF values of commercially available equipment. (See chapter 5 in the NOPR TSD.) In proposing these max-tech levels, DOE noted that some CCWs exceed the max-tech MEF or WF levels, but not both. For example, two front-loading models exceed the max-tech MEF—they are rated at 2.45 and 2.68 MEF, respectively, in the Consortium for Energy Efficiency (CEE) qualifying product list for its Commercial, Family-Sized Washer Initiative—but don't achieve a max-tech WF level—they are rated at 5.69 and 5.47 WF, respectively. In the California Energy Commission (CEC) equipment database for CCWs, DOE found one top-loading model that exceeds the max-tech WF—it is rated at 7.3 WF—but not the max-tech MEF level—it is rated at 1.32 WF. This model has been discontinued, as discussed in the November 2007 ANOPR and the October 2008 NOPR TSD. The max-tech efficiency levels proposed in the October 2008 NOPR were selected to represent the best available combinations of high MEF and low WF for each equipment class.
For the October 2008 NOPR, DOE proposed the max-tech levels shown in Table II.2. 73 FR 62034, 62036 (Oct. 17, 2008).
Table II.2—Commercial Clothes Washer Max-Tech Efficiency Levels Proposed in the October 2008 NOPR
Equipment class
Max-tech level
MEF,
ft
3
/kW
WF,
gal/ft
3
Top-Loading CCWs
1.76
8.3
Front-Loading CCWs
2.35
4.4
According to the CEE database, three front-loading CCWs rated at the max-tech efficiency level are on the market in the United States. One model listed in the database which exceeds the max-tech level is rated at (2.84 MEF/3.68 WF), but DOE determined this CCW has yet to be sold in the United States. The front-loading max-tech level was based on a single model listed in the CEC database.
The max-tech top-loading CCW efficiency rating in the October 2008 NOPR was questioned by Alliance at the November 2008 NOPR meeting. (Alliance, Public Meeting Transcript, No. 40.5 at pp. 90-92) In response, DOE contracted an independent testing laboratory to verify the performance ratings for the max-tech top-loading CCW. The laboratory results (based on a 3-unit sample) suggest that the unit achieves 1.63 MEF/8.4 WF. Based on this information, for the SNOPR analysis, DOE revised the max-tech top-loading CCW level downward to 1.60 MEF/8.5 WF, a level proposed in the October 2008 NOPR as a “gap-fill” level and one which DOE concludes is attainable by the max-tech CCW model. For more details on this selection of max-tech levels for the SNOPR, see section III.C.1 of today's supplemental notice.
In sum, Table II.3 lists the max-tech levels that DOE is proposing for today's SNOPR. Today's proposed front-loading max-tech level is the same as in the October 2008 NOPR, whereas today's proposed top-loading max-tech level has been revised based on the independent test results.
Table II.3—Commercial Clothes Washer Max-Tech Efficiency Levels Proposed for This SNOPR
Equipment class
Max-tech level
MEF,
ft
3
/kW
WF,
gal/ft
3
Top-Loading CCWs
1.60
8.5
Front-Loading CCWs
2.35
4.4
F. Energy Savings
1. Determination of Savings
DOE used its NIA spreadsheet tool to estimate energy savings from amended standards for CCWs. (Section III.E of today's supplemental notice and chapter 11 of the SNOPR TSD describe the NIA spreadsheet model.) DOE forecasted energy savings over the period of analysis (beginning in 2013, the year that amended standards would go into effect, and ending in 2043) for each TSL, relative to the base case, which represents the forecast of energy consumption in the absence of amended energy conservation standards. DOE quantified the energy savings attributable to amended energy conservation standards as the difference in energy consumption between the standards case and the base case. The base case represents the forecast of energy consumption in the absence of amended energy conservation standards. The base case considers market demand for more efficient equipment.
The NIA spreadsheet tool calculates the electricity savings in “site energy” expressed in kWh. Site energy is the energy directly consumed on location by an individual equipment. DOE reports national energy savings on an annual basis in terms of the aggregated source energy savings, which is the savings of energy that is used to generate and transmit the energy consumed at the site. To convert site energy to source energy, DOE derived conversion factors, which change with time, from the March 2009 release of the
AEO 2009.
(See TSD chapter 11 accompanying today's supplemental notice for further details.)
2. Significance of Savings
EPCA, as amended, prohibits DOE from adopting a standard for a product if that standard would not result in “significant” energy savings. (42 U.S.C. 6295(o)(3)(B)) While the Act does not define the term “significant,” the U.S. Court of Appeals for the District of Columbia, in
Natural Resources Defense Council
v.
Herrington,
768 F.2d 1355,
1373 (D.C. Cir. 1985), indicated that Congress intended “significant” energy savings in this context to be savings that were not “genuinely trivial.” The energy savings for energy conservation standards at each of the TSLs considered in this rulemaking are nontrivial, and, therefore, DOE considers them “significant” within the meaning of 42 U.S.C. 6295(o)(3)(B).
G. 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. (42 U.S.C. 6295(o)(2)(B)). The following sections discuss how DOE has addressed each of those seven factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
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 during the period between the announcement of a regulation and the time when the regulation becomes effective, and a long-term assessment. The impacts analyzed include INPV (which values the industry on the basis of expected future cash flows), cash flows by year, changes in revenue and income, and other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, with particular attention to impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment, manufacturing capacity, plant closures, and loss of capital investment. DOE also takes into account cumulative impacts of different regulations on manufacturers. For more details on this analysis, see section III.G.
For commercial consumers, measures of economic impact include the changes in LCC and payback period for the equipment at each TSL. Under EPCA, the LCC is one of the seven factors to be considered in determining economic justification. (42 U.S.C. 6295(o)(2)(B)(i)(II)) It is discussed in detail in the section below.
b. Life-Cycle Costs
The LCC is the sum of the purchase price of equipment (including the installation) and the operating expense (including energy and maintenance expenditures), discounted over the lifetime of the equipment.
In this rulemaking, DOE calculated both LCC and LCC savings for various CCW efficiency levels. DOE established the variability and uncertainty in energy and water use by defining the uncertainty and variability in the use (cycles per day) of the equipment. The variability in energy and water pricing were characterized by regional differences in energy and water prices. To account for uncertainty and variability in other inputs, such as equipment lifetime and discount rate, DOE used a distribution of values with probabilities attached to each value. For each consumer with a CCW, DOE sampled the values of these inputs from the probability distributions. As a result, the analysis produced a range of LCCs. This approach permits DOE to identify the percentage of consumers achieving LCC savings or attaining certain payback values due to an increased energy conservation standard, in addition to the average LCC savings or average payback for that standard. DOE presents the LCC savings as a distribution, with a mean value and a range. In the analysis prepared for the October 2008 NOPR, DOE assumed that the consumer will purchase the equipment in 2012. For today's SNOPR, that assumption has been changed to 2013 due to the expected effective date of any amended standards. See section III.D for more details on the analysis.
c. Energy Savings
While significant conservation of energy is a separate statutory requirement for imposing an energy conservation standard, EPCA requires DOE, in determining the economic justification of a proposed standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As in the October 2008 NOPR, DOE used the NIA spreadsheet results in its consideration of total projected savings expected to be directly attributable to the considered standard levels. See section III.E for more details on this analysis.
d. Lessening of Utility or Performance of Equipment
In establishing classes of equipment, DOE considered whether the evaluated design options would likely lessen the utility or performance of CCWs. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) In the October 2008 NOPR, DOE determined that none of the considered TSLs would reduce the utility or performance of the equipment under consideration in the rulemaking. Specifically, the standards proposed in the October 2008 NOPR would maintain the consumer utility of washing clothes in a washer with either top or front access. 73 FR 62034, 62047 (Oct. 17, 2008). This conclusion remains the same for the proposed standards in today's SNOPR. As in the October 2008 NOPR, the efficiency levels considered in today's SNOPR for both equipment classes require no changes in equipment design or unusual installation requirements that could reduce the utility or performance of CCWs.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider any lessening of competition that is likely to result from standards. It directs the Attorney General to determine the impact, if any, of any lessening of competition likely to result from a proposed standard and to transmit such determination to the Secretary, not later than 60 days after the publication of a proposed rule, together with an analysis of the nature and extent of such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)). DOE received the Attorney General's determination dated December 16, 2008. It is discussed in section V.B.5 below, and is reprinted at the end of this SNOPR. Impacts on manufacturers are also discussed in section III.G below.
f. Need of the Nation To Conserve Energy
The non-monetary benefits of today's proposed standards are likely to be reflected in improvements to the security and reliability of the Nation's energy system-namely, reductions in the overall demand for energy will result in reduced costs for maintaining reliability of the Nation's electricity system. DOE conducts a utility impact analysis to estimate how standards may impact the Nation's needed power generation capacity. This analysis captures the effects of efficiency improvements on electricity consumption by the equipment which is the subject of this rulemaking.
Today's proposed standards also 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 emissions reductions based on the estimated level of power generation displaced by energy conservation standards. DOE reports the environmental effects from each TSL in an environmental assessment in chapter 16 of the SNOPR TSD. (42. U.S.C. 6295(o)(2)(B)(i)(VI) and 6316(a)) See section III.J for more details on this analysis.
g. Other Factors
The Secretary, in determining whether a standard is economically justified, may consider other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) In considering amended standards for today's SNOPR, the Secretary found no relevant factors other than those identified elsewhere in today's SNOPR.
2. Rebuttable Presumption
As set forth under 42 U.S.C. 6295(o)(2)(B)(iii), there is a rebuttable presumption that an energy conservation standard is economically justified if the increased installed cost for equipment that meets the standard is less than three times the value of the first-year energy savings resulting from the standard (and water savings in the case of a water efficiency standard). DOE's LCC and PBP analyses generate values that calculate the payback period for consumers of equipment meeting potential energy conservation standards, which includes, but is 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 analysis serve as the basis for DOE to definitively evaluate the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). Section III.D.13 of today's supplemental notice addresses the rebuttable-presumption payback calculation.
III. Methodology and Revisions to the Analyses Employed in the October 2008 Proposed Rule
DOE used economic models to estimate the impacts of the TSLs used in weighing the benefits and burdens of amended standards for the equipment that is the subject of this rulemaking. Specifically, DOE developed the relationship between cost and efficiency for this equipment, and calculated the simple payback period for the purposes of addressing the rebuttable presumption that a standard with a payback period of less than 3 years is economically justified. The LCC spreadsheet calculates the consumer benefits and payback periods for amended energy conservation standards. The NIA spreadsheet provides shipments forecasts and then calculates NES and NPV impacts of potential amended energy conservation standards. DOE also assessed manufacturer impacts, largely through use of the Government Regulatory Impact Model (GRIM).
Additionally, DOE estimated the impacts of energy conservation standards due to equipment 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 the EIA primarily for the purpose of preparing the
AEO.
The NEMS produces forecasts for the United States that are available in the public domain. The version of NEMS used for appliance standards analysis is called NEMS-BT and is primarily based on the
AEO 2009
April Release with minor modifications.
9
The NEMS-BT offers a sophisticated picture of the effect of standards, since it accounts for the interactions between the various energy supply and demand sectors and the economy as a whole.
9
The EIA approves the 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 as used here. (“BT” stands for DOE's Building Technologies Program.) For more information on NEMS, refer to
The National Energy Modeling System: An Overview,
DOE/EIA-0581 (98) (Feb. 1998)(available at:
http://tonto.eia.doe.gov/ FTPROOT/forecasting/058198.pdf
).
A. Equipment Classes
In general, when evaluating and establishing energy conservation standards, DOE divides covered products or equipment into classes by the type of energy used, capacity, or other performance-related features that affect consumer utility and efficiency. (42 U.S.C. 6295(q); 6316(a)) Different energy conservation standards may apply to different equipment classes.
Id.
In the October 2008 NOPR, DOE proposed separate equipment classes and accompanying standards for top-loading and front-loading CCWs with separate standards for each class. 73 FR 62034, 62036 (Oct. 17, 2008). Thus the October 2008 NOPR represented a change from the November 2007 ANOPR and from EPACT 2005
10
, which placed all CCWs into a single equipment class with a single energy efficiency and water efficiency standard. The October 2008 NOPR stated that DOE believes it has the authority to establish additional equipment classes within an equipment category, if warranted. DOE determined in the October 2008 NOPR that two equipment classes are warranted because an amended standard would set MEF for all CCWs at a level significantly higher than what the max-tech for top-loading machines can attain today, and effectively eliminate top-loading CCWs from the market.
Id.
10
42 U.S.C. 6313(e); codified at 10 CFR 431.156.
DOE explained the basis of its authority to establish separate classes, and noted that it had previously established and used classes for residential clothes washers (RCW) in previous rulemakings and had cited the likely elimination of one of these classes as one of several reasons for denying the California Energy Commission's (CEC) petition for waiver from Federal preemption of its RCW regulation. DOE then concluded that, “Given the similarities in technologies and design and operating characteristics between RCWs and CCWs, * * * the axis of access must be accorded similar treatment in the context of the current CCW rulemaking.” DOE also asserted that, “If DOE were to propose an amended standard for CCWs under the statutory criteria set forth in EPCA based upon a single product class, the result would be a standard that would effectively eliminate top-loading CCW's from the market * * *;”
Alliance, GE, Whirlpool Corporation (Whirlpool), and AHAM supported the two equipment classes as proposed in the October 2008 NOPR. (Alliance, Public Meeting Transcript, No. 40.5 at p. 22; Alliance, No. 45 at p. 1; GE, Public Meeting Transcript, No. 40.5 at p. 31; GE, No. 48 at p. 4; Whirlpool, Public Meeting Transcript, No. 40.5 at p. 28; Whirlpool, No. 50 at pp. 2-3, AHAM, Public Meeting Transcript, No. 40.5 at p. 26; AHAM, No. 47 at p. 4)
ASAP, American Council for an Energy-Efficient Economy (ACEEE), American Rivers, Natural Resources Defense Council, Northeast Energy Efficiency Partnerships, Northwest Power and Conservation Council, Southern California Edison, Southern California Gas Company, and San Diego Gas and Electric Company, jointly, (the Joint Comment) and ASAP, individually, stated that they dispute DOE's conclusion that two equipment classes are required under the law to preserve the availability of top-loading machines. (Joint Comment, No. 44 at pp. 5-6; ASAP, Public Meeting Transcript, No. 40.5 at p. 33) EarthJustice (EJ) noted that a horizontal-axis CCW, like some horizontal-axis residential models, could be designed with top-loading access through a hatch. (EJ, Public Meeting Transcript, No. 40.5 at p. 26)
The Joint Comment stated that the ability to load a CCW from the front is substantially the same as the ability to load from the top. (Joint Comment, No. 44 at appendix A, pp. 1-4) Thus, the unavailability of top-loading CCWs would have no effect on equipment utility.
In response to the EarthJustice, DOE examined the potential use of top-loading, horizontal-axis machines in the CCW market. While a top-loading horizontal-axis design can provide access similar to traditional vertical-axis clothes washers, the consumer utility of a top-loading, horizontal-axis clothes washer may not be sufficiently comparable to that of a top-loading, vertical-axis clothes washer, since users of top-loading horizontal-axis units must perform multiple actions to undo and re-secure the hatch every time they access the inside of the wash basket. DOE research suggests that the added complication in loading and unloading such a clothes washer appears to be more relevant in a shared laundry and laundromat setting and less relevant in an institutional setting due to consumer education issues. In any case, DOE knows of no top-loading, horizontal-axis machines in the U.S. market for CCWs.
As discussed in the October 2008 NOPR, DOE concluded that the method of “loading” clothes (
i.e.,
the axis of access) is a “feature” of RCWs within the meaning of 42 U.S.C. 6295(o)(4). Due to similarities in technologies and in design and operating characteristics between RCWs and CCWs, the axis of access may also be considered a feature in the context of this CCW rulemaking. Therefore, DOE tentatively concludes that top-loading, vertical-axis CCWs provide unique utility, and that, as determined in the October 2008 NOPR, axis of access is a feature pursuant to EPCA. Thus, DOE is retaining the two proposed equipment classes from the October 2008 NOPR in today's SNOPR.
DOE seeks comment as to whether the method of “loading” clothes washers, or any other characteristic commonly associated with traditional “top-loading” or “front-loading” clothes washers are “features” within the meaning of 42 U.S.C. 6295(o)(4) in EPCA and whether the availability of such feature(s) would likely be affected by eliminating the separate classes for these equipment types previously established by DOE. This is identified as Issue 1 in section VII.E of today's supplemental notice (Issues on Which DOE Seeks Comment.)
As noted above, in the October 2008 NOPR, DOE took the position that EPCA does not permit adoption of a standard that would eliminate top-loading CCWs because the method of loading is a “feature.” 73 FR 62034, 62049-50. Furthermore, in DOE's denial of the CEC's petition for waiver from Federal preemption (71 FR 78157 (December 28, 2006)) and the ensuing litigation,
California Energy Commission
v.
DOE,
Case. No. 07-71576 (9th Cir.), DOE took the position that it could not waive Federal preemption, in part because the proposed California regulation of residential clothes washer water usage would result in the unavailability of top-loading residential clothes washers in the California market, based on DOE's evaluation of the clothes washer market in 2006.
DOE is willing to reconsider its previous conclusions as part of this rulemaking. More specifically, DOE is soliciting public comments on whether one or more of the characteristics commonly associated with different types of clothes washers, such as method of loading, presence or absence of agitators, ability to interrupt cycles, and possibly others, provide consumer utility that should, under existing law, be recognized and protected by DOE through the maintenance or establishment of separate equipment classes. DOE also seeks comments as to whether, as a consequence of market and technology developments, it should maintain the same equipment classes for commercial clothes washers as it does for residential clothes washers.
DOE notes that, if warranted by the public comments received and its further consideration of this issue, it were to establish a single equipment class in setting standards for CCWs, DOE intends to give considerable weight to the potential adverse effects of a single equipment class efficiency standard on competition in the CCW market. That is, DOE does not intend to set a standard that would produce significant adverse impacts on competition in this market.
B. Technology Assessment
For the technology assessment in the October 2008 NOPR analyses, DOE considered all RCW and CCW technology options that it is aware are or have been incorporated into working prototypes or commercially available clothes washers at the time of the analysis. ASAP stated that DOE should give more serious consideration to innovations currently in production on the RCW market. (ASAP, Public Meeting Transcript, No. 40.5 at pp. 33-34) DOE did not receive information on specific technologies for RCWs that it did not consider. Further, DOE notes that it considered as design options many technologies that are found in both RCWs and CCWs. Of the technology options screened out, only suds saving
11
has appeared previously as a feature in commercially available RCWs. DOE research suggests that clothes washers incorporating a suds-saving feature have not been available on the market since 2005, and further DOE research suggests that suds saving would be impractical to install in a commercial setting for reasons such as space limitations, questionable energy savings, incompatibility with CCW usage patterns, and lack of consumer acceptance. Therefore, DOE concludes that suds-savings is an RCW feature that was appropriately screened out for the CCW SNOPR analysis.
11
A suds-saving feature allows water from one wash cycle to be reused in the next wash cycle. After agitation, sudsy wash water is pumped into a separate storage tub, remaining there until the next wash cycle. While the water is stored, soil settles to the bottom of the tub. During the next wash cycle, all but an inch of the water is pumped back into the washer tub for use again. Clothes washers with the suds-saving feature must be larger than typical clothes washers in order to accommodate the additional storage tub.
In addition, DOE has gathered and analyzed data published by CEC, CEE, and the ENERGY STAR Program to provide an overview of the energy efficiency levels achieved in today's CCWs and RCWs. Certain information about technologies associated with high-efficiency clothes washers can be determined by evaluating the models in these databases. DOE found that all front-loading CCWs on the market today are more efficient than top-loading CCW models. No top-loading CCW listed in these databases has an MEF greater than 1.76, whereas the majority of front-loading CCWs are listed as having MEFs greater than 2.0. Similarly, no top-loading CCW is rated as having a WF below 8.0, whereas the majority of front-loading CCWs have rated WFs below 7.0. In contrast, DOE research suggests that the most efficient vertical-axis RCWs achieve efficiency levels comparable to some horizontal-axis CCWs on the market today.
12
High efficiency, vertical-axis platforms that do not employ an agitator have been sold into the RCW market for several
years, but have yet to be released in a CCW form. DOE expects manufacturers will continue to introduce new features first in the higher-volume residential markets before transitioning them to commercial applications. At this time, however, DOE is not aware of such technologies being incorporated in either commercially available CCWs or working CCW prototypes, and therefore did not consider them in the SNOPR analyses.
12
Typically, vertical-axis clothes washers are accessed from the top (also known as “top-loaders”), while horizontal-axis clothes washers are accessed from the front (also known as “front-loaders”). However, a limited number of residential horizontal-axis clothes washers which are accessible from the top (using a hatch in the wash basket) are currently available, although DOE is unaware of any such CCWs on the market. For the purposes of this analysis, the terms “vertical-axis” and “top-loading” will be used interchangeably, as will the terms “horizontal-axis” and “front-loading.” Additionally, clothes washers that have a wash basket whose axis of rotation is tilted from horizontal are considered to be horizontal-axis machines.
Whirlpool stated that there are considerable differences between RCWs and CCWs, including, but not limited to heavier duty components and a smaller basket utilized in CCW's. According to Whirlpool, the smaller basket is required by CCW customers, and it is inherently more difficult to achieve high efficiency with smaller baskets. (Whirlpool, No. 50 at p. 3)
For these reasons, DOE believes it has adequately considered RCW technologies that may be applicable to CCWs in its technology assessment. See chapter 3 of the SNOPR TSD for more information on the technologies considered.
C. Engineering Analysis
The purpose of the engineering analysis is to characterize the relationship between the incremental manufacturing cost and efficiency improvements of CCWs. DOE used this cost-efficiency relationship as input to the PBP, LCC, and NES analyses.
To estimate incremental manufacturing costs, DOE has identified three basic methodologies: (1) The design-option approach, which provides the incremental costs of adding to a baseline model design options that will improve its efficiency; (2) the efficiency-level approach, which provides the incremental costs of moving to higher energy efficiency levels, without regard to the particular design option(s) 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 data on costs for parts and material, labor, shipping/packaging, and investment for models that operate at particular efficiency levels. DOE conducted the engineering analysis for this rulemaking using the efficiency-level approach. For this analysis, DOE relied upon efficiency data published in multiple databases, including those published by CEC, CEE and ENERGY STAR, which were supplemented with limited laboratory testing, data gained through reverse-engineering analysis, and primary and secondary research.
1. Efficiency Levels
The efficiency levels for CCWs are defined by two factors normalized by wash basket volume—MEF and WF. These two variables are only directly related to each other via the average hot water usage by a clothes washer, as measured by the DOE test procedure. Other measured parameters affect only one variable or the other. For example, cold water consumption only affects the WF, while remaining moisture content (RMC) only affects the MEF. (See chapter 5 of the SNOPR TSD for further explanation.)
In the October 2008 NOPR, DOE proposed the following efficiency levels for CCWs.
Table III.1—Commercial Clothes Washer Efficiency Levels Proposed in the October 2008 NOPR
Efficiency level
Modified energy factor (ft
3
/kWh)/water factor (gal/ft
3
)
Top-loading
Front-loading
Baseline
1.26/9.5
1.72/8.0
1
1.42/9.5
1.80/7.5
2
1.60/8.5
2.00/5.5
3
1.76/8.3
2.20/5.1
4
N/A
2.35/4.4
a. Revised Efficiency Levels
In response to the October 2008 NOPR, Alliance disputed DOE's finding that the proposed max-tech level for top-loading CCWs is technically feasible, based on Alliance's internal testing of one max-tech unit. Alliance stated that there were numerous inconsistencies related to the stated efficiencies of the max-tech top-loading CCW, the GE WNRD2050G, in databases such as those published by the CEC and ENERGY STAR. (Alliance, Public Meeting Transcript, No. 40.5 at pp. 22-24 and 90-92) According to Alliance, its own tests for the same model did not achieve the published efficiency levels of 1.76 MEF/8.3 WF. Alliance suggested that DOE should test and confirm the max-tech model's efficiency before continuing to use it as the basis for the max-tech efficiency levels proposed in the October 2008 NOPR. (Alliance, No. 45 at Attachment 2, pp. 4-5)
GE responded in its written comments that there was indeed a transposition error, which led to the inconsistencies noted by Alliance. GE stated that the equipment label indicated an energy rating of 472 kWh per year, equaling 1.204 kWh per cycle, meaning that consumers were getting a more efficient product than the energy rating contained on the label. GE stated that it takes any labeling error very seriously, and corrected the issue immediately upon its discovery. (GE, No. 48 at pp. 4-5). DOE review of present and past ENERGY STAR databases for CCWs failed to find an entry for the WNRD2050G. Based on market research and the CEC addition of the unit in December 2007, it appears that the WNRD2050G was released into production in December 2007. Thus, because the model's stated WF (8.3) was above the cutoff for ENERGY STAR eligibility (8.0) at that time, DOE concludes that the WNRD2050G was never listed in the ENERGY STAR database for CCWs.
In response to comments about the validity of published CCW data, the DOE rulemaking team purchased three nominally identical max-tech top-loading CCWs, and hired an independent test facility to determine their average efficiency rating per the DOE test procedure.
13
The test results suggest that the max-tech CCW achieves a 1.63 MEF/8.4 WF efficiency rating instead of 1.76 MEF/8.3 WF as stated. Even at this lower max-tech level, the unit identified as the max-tech top-loading CCW model for the October 2008 NOPR continues to be the max-
tech top-loading CCW for the SNOPR analyses. However, as the tested values do not agree with the MEF and WF ratings in the CEC database on which the October 2008 NOPR analyses were based, and because this model was the only top-loading CCW stated to meet the (1.76 MEF/8.3 WF) max-tech level defined in the October 2008 NOPR, DOE elected to eliminate that efficiency level from the top-loading CCW analysis in the SNOPR.
13
A minimum of three washers are required to be tested per the DOE test procedure (10 CFR 430 subpart B, appendix J1) to give test results some statistical certainty. If variability in the test results for the three washers is too high, an additional three units must be tested. For the DOE testing, no additional test units were required because the initial results had sufficiently low variability to be statistically valid.
Accordingly, DOE is proposing (1.60 MEF/8.5 WF) for today's max-tech level. Originally included based upon the CEE's Tier 2 qualifying criteria for CCWs effective between January 1, 2004, and January 1, 2007, 1.6 MEF/8.5 WF is an efficiency level for which DOE had previously solicited feedback from interested parties and which is also very close to the tested results for the max-tech CCW. The max-tech model uses many standard top-loader components and materials; hence, DOE research suggests that no CCW manufacturer would suffer material harm since they all should be able to produce top-loading machines that meet the max-tech efficiency level without technical difficulty.
ASAP stated that DOE should review current and upcoming ENERGY STAR efficiency levels for RCWs and subsequently revise efficiency levels under consideration for CCWs. ASAP noted that there are vertical-axis RCWs with agitators on the market that exceed the max-tech CCW level (
i.e.,
that impeller-type clothes washers are not necessary to exceed the current max-tech CCW efficiency level as implied by some manufacturers). (ASAP, Public Meeting Transcript, No. 40.5 at pp. 202-203) DOE is aware of the clothes washers referenced by ASAP and notes that they are only sold into the RCW market. Thus, it is not possible to assess whether these washers would be able to stand up to the rigors of operating in the CCW market. DOE research suggests that these washers are heavily patented, possibly preventing competitors such as the LVM from developing similar appliances. DOE research also suggests that some of the means by which these washers achieve their high efficiency levels (such as adaptive fill, a high number of wash programs,
etc.
) would yield few savings in a CCW setting, where washers are typically only washed with full loads and a limited number of wash programs are desired to limit consumer education needs. For these reasons, DOE did not consider these clothes washers in determining revised efficiency levels for the CCW analysis.
Thus, for today's SNOPR, DOE has proposed revised top-loading CCW efficiency levels shown in Table III.2, in which the max-tech top-loading level is now efficiency level 2 (1.60 MEF/8.5 WF). No changes have been made to the efficiency levels proposed in the October 2008 NOPR for front-loading CCWs in today's supplemental notice.
Table III.2—Commercial Clothes Washer Efficiency Levels Proposed for This SNOPR
Efficiency level
Modified energy factor (ft
3
/kWh)/
water factor (gal/ft
3
)
Top-loading
Front-loading
Baseline
1.26/9.5
1.72/8.0
1
1.42/9.5
1.80/7.5
2
1.60/8.5
2.00/5.5
3
N/A
2.20/5.1
4
N/A
2.35/4.4
DOE seeks comment on the revised efficiency levels for top-loading CCWs. This is identified as Issue 2 in section VII.E of today's supplemental notice (Issues on Which DOE Seeks Comment).
b. Technological Feasibility of the Revised Top-Loading Max-Tech Level
DOE also received numerous comments regarding the viability in commercial settings of the max-tech top-loading CCW evaluated in the October 2008 NOPR. Alliance and GE commented that the commercial acceptance of the technology behind the max-tech vertical-axis CCW is as yet unknown because the GE model was introduced only recently and because the max-tech unit is currently only sold into the on-premise laundry market segment, where the frequency of user abuse such as overloading is lower than in other commercial segments (laundromats, multi-family housing,
etc.
). (Alliance, Public Meeting Transcript, No. 40.5 at p. 23; GE, Public Meeting Transcript, No. 40.5 at pp. 173-174; GE, No. 48 at p.4;) Whirlpool suggested that the practice of overloading impairs top-loading CCWs more than front-loading machines, and, thus, inherently limits the efficiency levels that top-loading CCWs can achieve. Whirlpool also stated that CCWs are more prone to user abuse, such as extreme overloading, than RCWs. Whirlpool noted that certain residential platforms are not able to achieve proper clothes roll-over and, hence, cleaning when overfilled. (Whirlpool, No. 50 at pp. 2-3) The Joint Comment stated that on-premise laundry is served primarily by larger capacity equipment than is covered by this rulemaking. (Joint Comment, No. 44 at pp. 4-5) Conversely, Alliance stated that the max-tech vertical-axis CCW is based on a lightweight RCW platform that is poorly suited to commercial usage. (Alliance, No. 45 at Attachment 2, p. 7)
DOE recognizes that the max-tech top-loading CCW is currently marketed only to on-premise laundry facilities and is not yet offered with a coin-box or smart card reader option for laundromat or multi-housing laundry use. DOE research indicates that the max-tech CCW is based on a standard vertical-axis RCW platform (
i.e.,
one with an agitator) with selective upgrades, including spray rinse, four water-level settings, additional low-temperature wash programs, a low-standby power supply, and an electronic control board/user interface/drive system that is customized for its intended use. No proprietary technologies were observed, and, thus, DOE believes that all CCW manufacturers could market vertical-axis clothes washers with similar performance in time for the effective date of today's proposed rule. The unit shares many characteristics with CCWs from the same manufacturer marketed towards laundromat and multi-unit housing applications, including an industry-standard 25-minute wash cycle. In its teardown analysis, DOE observed that the max-tech top-loading CCW appears to be built with similar construction and components as similar CCW models marketed to commercial laundromats, which are also largely based on an existing RCW platform. Thus, DOE believes that the max-tech CCW is equally rugged and durable as
other units on the market. Further, DOE believes that applicable payment-system interfaces could be incorporated in time for the effective date of today's proposed standards.
DOE research also suggests that commercial acceptance depends on wash performance. Multiple comments from interested parties were received concerning wash performance of high-efficiency clothes washers. The Multi-Housing Laundry Association (MLA) and Alliance commented that the top-loading CCW standard proposed in the October 2008 NOPR could result in reduced equipment quality and clothes washing and rinsing performance. Alliance stated that the required reductions in water consumption and and/or low wash temperature to meet the standard proposed in the October 2008 NOPR would negatively affect consumer utility. Alliance stated that the max-tech vertical-axis CCW, when used with common clothes washing detergents, may not provide adequate clothes washing performance. (Alliance, Public Meeting Transcript, No. 40.5 at pp. 23-24 and p. 202; Alliance No. 45 at p. 1 and Attachment 2, p. 14; MLA No. 49 at pp. 3-4) DOE recognizes that any amended energy efficiency standard could result in a lessening of certain equipment utility and hence interviews interested parties to better understand the potential impacts of energy efficiency strategies that manufacturers might employ in their equipment. Although interested parties have suggested that the max-tech model does not provide acceptable washing and rinsing performance targets, especially when overloaded, they have yet to submit evidence of such performance degradation. Furthermore, DOE is not aware of any widely accepted, quantitative measures associated with clothes washing performance. While DOE research uncovered a rinse-performance standard that was developed by Australian clothes washer manufacturers, this rinse test has yet to find acceptance in the U.S. market.
DOE also received comments on whether the max-tech vertical-axis efficiency level could be achieved by multiple CCW models. Alliance stated that it would be unwise to set a standard close to the max-tech level, since it could eliminate all but the max-tech model from the market. (Alliance, No. 45 at Attachment 2, p. 13) Alliance believes a properly functioning top-loading CCW market requires a range of models to serve all users. (Alliance, No. 45 at Attachment 2, p. 13) DOE notes that the MEF/WF combination for vertical-axis CCWs proposed in the October 2008 NOPR as TSL 2 and currently proposed in today's SNOPR as the max-tech level is not based on either the stated or the tested max-tech vertical-axis unit. Rather, the combination of MEF and WF proposed is set at a level slightly below the measured max-tech values, and is a level for which DOE had previously collected manufacturing, capital expenditure, product development, and other costs. For today's supplemental notice, DOE revised the max-tech level to the values at TSL 2 proposed in the October 2008 NOPR—1.60 MEF/8.5 WF —based on its independent testing. Compared to the top-loading max-tech level and proposed standard of 1.76 MEF/8.3 WF published in the October 2008 NOPR, the revised level is slightly less stringent (see section III.C.1 for a complete discussion of this change) and may allow manufacturers to field units with higher tested efficiencies in the future. For example, the max-tech unit may be revised to achieve its stated efficiency level. DOE believes that this revision of the proposed max-tech level for today's SNOPR should help alleviate some manufacturers' concerns regarding the technological feasibility and commercial acceptance of a max-tech top-loading CCW.
Alliance commented that front-loading CCWs with electric heaters have an MEF of 1.96, which would not meet the front-loading standards proposed in the October 2008 NOPR. According to Alliance, customers in some parts of the northern United States need such heaters to supplement their hot water supply in order to maintain proper wash temperatures despite very cold water supply temperatures. (Alliance, Public Meeting Transcript, No. 40.5 at p. 22) DOE has received no data on the extent or size of this impact or of the affected population. Hence, DOE invites comment, including population and efficiency impact data, to describe this issue.
DOE also invites further comment and information on the technological feasibility of the proposed max-tech CCW, including washing and rinsing performance measures for CCWs and population data for water heating CCWs. This is identified as Issue 3 in section VII.E of today's supplemental notice (Issues on Which DOE Seeks Comment).
2. Manufacturing Costs
In the October 2008 NOPR, DOE presented manufacturing cost estimates based on the November 2007 ANOPR analysis, revised in response to detailed CCW manufacturer feedback obtained at the NOPR stage for equipment at each efficiency level. 73 FR 62034, 62055-62056 (Oct. 17, 2008). These manufacturing costs were the basis of inputs for a number of other analyses in this rulemaking, including the LCC, national impact, and GRIM analyses.
As described in the October 2008 NOPR, DOE found that a low-volume manufacturer (LVM) operates in both the residential and CCW markets. DOE considers this manufacturer to be low-volume because its annual shipments in the combined RCW and CCW market are significantly lower than those of its larger competitors. However, unlike its larger rivals, most of the LVM's unit shipments are in the CCW market, where the LVM has significant market share. Also unlike its diversified competitors, this company exclusively manufactures laundry equipment. A review of the Securities and Exchange Commission (SEC) 10-K documents filed by the LVM revealed that, as of 2005, this company derived 22 percent of its total revenue from the sale of front- and top-loading clothes washers and 87 percent of that income was from the commercial market.
14
As a result, the LVM could be affected disproportionately by any rulemaking concerning CCWs compared to its competitors, for whom CCWs represent less than 2 percent of total clothes washer sales. Alliance stated that it is the LVM and that it has neither the purchasing power nor the funding to support wide-ranging research and development programs like those of its larger, more diverse rivals. (Alliance, No. 45 at Attachment 2, p. 8) As a result, the manufacturing costs for Alliance are inherently higher compared to those of its rivals. Alliance believes that the cost of compliance with the top-loading CCW standard proposed in the October 2008 NOPR would be especially high if Alliance were required to introduce non-traditional agitator designs to meet it. (Alliance, Public Meeting Transcript, No. 40.5 at p. 23 and p. 202) DOE research suggests that this efficiency level for vertical-axis clothes washers can be met with conventional, non-proprietary technology that is on the market today. Since the October 17, 2008 NOPR meeting, DOE has received no further comments on the manufacturing cost curves. Thus, for today's SNOPR, DOE has retained all cost estimates presented in the October 2008 NOPR at the retained efficiency levels, though each value was scaled by the Producer Price Index (PPI) multiplier for the commercial laundry equipment industry (NAICS 333312)
between 2007 and 2008
to update the costs in the October 2008 NOPR to 2008$.
15
These are shown in Table III.3.
14
SEC documents pertaining to the LVM are available online at:
http://sec.gov/cgi-bin/browse-idea?action=getcompany&CIK=0001063697&owner=exclude&count=40.
15
PPI data is maintained by the Bureau of Labor Statistics and is available at http://
www.bls.gov/ppi/.
Table III.3—Commercial Clothes Washer Incremental Manufacturing Costs
Efficiency level
Modified energy factor
(ft
3
/kWh)/water factor
(gal/ft
3
)
Top-loading
Front-loading
Incremental cost
Top-loading
Front-loading
Baseline
1.26/9.5
1.72/8.0
$0.00
$0.00
1
1.42/9.5
1.80/7.5
77.60
0.00
2
1.60/8.5
2.00/5.5
134.99
14.21
3
N/A
2.20/5.1
N/A
39.34
4
N/A
2.35/4.4
N/A
66.16
D. Life-Cycle Cost and Payback Period Analysis
In response to the requirements of section 325(o)(2)(B)(i) of the Act, DOE conducted LCC and PBP analyses to evaluate the economic impacts of possible amended energy conservation standards for owners of CCWs. This section of the notice describes these analyses. DOE conducted the analysis using a spreadsheet model developed in Microsoft (MS) Excel for Windows 2007. (See the SNOPR TSD, chapter 8).
The LCC is the total consumer expense over the life of the equipment, including purchase and installation expense and operating costs (energy and water expenditures, repair costs, and maintenance costs). The PBP is the number of years it would take for the consumer to recover the increased costs of a higher-efficiency equipment through energy savings. To calculate the LCC, DOE discounted future operating costs to the time of purchase and summed them over the lifetime of the equipment. DOE measured the change in LCC and the change in PBP associated with a given efficiency level relative to a base case forecast of equipment efficiency. The base case forecast reflects the market in the absence of amended mandatory energy conservation standards. As part of the LCC and PBP analyses, DOE developed data that it used to establish equipment prices, installation costs, annual energy consumption, energy and water prices, maintenance and repair costs, equipment lifetime, and discount rates.
DOE was unable to develop a consumer sample for CCWs because EIA's
Commercial Building Energy Consumption Survey
(CBECS) does not provide the necessary data to develop one.
16
Instead, DOE established the variability and uncertainty in energy and water use by defining the uncertainty and variability in the use (cycles per day) of the equipment. The variability in energy and water pricing was characterized by regional differences in energy and water prices. DOE calculated the LCC associated with a baseline CCW. To calculate the LCC savings and PBP associated with equipment meeting higher efficiency standards, DOE substituted the baseline unit with a more efficient design.
16
Available online at:
http://www.eia.doe.gov/emeu/cbecs/.
Table III.4 summarizes the approaches and data DOE used to derive the inputs to the LCC and PBP calculations for the October 2008 NOPR, and the changes it made for today's SNOPR. DOE did not introduce changes to the LCC and PBP analyses methodology described in the October 2008 NOPR. However, as the following sections discuss in more detail, DOE revised some of the inputs to the analysis. Chapter 8 of the TSD accompanying this notice contains detailed discussion of the methodology utilized for the LCC and PBP analyses as well as the inputs developed for the analyses.
Table III.4—Summary of Inputs and Key Assumptions in the LCC and PBP Analyses
Inputs
October 2008 NOPR
Changes for the SNOPR
Affecting Installed Costs:
Equipment Price
Derived by multiplying manufacturer cost by manufacturer, distributor markups and sales tax
Updated prices from 2006$ to 2008$.
Installation Cost
Baseline cost updated with RS Means
Mechanical Cost Data,
2008
Updated costs from 2006$ to 2008$.
Affecting Operating Costs:
Annual Energy and Water Use
Per-cycle energy and water use based on MEF and WF levels. Disaggregated into per-cycle machine, dryer, and water heating energy using data from DOE's 2000 TSD for residential clothes washers. Annual energy and water use determined from the annual usage (number of use cycles). Usage based on several studies including research sponsored by MLA
17
and the Coin Laundry Association
18
(CLA). Different use cycles determined for multi-family and laundromat equipment applications
No change.
Energy and Water/Wastewater Prices
Electricity: Updated using EIA's 2006 Form 861 data
Natural Gas: Updated using EIA's 2006
Natural Gas Monthly
Water/Wastewater: Updated using RFC/AWWA's 2006
Water and Wastewater Survey
Variability: Regional energy prices determined for 13 regions; regional water/wastewater price determined for four regions
Electricity: Updated using EIA's 2007 Form 861 data.
Natural Gas: Updated using EIA's 2007
Natural Gas Monthly.
Water/Wastewater: No change.
Variability: No change.
Energy and Water/Wastewater Price Trends
Energy: Forecasts updated with EIA's
AEO 2008
Water/Wastewater: Linear extrapolation of 1970-2007 historical trends in national water price index
Reference Case forecast updated with EIA's
AEO 2009
April Release. High-Growth and Low-Growth forecasts updated with EIA's
AEO 2009
March Release.
Water/Wastewater Prices: Updated to include historical trend through 2008. For the four years after 2008, fixed the annual price to the value in 2008 to prevent a dip in the forecasted prices.
Repair and Maintenance Costs
Estimated annualized repair costs for each efficiency level based on half the equipment lifetime divided by the equipment lifetime
Updated costs from 2006$ to 2008$.
Affecting Present Value of Annual Operating Cost Savings
Equipment Lifetime
Based on data from various sources including the CLA. Different lifetimes established for multi-family and laundromat equipment applications. Variability and uncertainty characterized with Weibull probability distributions
No change.
Discount Rates
Approach based on cost of capital of publicly traded firms in the sectors that purchase CCWs. Primary data source is Damodaran Online
19
No change.
Affecting Installed and Operating Costs:
Effective Date of New Standard
2012
2013.
Base-Case Efficiency Distributions
Analyzed as two equipment classes: top-loading and front-loading. Distributions for both classes based on the number of available models at the efficiency levels
Top-Loading: 63.6% at 1.26 MEF/9.5 WF; 33.3% at 1.42 MEF/9.5 WF; 0% at 1.60 MEF/8.5 WF; 3.0% at 1.76 MEF/8.3 WF. Front-Loading: 7.4% at 1.72 MEF/8.0 WF; 4.4% at 1.80 MEF/7.5 WF; 85.3% at 2.00 MEF/5.5 WF; 1.5% at 2.20 MEF/5.1 WF; 1.5% at 2.35 MEF/4.4 WF
Updated to reflect the most recent distributions on the number of available models at the efficiency levels.
Top-Loading: 64.8% at 1.26 MEF/9.5 WF; 33.8% at 1.42 MEF/9.5 WF; 1.4% at 1.60 MEF/8.5 WF; 1.76 MEF/8.3 WF removed as Max Tech.
Front-Loading: 3.5% at 1.72 MEF/8.0 WF; 0.0% at 1.80 MEF/7.5 WF; 73.7% at 2.00 MEF/5.5 WF; 22.8% at 2.20 MEF/5.1 WF; 0.0% at 2.35 MEF/4.4 WF.
1. Equipment
Prices
To calculate the equipment prices faced by CCW purchasers, DOE multiplied the manufacturing costs developed from the engineering analysis by the supply chain markups it developed (along with sales taxes). DOE used the same supply chain markups for today's SNOPR that were developed for the October 2008 NOPR. See chapter 7 of the TSD accompanying this notice for additional information. To calculate the final installed prices, DOE added installation cost to the equipment prices.
17
Please see the following Web site for further information:
http://www.mla-online.com/.
18
Please see the following Web site for further information:
http://www.coinlaundry.org/.
19
Please see the following Web site for further information:
http://pages.stern.nyu.edu/~adamodar/.
2. Installation Cost
Installation costs include labor, overhead, and any miscellaneous materials and parts. For the October 2008 NOPR and today's SNOPR, DOE used data from the RS Means
Mechanical Cost Data,
2008 on labor requirements to estimate installation costs for CCWs.
20
DOE estimates that installation costs do not increase with equipment efficiency.
20
Available online at:
http://
www.rsmeans.com/bookstore/.
3. Annual Energy Consumption
DOE determined the annual energy and water consumption of CCWs by multiplying the per-cycle energy and water use by the estimated number of cycles per year. In the October 2008 NOPR, DOE concluded that the use of the existing RCW test procedure provides a representative basis for rating and estimating the per-cycle energy use of CCWs. For today's SNOPR, DOE maintained the above approach.
4. Energy and Water Prices
a. Energy Prices
DOE derived average electricity and natural gas prices for 13 geographic areas consisting of the nine U.S. Census divisions, with four large States (New York, Florida, Texas, and California) treated separately.
DOE estimated commercial electricity prices for each of the 13 geographic areas based on data from EIA Form 861,
Annual Electric Power Industry Report.
21
DOE calculated an average commercial electricity price by first estimating an average commercial price
for each utility, and then calculated a regional average price by weighting each utility with customers in a region by the number of commercial customers served in that region. The calculations for today's SNOPR used the most recent available data from 2007.
21
Available online at:
http://www.eia.doe.gov/cneaf/electricity/page/eia861.html.
For the October 2008 NOPR, DOE estimated average commercial natural gas prices in each of the 13 geographic areas based on 2006 data from the EIA publication
Natural Gas Monthly.
22
DOE calculated an average natural gas price for each area by first calculating the average prices for each State, and then calculating a regional price by weighting each State in a region by its population. For today's SNOPR, DOE used 2007 data from the same source.
22
Available online at:
http://www.eia.doe.gov/oil_gas/natural_gas/data_publications/natural_gas_monthly/ngm.html.
To estimate the trends in electricity and natural gas prices for the October 2008 NOPR, DOE used the price forecasts in the
AEO 2008.
23
To arrive at prices in future years, DOE multiplied the average prices described above by the forecast of annual average price changes in
AEO 2008.
For today's supplemental notice, DOE updated its energy price forecasts using those in the
AEO 2009
April Release. Because the
AEO
forecasts prices only to 2030, DOE followed past guidelines provided to the Federal Energy Management Program by EIA and used the average rate of change during 2020-2030 to estimate the price trends beyond 2030.
23
All AEO publications are available online at:
http://www.eia.doe.gov/oiaf/aeo/.
The spreadsheet tools used to conduct the LCC and PBP analysis allow users to select either the
AEO'
s high-growth case or low-growth case price forecasts to estimate the sensitivity of the LCC and PBP to different energy price forecasts. The
AEO 2009
April Release provides only forecasts for the Reference Case. Therefore, for today's supplemental notice, DOE used the
AEO 2009
March Release high-growth case or low-growth forecasts to estimate high-growth and low-growth price trends.
DOE received comment regarding the inputs into the energy price forecasts. The Joint Comment recommended that DOE conduct a sensitivity analysis using a basket of other forecasts besides the
AEO.
(Joint Comment, No. 44 at p. 11) As mentioned above, DOE considered the
AEO'
s high-growth case and low-growth case price forecasts to estimate the sensitivity of the LCC and PBP results to different energy price forecasts. The
AEO
alternative forecasts provide a suitable range to examine the sensitivity of LCC and PBP results to different energy price forecasts.
Interested parties also recommended DOE consider pending legislation that could influence future energy prices. The Joint Comment stated that to realistically depict energy prices in the future, DOE must consider the impact of carbon control legislation, since such legislation is very likely. It also noted that there are regional cap and trade programs that are in effect in the Northeast (Regional Greenhouse Gas Initiative (RGG)) and the West (Western Climate Initiative (WCI)) that will impact the price of electricity and are not reflected in the
AEO
energy price forecasts. (Joint Comment, No. 44 at p. 12) EJ stated that caps will likely be in place by the time new standards become effective, so DOE should increase its electricity prices to reflect the cost of complying with emission caps. (EJ, Public Meeting Transcript, No. 40.5 at pp. 105-106) The shape 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 RGGI in its
AEO 2009
April Release energy price forecasts. (WCI did not provide sufficient detail to EIA in order for them to model the impact of the WCI on energy price forecasts.) Therefore, the energy price forecasts used in today's supplemental notice do include the impact of one of the two regional cap and trade programs in the United States.
b. Water and Wastewater Prices
DOE obtained commercial water and wastewater price data from the Water
and Wastewater Rate Survey
conducted by Raftelis Financial Consultants (RFC) and the American Water Works Association (AWWA). For the October 2008 NOPR and today's SNOPR, DOE used the 2006
Water and Wastewater Rate Survey.
24
The survey covers approximately 300 water utilities and 200 wastewater utilities, with each industry analyzed separately. DOE calculated values at the Census region level (Northeast, South, Midwest, and West). Edison Electric Institute (EEI) questioned why water and wastewater prices were not developed at the Census division level. (EEI, Public Meeting Transcript, No. 40.5, p. 103 and p. 178) The samples that DOE obtained of 200-300 utilities are not large enough to calculate regional prices for all U.S. Census divisions and large States. Hence, DOE was only able to capture the variability of water and wastewater prices at the Census region level.
24
Raftelis Financial Consultants, Inc.,
2006 RFC/AWWA Water and Wastewater Rate Survey, 2006,
(2006). This document is available at:
http://www.raftelis.com/ratessurvey.html.
To estimate the future trend for water and wastewater prices, DOE used data on the historic trend in the national water price index (U.S. city average) provided by the Bureau of Labor Statistics (BLS). For the October 2008 NOPR, DOE extrapolated a future trend based on the linear growth from 1970 to 2007. The Joint Comment stated that (1) the trend line for water and wastewater prices developed by DOE begins with an anomalous dip of over seven percent in costs for 2008, rather than the likely increase of 2 percent or more; and (2) DOE's trend forecast understates the future cost of water and wastewater service by some ten percent. (Joint Comment, No. 44 at pp. 3-4) For today's SNOPR, DOE modified its future trends of water and wastewater prices based on some of the Joint Comment's suggestions. DOE continued to the use the BLS historical data, which now provides data for the year 2008, and extrapolated the future trend based on the linear growth from 1970 to 2008. But rather than use the extrapolated trend to forecast the prices for the four years after 2008, DOE pinned the annual price to the value in 2008. Otherwise, forecasted prices for this 4-year time period would have been up to 8 percent lower than the price in 2008. Estimating prices in this manner is appropriate because it is consistent with the historical trend that demonstrates that prices do not decrease over time. Estimating prices in this manner also prevents the anomalous dip noted by the Joint Comment. Beyond the 4-year time period, DOE used the extrapolated trend to forecast prices out to the year 2043.
5. Repair and Maintenance Costs
Repair costs are associated with repairing or replacing components that have failed in the appliance, whereas maintenance costs are associated with maintaining the operation of the equipment. For the October 2008 NOPR, DOE included increased repair costs based on an algorithm developed by DOE for central air conditioners and heat pumps and which was also used for residential furnaces and boilers.
25
This algorithm calculates annualized repair costs by dividing half of the equipment retail price over the equipment lifetime. Whirlpool agreed with the assumptions DOE used to estimate CCW repair costs in the October 2008 NOPR. (Whirlpool, No. 50 at p. 3) MLA stated that more efficient CCWs incur higher maintenance costs. (MLA, No. 49 at p. 4) ASAP asked whether DOE had gathered empirical data to estimate CCW repair and maintenance costs. (ASAP, Public Meeting Transcript, No. 40.5 at pp. 110-111) DOE was unable to gather any empirical data specific to CCWs to estimate repair and maintenance cost. In the absence of better data, DOE retained its approach from the October 2008 NOPR for today's SNOPR.
25
U.S. Department of Energy, Technical Support Document: Energy Efficiency Standards for Consumer Products: Residential Central Air Conditioners and Heat Pumps (May 2002) chapter 5. This document is available at:
http://
www.eere.energy.gov/buildings/appliance_standards/residential/ac_central_1000_r.html.
6. Equipment Lifetime
For the October 2008 NOPR and today's SNOPR, DOE used a variety of sources to establish low, average, and high estimates for equipment lifetime. The average CCW lifetime was 11.3 years for multi-family applications, and 7.1 years in laundromat applications. DOE characterized CCW lifetimes with Weibull probability distributions.
7. Discount Rates
To establish discount rates for CCWs for the October 2008 NOPR and today's SNOPR, DOE estimated the cost of capital of publicly traded firms in the sectors that purchase CCWs as the weighted average of the cost of equity financing and the cost of debt financing. DOE identified the following sectors purchasing CCWs: (1) Educational services; (2) hotels; (3) real estate investment trusts; and (4) personal services. DOE estimated the weighted-average cost of capital (WACC) using the respective shares of equity and debt financing for each sector that purchases CCWs. It calculated the real WACC by adjusting the cost of capital by the expected rate of inflation. To obtain an average discount rate value, DOE used additional data on the number of CCWs in use in various sectors. DOE estimated the average discount rate for companies that purchase CCWs at 5.7 percent. DOE received comment on the discount rates from Alliance, who suggested that the discount rates used in LCC and PBP analyses should be updated to reflect current financial market conditions. (Alliance, Public Meeting Transcript, No. 40.5 at pp. 115-116) DOE used the most recent available data (from 2006) from Damodaran Online and Ibbotson Associates to estimate its discount rates for CCWs. Damodaran Online is a widely used source of information about company debt and equity financing for most types of firms. Ibbotson Associates is a leading authority on asset allocation with expertise in capital market expectations and portfolio implementation. DOE believes that the data it used are representative of conditions that may apply when the first purchases impacted by standards would be made. Therefore, DOE continued to use these sources for today's SNOPR and will determine if the data used from both sources needs to be updated for the final rule.
8. Effective Date of the Amended Standards
The compliance date is the future date when parties subject to the requirements of a new standard must begin compliance. For the October 2008 NOPR, DOE assumed that any new energy efficiency standards adopted in this rulemaking would require compliance in March 2012, 3 years after the final rule was expected to be published in the
Federal Register
. For today's SNOPR, DOE expects that the final rule will be published by January 1, 2010, as required by EPACT 2005, with compliance with new standards required by January 1, 2013. DOE calculated the LCC for the appliance consumers as if they would purchase new equipment in the year after the standard takes effect.
9. Equipment Energy Efficiency in the Base Case
For the LCC and PBP analysis, DOE analyzes higher efficiency levels relative to a baseline efficiency level. However, some consumers may already purchase equipment with efficiencies greater than the baseline equipment levels. Thus, to accurately estimate the percentage of consumers that would be affected by a particular standard level, DOE estimates the distribution of equipment efficiencies that consumers are expected to purchase under the base case (
i.e.,
the case without new energy efficiency standards). DOE refers to this distribution of equipment energy efficiencies as a base-case efficiency distribution. As discussed previously in section III.A, DOE decided to analyze CCWs with two equipment classes—top-loading CCWs and front-loading CCWs. For the October 2008 NOPR and today's SNOPR, DOE used the number of available models within each equipment class to establish the base-case efficiency distributions. Table III.5 presents the market shares of the efficiency levels in the base case for CCWs. See chapter 8 of the TSD accompanying this notice for further details on the development of CCW base-case market shares.
Table III.5—Commercial Clothes Washers: Base Case Market Shares
Top-loading
Standard level
MEF
WF
Market share
(percent)
Front-loading
Standard level
MEF
WF
Market share
(percent)
Baseline
1.26
9.50
64.8
Baseline
1.72
8.00
3.5
1
1.42
9.50
33.8
1
1.80
7.50
0.0
2
1.60
8.50
1.4
2
2.00
5.50
73.7
3
2.20
5.10
22.8
4
2.34
4.40
0.0
10. CCW Split Incentive
Under a split incentive situation, the party purchasing more efficient and presumably more expensive equipment (referred to as “consumers” in this notice) may not realize the operating cost savings from that equipment, because another party may pay the utility bill. For the October 2008 NOPR, DOE evaluated the ability of CCW owners to pass on the higher purchase costs of more expensive CCWs in return for lower operational costs. DOE concluded that few route operators
would allow themselves to be held to a lease agreement which would prevent them from recovering the cost of more efficient CCW equipment. The Joint Comment stated that contracts between route operators are multi-housing property owners are subject to revision and renewal, and that the division of coin-box revenue may be negotiated as a result of cost-effective efficiency improvements in CCWs. (Joint Comment, No. 44 at p. 6) Because DOE received only supportive comments regarding its assessment of the potential of a split incentive in the CCW market, DOE continues to conclude for today's SNOPR that new CCW efficiency standards are unlikely to lead to split incentives in the CCW market.
11. Rebound Effect
The rebound effect occurs when a piece of equipment, made more efficient and used more intensively, does not yield the expected energy savings from the efficiency improvement. In the case of more efficient clothes washers, limited research has been conducted to show that there is no rebound effect for home appliances, although the consumer may choose to purchase larger models with more features that would result in higher energy use.
26
DOE did not receive any comments from interested parties on the issue of the rebound effect for CCWs. Based on the limited research showing no rebound effect for home appliances, DOE did not include a rebound effect in its analysis of CCW standards.
26
L.A. Greening, D.L. Greene, and C. Difiglio. “Energy efficiency and consumption—the rebound effect—a survey.”
Energy Policy
28 (2000) 389-401. Available for purchase at
http://www.elsevier.com/locate/enpol.
12. Inputs to Payback Period Analysis
The PBP is the amount of time (expressed in years) it takes the consumer to recover the additional installed cost of more efficient equipment through operating cost savings, compared to baseline equipment. The simple PBP does not account for changes in operating expense over time or the time value of money. The inputs to the PBP calculation are the total installed cost of the equipment to the customer for each efficiency level and the annual (first-year) operating expenditures for each efficiency level. For the October 2008 NOPR and today's SNOPR, the PBP calculation uses the same inputs as the LCC analysis, except that energy price trends and discount rates are not needed.
13. Rebuttable-Presumption Payback Period
As noted above, EPCA, as amended (42 U.S.C. 6295(o)(2)(B)(iii) and 6316(a)), establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that “the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy (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. For each TSL, DOE determined the value of the first year's energy savings by calculating the quantity of those savings in accordance with DOE's test procedure, and multiplying that amount by the average energy price forecast for the year in which a new standard would be first effective—in this case, 2013.
DOE received comments addressing the topic of using a rebuttable presumption payback period to establish the economic justification of an energy conservation standard level. The Joint Comment and EJ stated that DOE's view that consideration of a full range of impacts is necessary because the rebuttable presumption payback period criterion is not sufficient for determining economic justification does not reflect the extent to which the rebuttable presumption analysis constrains DOE's authority to reject standards based on economic impacts. (Joint Comment, No. 44 at appendix B, p. 1; EJ, Public Meeting Transcript, No. 40.5 at p. 130) The Joint Comment stated that in 42 U.S.C. 6295(o)(2)(B)(iii), Congress erected a significant barrier to DOE's rejection, on the basis of economic justifiability, of standard levels to which the rebuttable presumption applies. Further, EJ and the Joint Comment stated DOE preference to proceed under the seven-factor test contained in 42 U.S.C. 6295(o)(2)(B)(i) is not pertinent.
The Joint Comment agreed with DOE that analysis under the seven-factor test is necessary and has typically supported standards with paybacks longer than 3 years. However, the Joint Comment stated that DOE's decision-making must reflect the expressed intent of Congress that the highest standard level resulting in cost recovery within 3 years constitutes the presumptive lowest standard level that DOE must adopt. (Joint Comment, No. 44 at appendix B, pp. 1-2)
DOE does consider both the rebuttable presumption payback criteria, as well as a full analysis including all seven relevant statutory criteria under 42 U.S.C. 6295(o)(2)(B)(i) when examining potential standard levels. However, DOE believes that the interested parties are misinterpreting the statutory provision in question. The Joint Comment and EJ present one possible reading of an ambiguous provision (
i.e.,
that DOE need not look beyond the results of the rebuttable presumption inquiry), but DOE believes that such an approach is neither required nor appropriate, because it would ask the agency to potentially ignore other relevant information that would bear on the selection of the most stringent standard level that meets all applicable statutory criteria. The interested parties' interpretation would essentially restrict DOE from being able to rebut the findings of the preliminary presumptive analysis.
The statute contains no such restriction, and such an approach would hinder DOE's efforts to base its regulations on the best available information. Similarly, DOE believes that the Joint Comment misreads the statute in calling for a level that meets the rebuttable presumption test to serve as a minimum level when setting the final energy conservation standard. To do so would not only eliminate the “rebuttable” aspect of the presumption but would also lock in place a level that may not be economically justified based upon the full review of statutory criteria. DOE is already obligated under EPCA to select the most stringent standard level that meets the applicable statutory criteria, so there is no need to tie the same requirement to the rebuttable presumption.
E. National Impact Analysis—National Energy Savings and Net Present Value Analysis
1. General
DOE's NIA assesses the national energy savings, as well as the national NPV of total consumer costs and savings, expected to result from new standards at specific efficiency levels. DOE applied the NIA spreadsheet to perform calculations of energy savings and NPV, using the annual energy consumption and total installed cost data from the LCC analysis. DOE forecasted the energy savings, energy cost savings, equipment costs, and NPV for each equipment class from 2013 to 2043. The forecasts provide annual and cumulative values for all four parameters. In addition, DOE incorporated into its NIA spreadsheet the capability to analyze sensitivity of the results to forecasted energy prices
and equipment efficiency trends. Table III.6 summarizes the approach and data DOE used to derive the inputs to the NES and NPV analyses for the October 2008 NOPR and the changes made in the analyses for today's SNOPR. A discussion of the inputs and the changes follows below. (See chapter 11 of the SNOPR TSD for further details.)
Table III.6—Approach and Data Used to Derive the Inputs to the National Energy Savings and NPV Analyses
Inputs
2008 NOPR description
Changes for the SNOPR
Shipments
Annual shipments from Shipments Model
See Table III.7.
Effective Date of Standard
2012
2013.
Base-Case Forecasted Efficiencies
Shipment-weighted efficiency (SWEF) determined in the year 2005. SWEF held constant over forecast period
No change.
Standards-Case Forecasted Efficiencies
Analyzed as two equipment classes. For each equipment class, roll-up scenario used for determining SWEF in the year that standards become effective for each standards case. SWEF held constant over forecast period
No change.
Annual Energy Consumption per Unit
Annual weighted-average values as a function of SWEF
No change.
Total Installed Cost per Unit
Annual weighted-average values as a function of SWEF
Updated costs from 2006$ to 2008$.
Energy and Water Cost per Unit
Annual weighted-average values a function of the annual energy consumption per unit and energy (and water) prices
Updated costs from 2006$ to 2008$.
Repair Cost and Maintenance Cost per Unit
Incorporated changes in repair costs as a function of efficiency
Updated costs from 2006$ to 2008$.
Escalation of Energy and Water/Wastewater Prices
Energy Prices:
AEO 2008
forecasts (to 2030) extrapolation to 2042
Water/Wastewater Prices: Linear extrapolation of 1970-2007 historical trends in national water price index
Energy Prices: Updated to
AEO 2009
April Release forecasts for the Reference Case.
AEO 2009
April Release does not provide High-Growth and Low-Growth forecasts; used
AEO 2009
March Release High-Growth and Low-Growth forecasts to estimate high and low growth price trends.
Water/Wastewater Prices: Updated to include historical trend through 2008. For the four years following 2013 fixed the annual price to the value in 2008 to prevent a dip in the forecasted prices.
Energy Site-to-Source Conversion
Conversion varies yearly and is generated by DOE/EIA's NEMS program (a time-series conversion factor; includes electric generation, transmission, and distribution losses)
No change.
Effect of Standards on Energy Prices
Determined but found not to be significant
No change.
Discount Rate
Three and seven percent real
No change.
Present Year
Future expenses discounted to year 2007
Future expenses discounted to year 2009.
2. Shipments
The shipments portion of the NIA Spreadsheet is a Shipments Model that uses historical data as a basis for projecting future shipments of the equipment that are the subject of this rulemaking. In projecting CCW shipments, DOE accounted for three market segments: (1) New construction; (2) existing buildings (
i.e.,
replacing failed equipment); and (3) retired units not replaced. DOE used the non-replacement market segment to calibrate the Shipments Model to historical shipments data. For purposes of estimating the impacts of prospective standards on equipment shipments (
i.e.,
forecasting standards-case shipments) DOE considered the combined effects of changes in purchase price, annual operating cost, and household income on the magnitude of shipments.
Table III.7 summarizes the approach and data DOE used to derive the inputs to the shipments analysis for the October 2008 NOPR, and the changes it made for today's SNOPR. The general approach for forecasting CCW shipments for today's SNOPR remains unchanged from the October 2008 NOPR. That is, all CCW shipments (for both equipment classes) were estimated for the new construction, replacement and non-replacement markets. DOE then allocated shipments to each of the two equipment classes based on the market share of each class. Based on data provided by AHAM for the November 2007 ANOPR, DOE estimated that top-loading washers comprise 80 percent of the market while front-loading washers comprise 20 percent. DOE estimated that the equipment class market shares would remain unchanged over the time period 2005-2042. A discussion of the inputs and the changes follows below.
The Joint Comment suggested that DOE update its equipment class market shares to reflect the impacts of the 2006 Federal tax incentives for CCWs. (Joint Comment, No. 44 at p. 5) The Joint Comment noted that the increased production of front-loading washers in the base-case would in turn lead to lower conversion costs for manufacturers and, therefore, make it less costly to meet higher CCW efficiency standards. For today's supplemental notice, DOE reviewed the SEC 10K report of the LVM of CCWs and determined that manufacturer tax credits in recent Federal legislation have resulted in significantly increased sales of the front-loading washers for the LVM. When accounting for the LVM's market share, the increase in front-loading sales results in a current market share of 30 percent for front-loading washers. Although tax credits are set to expire after 2010, DOE believes that the
tax credits are impacting production costs and manufacturing infrastructure such that front-loading washers would continue to comprise 30 percent of the market over the entire forecast period.
Table III.7 below shows the inputs chosen for the Shipments Analysis in today's supplemental notice.
Table III.7 Approach and Data Used To Derive the Inputs to the Shipments Analysis
Inputs
October 2008 NOPR description
Changes for the SNOPR
Number of Equipment Classes
Two equipment classes: top-loading washers and front-loading washers. Shipments forecasts established for all CCWs and then disaggregated into the two equipment classes based on the market share of top- and front-loading washers. Market share data provided by AHAM; 80% top-loading and 20% frontloading
Equipment class market shares held constant over forecast period
Updated, market share data based on SEC 10K report of the LVM and tax credits claimed by the LVM for producing high-efficiency CCWs. Market share determined to be: 70% top-loading and 30% front-loading. Equipment class market shares held constant over forecast period.
New Construction Shipments
Determined by multiplying multi-housing forecasts by forecasted saturation of CCWs for new multi-housing. Multi-housing forecasts with
AEO 2008
projections. Verified frozen saturations with data from the U.S. Census Bureau's
American Housing Survey
(AHS) for 1997-2005
No change in approach. Housing forecasts updated with EIA
AEO 2009
April Release forecasts for the Reference Case.
AEO 2009
March Release forecasts used for the High-Growth Case and Low-Growth Case.
Replacements
Determined by tracking total equipment stock by vintage and establishing the failure of the stock using retirement functions from the LCC and PBP analysis. Retirement functions revised to be based on Weibull lifetime distributions
No change.
Retired Units not Replaced (
i.e.,
non-replacements)
Used to calibrate Shipments Model to historical shipments data. Froze the percentage of non-replacements at 15 percent for the period 2007─2042 to account for the increased saturation rate of in-unit washers in the multi-family stock between 1997 and 2005 timeframe shown by the AHS
Extended the time period out to 2043 to reflect an updated date of 2013 for when the standard becomes effective.
Historical Shipments
Data sources include AHAM data submittal,
Appliance Magazine,
and U.S. Bureau of Economic Analysis' quantity index data for commercial laundry
No change.
Purchase Price, Operating Cost, and Household Income Impacts due to efficiency standards
Developed the “relative price” elasticity which accounts for the purchase price and the present value of operating cost savings divided by household income. Used purchase price and efficiency data specific to residential refrigerators, clothes washers, and dishwashers between 1980 and 2002 to determine a “relative price” elasticity of demand, of −0.34
No change.
Fuel Switching
Not applicable
No change.
DOE based its Shipments Model on the following three assumptions: (1) All equipment shipments for new construction are driven by the new multi-family housing market, (2) the relative market shares of the two equipment applications, laundromats and common-area laundry facilities in multi-family housing, are constant over time at 15 and 85 percent, respectively, and (3) the U.S. Census Bureau's quantity index data can be used to validate the shipments trend observed in the historical data. The Joint Comment stated that DOE's assumed 85 percent to 15 percent split between sales for multi-family applications and sales for laundromat applications is not based on robust or current data. (Joint Comment, No. 44 at p. 5) It cited information from Alliance Laundry that suggests that the ratio of multi-family to laundromat shipments is about 36 percent to 64 percent. DOE based its market information on a report from the CEE,
27
which gathered information from several sources. Therefore, DOE concluded that this source is more reliable than information from a single manufacturer, and it continued to apply the same multi-family/laundromat sales split used in the October 2008 NOPR for today's SNOPR.
27
Consortium for Energy Efficiency,
Commercial Family-Sized Washers: An Initiative Description of the Consortium for Energy Efficiency
(1998). This document is available at:
http://www.cee1.org/com/cwsh/cwsh-main.php3
.
DOE received comments regarding the impacts of impending amended energy conservation standards for CCWs on unit sales. Alliance suggested that impacts to the CCW market would encourage customers to stock up on less efficient top-loading CCWs before the implementation date, and keep older machines in operation longer. These effects would undermine the effectiveness of the standards proposed in the October 2008 NOPR. (Alliance, No. 45 at Attachment 2, p. 10) As discussed below in section III.E.2.c, DOE's shipments model uses a “relative” purchase price elasticity to determine the drop in shipments as a function of increased purchase price and operating cost savings. The model does forecast a drop in new shipments due to a high standard on top-loading CCWs, which is expected to result in purchase of used CCWs. DOE did not have sufficient information to account for possible stocking up on less efficient top-loading CCWs before the implementation date.
a. New Construction Shipments
To determine new construction shipments, DOE used a forecast of new housing coupled with equipment market saturation data for new housing. For new housing completions and mobile home placements, DOE adopted the projections from EIA's
AEO 2008
through 2030 for the October 2008 NOPR. For today's SNOPR, DOE used the projections from EIA's
AEO 2009
April Release Reference Case. For CCWs, DOE relied on new construction market saturation data from the above-mentioned CEE report.
b. Replacements and Non-Replacements
DOE estimated replacements using equipment retirement functions developed from equipment lifetimes. For the October 2008 NOPR and today's SNOPR, DOE used retirement functions based on Weibull distributions. For the October 2008 NOPR, DOE determined that the growth of in-unit washer saturations in the multi-family stock over the last 10 years was likely caused by conversions of rental property to condominiums, resulting in the gradual phase-out or non-replacement of failed CCWs in common-area laundry facilities. As a result, DOE used the average percent of non-replacements over the period between 1999 and 2005 (18 percent) and maintained it over the entire forecast period (2006 to 2042 for the October 2008 NOPR and 2007 to 2043 for today's SNOPR). The effect of maintaining non-replacements at 18 percent results in forecasted CCW shipments staying relatively flat during the forecast period.
Multiple interested parties commented on the shipment forecasts used by DOE in the October 2008 NOPR. Alliance agreed with the relatively flat shipment forecast. (Alliance, Public Meeting Transcript, No. 40.5 at p. 22; Alliance, No. 45 at p. 1) AHAM and Whirlpool stated that the October 2008 NOPR estimates of future shipments for CCWs were much more realistic than those used in the November 2007 ANOPR. (AHAM, Public Meeting Transcript, No. 40.5 at p. 27; AHAM, No. 47 at p. 4; Whirlpool, Public Meeting Transcript, No 40.5 at p. 28; Whirlpool, No. 50 at p. 3) The Joint Comment questioned DOE's forecast of reduced shipments for new and replacement CCWs, citing Alliance's SEC filing which projected “modest growth” in the installed base of commercial laundry equipment, estimated by Alliance to have grown at 0.9 percent annually since 1997. (Joint Comment, No. 44 at p. 5) DOE believes that the information it used to forecast CCW shipments for the October 2008 NOPR is more reliable than the limited information provided by the Joint Comment on one manufacturer's statement in a single SEC filing; thus DOE maintained the approach used in the October 2008 NOPR for today's SNOPR.
c. Purchase Price, Operating Cost, and Income Impacts
To estimate the combined effects on CCW shipments from increases in equipment purchase price and decreases in equipment operating costs due to amended efficiency standards, DOE conducted a literature review and a statistical analysis on a limited set of appliance price, efficiency, and shipments data for the October 2008 NOPR. DOE used purchase price and efficiency data specific to residential refrigerators, clothes washers, and dishwashers between 1980 and 2002 to conduct regression analyses. DOE's analysis suggests that the “relative” short-run price elasticity of demand, averaged over the three appliances, is −0.34. Because DOE's forecast of shipments and national impacts due to standards spans over 30 years, DOE also considered how the relative price elasticity is affected once a new standard takes effect. Past analyses of consumer purchase decisions for automobiles suggest that after the initial purchase price change, price elasticity becomes more inelastic over the years until it reaches a terminal value. See appendix 10A of the SNOPR TSD for more details on the development of the short-run price elasticity of demand and the long-run effects on the elasticity.
For the October 2008 NOPR, DOE incorporated a relative price elasticity change that resulted in a terminal value of approximately one-third of the short-run elasticity. In other words, DOE estimated that consumer purchase decisions, in time, become less sensitive to the initial change in the equipment's relative price. MLA commented that if the standards result in a substantial increase in the use of front-loading CCWs and a reduction or elimination in that of top-loading CCWs, consumers would see resulting price increases driven by higher purchase price and higher maintenance, service, and operating cost for front-loading CCWs compared to top-loaders. (MLA, No. 49 at pp. 3-4) In addition, ASAP questioned DOE's conclusion that standards more aggressive than the ones proposed in the October 2008 NOPR for front-loading CCWs could lead to significant recapture of the CCW market by top-loading machines. (ASAP, Public Meeting Transcript, No. 40.5 at pp. 34-35 and pp. 160-161) For its October 2008 NOPR as well as today's SNOPR, DOE estimated that price increases would lead to reductions in unit shipments for both top-loading and front-loading CCWs. DOE analyzed the impacts of increased purchase prices for each equipment class independently of the other. DOE was not able to estimate the cross price elasticity of demand between the two equipment classes to determine whether consumers would switch from one type of CCW to the other. But because the price impacts for more efficient top-loaders are higher than those for more efficient front-loaders, DOE estimated that top-loading CCW sales would decrease more rapidly than for front-loaders. As a result, DOE estimated that front-loading CCWs would gain an additional market share of only about 2 percent. In addition, DOE estimated that those consumers forgoing the purchase of new top-loading CCWs would instead purchase used top-loading CCWs with efficiencies equal to baseline top-loader levels. DOE received no additional comments on its analysis to estimate the combined effects of increases in equipment purchase price and decreases in operating costs on CCW shipments and, therefore, retained the approach for today's SNOPR.
Although DOE retained its approach from the October 2008 NOPR to estimate the impacts from changes in purchase price and operating cost, DOE has concerns over specific aspects of its analysis. First, because purchase price and efficiency data for residential appliances were used to develop the “relative” short-run price elasticity of demand, DOE is uncertain how applicable the price elasticity is to the commercial clothes washing market. Second, because estimates of the long-run price elasticity of demand were derived from consumer automobile purchase decisions, DOE is uncertain whether it can be inferred that the initial CCW price elasticity of demand would become more inelastic over time. Third, although a cross price elasticity of demand between top-loading and front-loading CCWs could not be developed due to the lack of specific data, DOE still has concern over the price interactions between the two types of CCWs, especially under those circumstances where the purchase price increase for one CCW equipment class is more significant than for the other. Finally, DOE is concerned over its assumption that consumers forgoing a top-loader CCW purchase due to a price increase caused by standards would instead acquire used top-loading washers. For example, those consumers forgoing a top-loading CCW purchase may instead purchase a new front-loading CCW. To understand the interactions between the used CCW market and the new front-loading CCW market, the development of a cross price
elasticity between these two markets would be ideal.
Due to the lack of data and information to develop both short- and long-run price elasticities of demand specific to CCWs as well as cross price elasticities between top-loading and front-loading CCWs and used and front-loading CCWs, DOE is seeking input and any data from interested parties that may assist in the development of price elasiticies specific to any or all of the items discussed above. This is identified as Issue 4 in section VII.E of today's supplemental notice (Issues on Which DOE Seeks Comment).
3. Other Inputs
a. Base-Case Forecasted Efficiencies
A key input to the calculations of NES and NPV are the energy efficiencies that DOE forecasts for the base case (without new standards). The forecasted efficiencies represent the annual shipment-weighted energy efficiency (SWEF) of the equipment under consideration over the forecast period (
i.e.,
from the estimated effective date of a new standard to 30 years after that date).
For the October 2008 NOPR, DOE first determined the distribution of equipment efficiencies currently in the marketplace to develop a SWEF for each equipment class for 2005. Using the SWEF as a starting point, DOE developed base-case efficiencies based on estimates of future efficiency increase. From 2005 to 2013 (2013 being the estimated effective date of a new standard), DOE estimated that there would be no change in the SWEF (
i.e.,
no change in the distribution of equipment efficiencies). Because there are no historical data to indicate how equipment efficiencies have changed over time, DOE estimated that forecasted efficiencies would remain at the 2013 level until the end of the forecast period. DOE recognizes the possibility that equipment efficiencies may change over time (
e.g.,
due to voluntary efficiency programs such as ENERGY STAR). But without historical information, DOE had no basis for estimating how much the equipment efficiencies may change. For today's supplemental notice, DOE maintained its estimate that the SWEF would remain constant from 2005 through the end of the forecast period.
b. Standards-Case Forecasted Efficiencies
For its determination of each of the cases with alternative standard levels (“standards cases”), DOE used a “roll-up” scenario in the October 2008 NOPR to establish the SWEF for 2013. In a roll-up scenario, equipment efficiencies in the base case which do not meet the standard level under consideration are projected to roll-up to meet the new standard level. Further, all equipment efficiencies in the base case that are above the standard level under consideration are not affected by the standard. The same scenario is used for the forecasted standards-case efficiencies as for the base-case efficiencies, namely, that forecasted efficiencies remained at the 2013 efficiency level until the end of the forecast period, as DOE has no data to reasonably estimate how such efficiency levels might change over the next 30 years. By maintaining the same rate of increase for forecasted efficiencies in the standards case as in the base case (
i.e.,
no change), DOE retained a constant efficiency difference between the two cases over the forecast period. Although the no-change trends may not reflect what would happen to base-case and standards-case equipment efficiencies in the future, DOE believes that maintaining a constant efficiency difference between the base case and standards case provides a reasonable estimate of the impact that standards have on equipment efficiency. It is more important to accurately estimate the efficiency difference between the standards case and base case, than to accurately estimate the actual equipment efficiencies in the standards and base cases. DOE retained the approach used in the October 2008 NOPR for today's SNOPR. But because the effective date of the standard is now assumed to be 2013, DOE applied the “roll-up” scenario in the year 2013 to establish the SWEF for each of the standards cases.
c. Annual Energy Consumption
The annual energy consumption per unit depends directly on equipment efficiency. For the October 2008 NOPR and today's SNOPR, DOE used the SWEFs associated with the base case and each standards case, in combination with the annual energy data, to estimate the shipment-weighted average annual per-unit energy consumption under the base case and standards cases. The national energy consumption is the product of the annual energy consumption per unit and the number of units of each vintage, which depends on shipments.
As noted above in section III.D, DOE used a relative price elasticity to estimate standards-case shipments for CCWs. As a result, shipments forecasted under the standards cases are lower than under the base case. To avoid the inclusion of energy savings from reduced shipments, DOE used the standards-case shipments projection and the standards-case stock to calculate the annual energy consumption in the base case. For CCWs, any drop in shipments caused by standards is estimated to result in the purchase of used machines. As a result, the standards-case forecast explicitly accounted for the energy and water consumption of new standard-compliant CCWs and also used machines coming into the market due to the drop in new equipment shipments.
DOE retained the use of the base-case shipments to determine the annual energy consumption in the base case and the approach used in the October 2008 NOPR for today's SNOPR.
d. Site-to-Source Conversion
To estimate the national energy savings expected from appliance standards, DOE uses a multiplicative factor to convert site energy consumption (energy use at the location where the appliance is operated) into primary or source energy consumption (the energy required to deliver the site energy). For the October 2008 NOPR, DOE used annual site-to-source conversion factors based on the version of NEMS that corresponds to
AEO 2008.
For today's SNOPR, DOE updated these conversion factors based on the
AEO 2009
March Release version of NEMS. These conversion factors account for natural gas losses from pipeline leakage and natural gas used for pumping energy and transportation fuel. For electricity, the conversion factors vary over time due to projected changes in generation sources (
i.e.,
the power plant types projected to provide electricity to the country). Since the
AEO
does not provide energy forecasts that go beyond 2030, DOE used conversion factors that remain constant at the 2030 values throughout the remainder of the forecast.
In response to a request from the DOE, Office of Energy Efficiency and Renewable Energy (EERE), the National Research Council (NRC) appointed a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” to conduct a study called for in Section 1802 of EPACT 2005.
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The fundamental task before the committee was to evaluate the methodology used for setting energy
efficiency standards and to comment on whether site (point-of-use) or source (full-fuel-cycle) measures of energy efficiency better support rulemaking to achieve energy conservation goals. The NRC committee defined site (point-of-use) energy consumption as reflecting the use of electricity, natural gas, propane, and/or fuel oil by an appliance at the site where the appliance is operated, based on specified test procedures. Full-fuel-cycle energy consumption was defined as including, in addition to site energy use, the energy consumed in the extraction, processing, and transport of primary fuels such as coal, oil, and natural gas; energy losses in thermal combustion in power-generation plants; and energy losses in transmission and distribution to homes and commercial buildings.
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The National Academies, Board on Energy and Environmental Systems, Letter to Dr. John Mizroch, Acting Assistant Secretary, U.S. DOE, Office of EERE from James W. Dally, Chair, Committee on Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards, May 15, 2009.
In evaluating the merits of using point-of-use and full-fuel-cycle measures, the NRC committee noted that DOE uses what the committee referred to as “extended site” energy consumption to assess the impact of energy use on the economy, energy security, and environmental quality. The extended site measure of energy consumption includes the generation, transmission, and distribution but, unlike the full-fuel-cycle measure, does not include the energy consumed in extracting, processing, and transporting primary fuels. A majority of members on the NRC committee believe that extended site energy consumption understates the total energy consumed to make an appliance operational at the site. As a result, the NRC committee's primary general recommendation is for DOE to consider moving over time to use of a full-fuel-cycle measure of energy consumption for assessment of national and environmental impacts, especially levels of greenhouse gas emissions, and to providing more comprehensive information to the public through labels and other means, such as an enhanced Web site. For those appliances that use multiple fuels (
e.g.,
water heaters), the NRC committee believes that measuring full-fuel-cycle energy consumption would provide a more complete picture of energy used, allowing comparison across many different appliances as well as an improved assessment of impacts. The NRC committee also acknowledged the complexities inherent in developing a full-fuel-cycle measure of energy use and stated that a majority of the committee recommended a gradual transition to that expanded measure and eventual replacement of the currently used extended site measure. To improve consumers' understanding, the committee recommended that DOE and the Federal Trade Commission could evaluate potential indices of energy use and its impacts and could explore various options for label design and content using established consumer research methods.
DOE acknowledges that its site-to-source conversion factors do not capture the energy consumed in extracting, processing, and transporting primary fuels. DOE also agrees with the NRC committee's conclusion that developing site-to-source conversion factors that capture the energy associated with the extraction, processing, and transportation of primary fuels is inherently complex and difficult. As a result, DOE will evaluate whether moving to a full-fuel-cycle measure will enhance its ability to set energy-efficiency standards.
DOE also notes that the NRC committee's recommendation to use a full-fuel-cycle measure was especially focused on appliances using multiple fuels. For single-fuel appliances, the committee recommended that the current practice of basing energy efficiency requirements on the site measure of energy consumption should be retained. Although CCWs utilize heated water from both electric and natural gas water heaters and are credited with improved performance by reducing the energy used in electric and gas clothes dryers, the energy efficiency metric with which they are regulated, the MEF, is expressed in terms of electrical energy usage (cubic feet per kWh). As a result, for labeling and enforcement purposes, CCWs are a single-fuel appliance. Therefore, although a full-fuel-cycle measure may provide a better assessment of national and environmental impacts, it is not necessary for providing energy use comparisons among CCW models.
e. Energy Used in Water and Wastewater Treatment and Delivery
In the October 2008 NOPR, DOE did not include the energy required for water treatment and delivery. It stated that EPCA defines “energy use” to be “the quantity of energy directly consumed by a consumer product at point of use, determined in accordance with test procedures under section 6293 of [42 U.S.C.].” (42 U.S.C. 6291(4)) Based on the definition of “energy use,” DOE does not believe it has the authority to consider embedded energy (
i.e.,
the energy required for water treatment and delivery) in the analysis. Furthermore, even if DOE had the authority, it does not believe adequate analytical tools exist to conduct such an evaluation.
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An analytical tool equivalent to EIA's NEMS would be needed to properly account for embedded energy impacts on a national scale, including the embedded energy due to water and wastewater savings. This new version of NEMS would need to analyze spending and energy use in dozens, if not hundreds, of economic sectors. This version of NEMS also would need to account for shifts in spending in these various sectors to account for the marginal embedded energy differences among these sectors. 72 FR 64432, 64498-99 (Nov. 15, 2007). DOE does not have access to such a tool or other means to accurately estimate the source energy savings impacts of decreased water or wastewater consumption and expenditures.
The Joint Comment stated that DOE's purported legal justification ignores that EPCA not only provides ample authority for DOE to consider this impact, but actually commands its consideration in weighing the economic justification for efficiency standards. (Joint Comment, No. 44, pp. 12-13) It said that DOE's position that it lacks the authority to consider the energy embedded in water is untenable in light of 42 U.S.C. 6295(o)(2)(B)(i)(VII), which provides that in assessing the economic justification for a standard, DOE may consider any factors it concludes are relevant. It added that 42 U.S.C. 6295(o)(2)(B)(i)(III) directs DOE to consider, to the greatest extent practicable, “the total projected amount of energy * * * savings likely to result directly from the imposition of such standard.” It also stated that the plain language of EPCA thus commands that DOE assess the “energy saving” resulting from the standard, not simply the “energy use” of the covered products or equipment. Moreover, though the statute concerns those energy savings likely to “result directly” from the standard, that language merely requires DOE to isolate the standard's impact from other energy saving initiatives for purposes of the economic justification analysis. (Joint Comment, No. 44 at p. 12-13) Pacific Gas & Electric Company (PG&E) stated that because of the preciousness of water in California and the embodied energy in it, a higher standard for CCWs is merited. (PG&E, Public Meeting Transcript, No. 40.5 at pp. 136-137 and p. 181) Furthermore, PG&E commented that failing to consider energy in water due to the lack of an analytical tool is not acceptable. (PG&E, Public Meeting Transcript, No. 40.5 at pp. 178-179 and p. 183) Additional comments submitted by EJ, ASAP, and ACEEE, suggested that the energy embedded in the delivery and treatment of water and wastewater should be included in the determination of national energy savings from the standards proposed in the October 2008 NOPR. (EJ, Public Meeting Transcript,
No. 40.5 at pp. 140-141 and p. 180; ASAP, Public Meeting Transcript, No. 40.5 at pp. 180-181; ACEEE, Public Meeting Transcript, No. 40.5 at p. 182)
DOE continues to maintain that it only has the authority to consider the quantity of energy directly consumed by the equipment at point of use, and the energy consumed in production and delivery of that energy, in determining the total projected amount of energy savings likely to result directly from the imposition of a standard. Although DOE does agree with the Joint Comment that energy is consumed in providing water and wastewater service, this energy is not directly consumed by the equipment or in production and delivery of the energy. Inclusion of the embedded energy associated with water and wastewater service, would, for completeness, also require inclusion of the energy associated with all other aspects of the installation and operation of the equipment,
e.g.
the manufacture, distribution, and installation of the equipment. Furthermore, since water districts charge all costs related to transporting, treating, and distributing water to their consumers, the embedded energy is already accounted for in the LCC analysis. Thus, while DOE could go through the theoretical exercise of disaggegrating energy costs from total water costs, the LCC results would not change since the total cost of operating equipment would not change.
f. Total Installed Costs and Operating Costs
The increase in total annual installed cost is equal to the difference in the per-unit total installed cost between the base case and standards case, multiplied by the shipments forecasted in the standards case. The annual operating cost savings per unit includes changes in energy, water, repair, and maintenance costs. DOE forecasted energy prices for the October 2008 NOPR based on
AEO 2008;
it updated the forecasts for today's SNOPR using data from
AEO 2009
April Release. For today's SNOPR, DOE maintained the accounting system it used to develop repair and maintenance costs for more efficient CCWs in the October 2008 NOPR.
g. Discount Rates
DOE multiplies monetary values in future years by the discount factor to determine the present value. DOE estimated national impacts using both a 3-percent and a 7-percent real discount rate, in accordance with guidance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis (OMB Circular A-4 (Sept.17, 2003), section E, “Identifying and Measuring Benefits and Costs”).
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The Joint Comment stated that DOE should use a 2 to 3 percent real discount rate for national impact analyses. (Joint Comment, No. 44 at p. 11) It noted that societal discount rates are the subject of extensive academic research, and the weight of academic opinion is that the appropriate societal discount rate is 3 percent or less. It urged DOE to give primary weight to results based on the lower of the discount rates recommended by OMB. OMB Circular A-4 references an earlier Circular A-94, which states that a real discount rate of 7 percent should be used as a base case for regulatory analysis. The 7 percent rate is an estimate of the average before-tax rate of return to private capital in the U.S. economy. It approximates the opportunity cost of capital, and, according to Circular A-94, it is the appropriate discount rate whenever the main effect of a regulation is to displace or alter the use of capital in the private sector. OMB later found that the average rate of return to capital remains near the 7-percent rate estimated in 1992. Circular A-4 also states that when regulation primarily and directly affects private consumption, a lower discount rate is appropriate. “The alternative most often used is sometimes called the social rate of time preference * * * the rate at which “society” discounts future consumption flows to their present value.” It suggests that the real rate of return on long-term government debt may provide a fair approximation of the social rate of time preference, and states that over the last 30 years, this rate has averaged around 3 percent in real terms on a pre-tax basis. It concludes that “for regulatory analysis, [agencies] should provide estimates of net benefits using both 3 percent and 7 percent.” Consistent with OMB's guidance, DOE did not give primary weight to results derived using a 3-percent discount rate.
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OMB circulars are available online at:
http://www.whitehouse.gov/omb/circulars/.
DOE also received comments regarding the discounting of emissions. The Joint Comment stated that DOE should not apply a discount rate to physical units of measure, such as tons of emissions or quads of energy. (Joint Comment, No. 44 at p. 11) Consistent with Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51737 (Oct. 4, 1993), DOE follows the guidance of OMB regarding methodologies and procedures for regulatory impact analysis that affect more than one agency. Regarding energy and environmental benefits from energy conservation standards, DOE reported both discounted and undiscounted values. DOE retained the approach used in the October 2008 NOPR for today's SNOPR.
h. Effects of Standards on Energy Prices
For the October 2008 NOPR, DOE conducted an analysis of the impact of reduced energy demand associated with possible standards on CCWs on prices of natural gas and electricity. The Joint Comment stated that the electricity price mitigation effects of the standard proposed in the October 2008 NOPR should be documented and the value of reduced electricity bills to all consumers quantified as a benefit. (Joint Comment, No. 44 at p. 11) The DOE analysis found that gas and electric demand reductions resulting from max-tech standards for CCWs would have no detectable change on the U.S. average wellhead natural gas price or the average user price of electricity. DOE concluded that CCW standards will not provide additional economic benefits resulting from lower energy prices. Thus, for today's SNOPR DOE has made no change to its assumptions about the effects of standards on energy prices. See chapter 11 of the SNOPR TSD for more details.
F. Consumer Subgroup Analysis
In the October 2008 NOPR, DOE analyzed the potential effects of CCW standards on two subgroups: (1) Consumers not served by municipal water and sewer providers, and (2) small businesses. For consumers not served by water and sewer, DOE analyzed the potential impacts of standards by conducting the analysis with well and septic system prices, rather than water and wastewater prices based on RFC/AWWA data. For small CCW businesses, DOE analyzed the potential impacts of standards by conducting the analysis with different discount rates, because small businesses do not have the same access to capital as larger businesses. DOE estimated that for businesses purchasing CCWs, the average discount rate for small companies is 3.5 percent higher than the industry average. Due to the higher costs of conducting business, as evidenced by their higher discount rates, the benefits of CCW standards for small businesses will be lower than for the general population of CCW owners. For today's SNOPR DOE has made no changes to its assumptions about benefits of CCW standards to small businesses.
DOE received comments regarding the economic impacts of higher initial clothes washer costs. Alliance and MLA stated that the standards proposed in
the October 2008 NOPR would result in substantial price increases for customers of central area laundry rooms, especially for elderly, low-income, college students, and disabled end-users. MLA stated that a majority of the 35-50 million CCW customers are low- or low-to-middle income people, many of whom are elderly or who suffer disabilities. (Alliance, No. 45 at p. 1 and Attachment 2, p. 12; MLA, No. 49 at pp. 1-4) PG&E commented that lower-income consumers may pay higher energy costs in laundry rooms using older machines than those who have access to new machines. (PG&E, Public Meeting Transcript, No. 40.5 at p. 25) DOE research suggests that the end-users of CCW
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