Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards for Single Package Vertical Air Conditioners and Single Package Vertical Heat Pumps

As Enacted ( Federal Register)

Cited authorities 15

Cited in

Federal Register, Volume 79 Issue 249 (Tuesday, December 30, 2014)

Federal Register Volume 79, Number 249 (Tuesday, December 30, 2014)

Proposed Rules

Pages 78613-78677

From the Federal Register Online via the Government Printing Office www.gpo.gov

FR Doc No: 2014-29865

Page 78613

Vol. 79

Tuesday,

No. 249

December 30, 2014

Part III

Department of Energy

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10 CFR Part 431

Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards for Single Package Vertical Air Conditioners and Single Package Vertical Heat Pumps; Proposed Rule

Page 78614

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DEPARTMENT OF ENERGY

10 CFR Part 431

Docket Number EERE-2012-BT-STD-0041

RIN 1904-AC85

Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards for Single Package Vertical Air Conditioners and Single Package Vertical Heat Pumps

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

ACTION: Notice of proposed rulemaking (NOPR) and announcement of public meeting.

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SUMMARY: The Energy Policy and Conservation Act of 1975 (EPCA), as amended, prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including single package vertical air conditioners and single package vertical heat pumps. EPCA also requires that each time the American Society of Heating, Refrigerating, and Air-conditioning Engineers (ASHRAE) Standard 90.1 is amended with respect to the standard levels or design requirements applicable to that equipment, the U.S. Department of Energy (DOE) must adopt amended uniform national standards for this equipment equivalent to those in ASHRAE Standard 90.1, unless DOE determines that there is clear and convincing evidence showing that more-stringent, amended standards would be technologically feasible and economically justified, and would save a significant additional amount of energy. DOE has tentatively concluded that there is sufficient record evidence to support more-stringent standards for two classes of this equipment. However, for four equipment classes, DOE is proposing to adopt the revised ASHRAE levels, due to the absence of any models on the market in two classes, and absence of any models above the revised ASHRAE level in the remaining two classes. Accordingly, DOE is proposing amended energy conservation standards for all classes of single package vertical air conditioners and single package vertical heat pumps. DOE also announces a public meeting to receive comment on these proposed standards and associated analyses and results.

DATES: Comments: DOE will accept comments, data, and information regarding this notice of proposed rulemaking (NOPR) before and after the public meeting, but no later than March 2, 2015. See section VII, ``Public Participation,'' for details.

Meeting: DOE will hold a public meeting on Friday, February 6, 2014, from 8:30 a.m. to 12:30 p.m., in Washington, DC. The meeting will also be broadcast as a webinar. See section VII, ``Public Participation,'' for webinar registration information, participant instructions, and information about the capabilities available to webinar participants.

ADDRESSES: The public meeting will be held at the U.S. Department of Energy, Forrestal Building, Room 8E-089 1000 Independence Avenue SW., Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at (202) 586-2945. Persons may also attend the public meeting via webinar. For more information, refer to section VII, ``Public Participation,'' near the end of the preamble.

Due to the REAL ID Act implemented by the Department of Homeland Security (DHS), there have been recent changes regarding identification (ID) requirements for individuals wishing to enter Federal buildings from specific States and U.S. territories. As a result, driver's licenses from the following States or territory will not be accepted for building entry, and instead, one of the alternate forms of ID listed below will be required.

DHS has determined that regular driver's licenses (and ID cards) from the following jurisdictions are not acceptable for entry into DOE facilities: Alaska, American Samoa, Arizona, Louisiana, Maine, Massachusetts, Minnesota, New York, Oklahoma, and Washington.

Acceptable alternate forms of Photo-ID include: U.S. Passport or Passport Card; an Enhanced Driver's License or Enhanced ID-Card issued by the States of Minnesota, New York or Washington (Enhanced licenses issued by these States are clearly marked Enhanced or Enhanced Driver's License); a military ID or other Federal government-issued Photo-ID card.

Instructions: Any comments submitted must identify the NOPR for Energy Conservation Standards for Single Package Vertical Air Conditioners and Single Package Vertical Heat Pumps, and provide docket number EERE-2012-BT-STD-0041 and/or regulatory information number (RIN) number 1904-AC85. Comments may be submitted using any of the following methods:

1. Federal eRulemaking Portal: www.regulations.gov. Follow the instructions for submitting comments.

2. Email: SPVU2012STD0041@ee.doe.gov. Include the docket number and/or RIN in the subject line of the message. Submit electronic comments in WordPerfect, Microsoft Word, PDF, or ASCII file format, and avoid the use of special characters or any form of encryption.

3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Office, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. If possible, please submit all items on a compact disc (CD), in which case it is not necessary to include printed copies.

4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, 950 L'Enfant Plaza SW., Suite 600, Washington, DC 20024. Telephone: (202) 586-2945. If possible, please submit all items on a CD, in which case it is not necessary to include printed copies.

Written comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in this proposed rule may be submitted to the Office of Energy Efficiency and Renewable Energy through the methods listed above and by email to Chad_S._Whiteman@omb.eop.gov.

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

Docket: The docket, which includes Federal Register notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at www.regulations.gov. All documents in the docket are listed in the www.regulations.gov index. However, some documents listed in the index, such as those containing information that is exempt from public disclosure, may not be publicly available.

A link to the docket Web page can be found at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=107. This Web page contains a link to the docket for this NOPR on the www.regulations.gov site. The www.regulations.gov Web page contains simple instructions on how to access all documents, including public comments, in the docket. See section VII, ``Public Participation,'' for further information on how to submit comments through www.regulations.gov.

For further information on how to submit a comment, review other public

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comments and the docket, or participate in the public meeting, contact Ms. Brenda Edwards at (202) 586-2945 or by email: Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Ron Majette, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-7935. Email: Ronald.Majette@ee.doe.gov.

Mr. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-

0121. Telephone: (202) 586-9507. Email: Eric.Stas@hq.doe.gov.

For information on how to submit or review public comments, contact Ms. Brenda Edwards at (202) 586-2945 or by email: Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Proposed Rule

Benefits and Costs to Consumers
Impact on Manufacturers
National Benefits

II. Introduction
Authority
Background

1. Current Standards

2. History of Standards Rulemaking for Single Package Vertical Air Conditioners and Single Package Vertical Heat Pumps

III. General Discussion
Compliance Dates
Equipment Classes and Scope of Coverage

1. Consideration of a Space Constrained SPVU Equipment Class
Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels
Energy Savings

1. Determination of Savings

2. Significance of Savings
Economic Justification

1. Specific Criteria

2. Rebuttable Presumption

IV. Methodology and Discussion of Related Comments
Market and Technology Assessment

1. Definitions of a SPVAC and a SPVHP

2. Equipment Classes

3. Review of the Current Market for SPVUs

4. Technology Assessment
Screening Analysis
Engineering Analysis

1. Efficiency Levels for Analysis

2. Teardown Analysis

3. Cost Model

4. Manufacturing Production Costs

5. Cost-Efficiency Relationship

6. Manufacturer Markup

7. Shipping Costs

8. Manufacturer Interviews
Markups Analysis
Energy Use Analysis
Life-Cycle Cost and Payback Period Analysis

1. Approach

2. Life-Cycle Cost Inputs

3. Payback Period
National Impact Analysis

1. Approach
1. National Energy Savings
2. Net Present Value
2. Shipments Analysis

3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
Consumer Subgroup Analysis

I. Manufacturer Impact Analysis

1. Overview

2. GRIM Analysis

3. Manufacturer Interviews
Emissions Analysis
Monetizing Carbon Dioxide and Other Emissions Impacts

1. Social Cost of Carbon

2. Valuation of Other Emissions Reductions

L. Utility Impact Analysis
Employment Impact Analysis

V. Analytical Results and Conclusions
Trial Standard Levels
Economic Justification and Energy Savings

1. Economic Impacts on Commercial Consumers

2. Economic Impact on Manufacturers

3. National Impact Analysis

4. Impact on Utility or Performance of Equipment

5. Impact of Any Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors
Proposed Standards

1. Benefits and Burdens of Trial Standard Levels Considered for SPVUs

2. Summary of Benefits and Costs (Annualized) of the Proposed Standards

VI. Procedural Issues and Regulatory Review
Review Under Executive Orders 12866 and 13563
Review Under the Regulatory Flexibility Act
Review Under the Paperwork Reduction Act of 1995
Review Under the National Environmental Policy Act of 1969
Review Under Executive Order 13132
Review Under Executive Order 12988
Review Under the Unfunded Mandates Reform Act of 1995
Review Under the Treasury and General Government Appropriations Act, 1999

I. Review Under Executive Order 12630
Review Under the Treasury and General Government Appropriations Act, 2001
Review Under Executive Order 13211

L. Review Under the Information Quality Bulletin for Peer Review

VII. Public Participation
Attendance at the Public Meeting
Procedure for Submitting Requests to Speak and Prepared General Statements for Distribution
Conduct of the Public Meeting
Submission of Comments
Issues on Which DOE Seeks Comment

VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

Title III, Part C \1\ of the Energy Policy and Conservation Act of 1975 (``EPCA'' or ``the Act''), Pub. L. 94-163 (42 U.S.C. 6311-6317, as codified), added by Public Law 95-619, Title IV, Sec. 441(a), established the Energy Conservation Program for Certain Industrial Equipment, which includes the single package vertical air conditioners (SPVACs) and single package vertical heat pumps (SPVHPs) that are the subject of this rulemaking (collectively referred to as single package vertical units or SPVUs). Pursuant to EPCA, not later than 3 years after the date of enactment of the Energy Independence and Security Act of 2007 (EISA 2007), DOE must review the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 90.1 (ASHRAE Standard 90.1), ``Energy Standard for Buildings Except Low-Rise Residential Buildings,'' with respect to single package vertical air conditioners and single package vertical heat pumps in accordance with the procedures established in 42 U.S.C. 6313(a)(6). (42 U.S.C. 6313(a)(10)(B))

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

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At the time DOE commenced this rulemaking, the Department had not considered adoption of the then-current ASHRAE Standard 90.1-2010 levels as part of its analytical baseline (as is typically the case under 42 U.S.C. 6313(a)(6)), because the current energy conservation standards for SPVUs were already set at those levels by EPCA. However, on October 9, 2013, ASHRAE adopted ASHRAE Standard 90.1-2013, and this revision did contain amended standard levels for SPVUs, thereby triggering DOE's statutory obligation to promulgate an amended uniform national standard at those levels, unless DOE determines that there is clear and convincing evidence supporting the adoption of more-stringent energy conservation standards than the ASHRAE levels. The test for adoption of more-stringent standards is whether such standards would result in significant additional conservation of energy and would be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)(I) and (II)) Once complete, this rulemaking will satisfy DOE's statutory obligations under both 42 U.S.C. 6313(a)(6) and (10)(B).

In accordance with these and other statutory provisions discussed in this preamble, DOE has tentatively concluded that there is sufficient evidence to support more-stringent standards for two classes of SPVUs. For the remaining four equipment classes,

Page 78616

DOE has tentatively decided to adopt the levels in ASHRAE Standard 90.1-2013. Accordingly, DOE is proposing amended energy conservation standards for all classes of single package vertical air conditioners and single package vertical heat pumps. As shown in Table I.1, the proposed standards are expressed in terms of: (1) Energy efficiency ratio (EER), which is the ratio of the produced cooling effect of an air conditioner or heat pump to its total work input; and (2) coefficient of performance (COP), which is the ratio of produced heating effect to total work input (applicable only to heat pump units).

If adopted, the proposed standards listed in Table I.1 that are more stringent than those contained in ASHRAE Standard 90.1-2013 would apply to such equipment manufactured in, or imported into, the United States, excluding equipment that is manufactured for export, on and after a date four years after publication of an energy conservation standards final rule. If adopted, the proposed standards listed in Table I.1 that are set at the levels contained in ASHRAE Standard 90.1-

2013 would apply to such equipment manufactured in, or imported into, the United States, excluding equipment that is manufactured for export, on and after a date two or three years after the effective date of the requirements in ASHRAE Standard 90.1-2013, depending on equipment size (i.e., October 9, 2015 or 2016).

Table I.1--Proposed Energy Conservation Standards for SPVUs

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Cooling capacity Anticipated

Equipment class Btu/h Efficiency level Standard level compliance date

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Single Package Vertical Air =65,000 Btu/h and EER = 10.0......... ASHRAE............ October 9, 2015.

Conditioner. =135,000 Btu/h EER = 10.0......... ASHRAE............ October 9, 2016.

Conditioner. and =65,000 Btu/h and EER = 10.0......... ASHRAE............ October 9, 2015.

Pump. =135,000 Btu/h EER = 10.0......... ASHRAE............ October 9, 2016.

Pump. and =65,000 Btu/h and =65,000 Btu/h and =65,000 Btu/h and Adopt ASHRAE.............. 737 Adopt ASHRAE............. 7.0

Conditioner. =135,000 Btu/h and Adopt ASHRAE.............. N/A Adopt ASHRAE............. N/A

Conditioner. =65,000 Btu/h and Adopt ASHRAE.............. 241 Adopt ASHRAE............. 10.9

=135,000 Btu/h and Adopt ASHRAE.............. N/A Adopt ASHRAE............. N/A

2), 59 thousand tons of methane, 53 thousand tons of sulfur dioxide (SO2), 18 thousand tons of nitrogen oxides (NOX), and 0.06 tons of mercury (Hg).\10\ The cumulative reduction in CO2 emissions through 2030 amounts to 2.2 Mt. Emissions results using the EPCA baseline can be found in chapter 13 of the NOPR TSD, and cumulative reduction in CO2 emissions through 2030 amounts to 4.7 Mt relative to the EPCA baseline.

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\9\ A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons.

\10\ DOE calculated emissions reductions relative to the Annual Energy Outlook 2013 (AEO 2013) Reference case, which generally represents current legislation and environmental regulations for which implementing regulations were available as of December 31, 2012. Emissions factors based on the Annual Energy Outlook 2014 (AEO 2014), which became available too late for incorporation into this analysis, indicate that a significant decrease in the cumulative emission reductions of carbon dioxide and most other pollutants can be expected if the projections of power plant utilization assumed in AEO 2014 are realized. For example, the estimated amount of cumulative emission reductions of CO2 is expected to decrease by 33% from DOE's current estimate based on the projections in AEO 2014 relative to AEO 2013. The monetized benefits from GHG reductions would likely decrease by a comparable amount. DOE plans to use emissions factors based on the most recent AEO available for the next phase of this rulemaking, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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The value of the CO2 reductions is calculated using a range of values per metric ton of CO2 (otherwise known as the Social Cost of Carbon, or SCC) developed by a recent Federal interagency process.\11\ The derivation of

Page 78618

the SCC values is discussed in section IV.K. DOE estimates that the present monetary value of the CO2 emissions reduction described above is between $0.12 and $1.9 billion using the ASHRAE baseline. DOE also estimates the present monetary value of the NOX emissions reduction using the ASHRAE baseline is $7.3 million at a 7-percent discount rate and $21 million at a 3-percent discount rate.\12\ Results using the EPCA baseline can be found in chapter 14 of the NOPR TSD.

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\11\ Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; revised November 2013) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).

\12\ DOE is currently investigating valuation of avoided Hg and SO2 emissions.

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Table I.3 summarizes the national economic costs and benefits expected to result from the proposed standards for SPVUs using both the ASHRAE and EPCA baselines.

Table I.3--Summary of National Economic Benefits and Costs of Proposed SPVU Energy Conservation Standards using

ASHRAE and EPCA Baselines*

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Present value Billion 2013$

------------------------------ Discount rate

Category ASHRAE EPCA %

baseline baseline

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Benefits

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Consumer Operating Cost Savings................................... 0.49 1.0 7

1.2 2.6 3

CO2 Reduction Monetized Value ($12.0/t case)**.................... 0.12 0.26 5

CO2 Reduction Monetized Value ($40.5/t case)**.................... 0.60 1.2 3

CO2 Reduction Monetized Value ($62.4/t case)**.................... 1.0 2.0 2.5

CO2 Reduction Monetized Value ($119/t case)**..................... 1.9 3.8 3

NOX Reduction Monetized Value (at $2,684/ton)**................... 0.0073 0.015 7

0.021 0.042 3

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Total Benefitsdagger........................................ 1.1 2.3 7

1.9 3.8 3

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Costs

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Consumer Incremental Installed Costs.............................. 0.38 0.77 7

0.79 1.5 3

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Net Benefits

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Including CO2 and NOX Reduction Monetized Value................... 0.72 1.5 7

1.1 2.3 3

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* This table presents the costs and benefits associated with SPVU shipped in 2019-2048. These results include

benefits to customers which accrue after 2044 from the equipment purchased in 2019-2048. The results account

for the incremental variable and fixed costs incurred by manufacturers due to the amended standard, some of

which may be incurred in preparation for this final rule.

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the

updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and

2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution

calculated using a 3% discount rate. The SCC time series used by DOE incorporates an escalation factor.\13\

dagger Total Benefits for both the 3% and 7% cases are derived using the series corresponding to SCC value of

$40.5/t in 2015.

The benefits and costs of these proposed standards, for equipment sold in 2019-2048, can also be expressed in terms of annualized values. The annualized monetary values are the sum of: (1) The annualized national economic value of the benefits from customer operation of equipment that meet the proposed standards (consisting primarily of operating cost savings from using less energy, minus increases in equipment purchase and installation costs, which is another way of representing customer NPV); and (2) the annualized monetary value of the benefits of emission reductions, including CO2 emission reductions.\14\

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\13\ The CO2 and NOX results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOX, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

\14\ DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized values. First, DOE calculated a present value in 2014, the year used for discounting the NPV of total consumer costs and savings, for the time-series of costs and benefits using discount rates of three and seven percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates, as shown in Table I.3. From the present value, DOE then calculated the fixed annual payment over a 30-year period (2019 through 2048) that yields the same present value. The fixed annual payment is the annualized value. Although DOE calculated annualized values, this does not imply that the time-series of cost and benefits from which the annualized values were determined is a steady stream of payments.

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Although combining the values of operating savings and CO2 emission reductions provides a useful perspective, two issues should be considered. First, the national operating savings are domestic U.S. customer monetary savings that occur as a result of market transactions, whereas the value of CO2 reductions is based on a global value. Second, the assessments of operating cost savings and CO2 savings are performed with different methods that use different time frames for analysis. The national operating cost savings is measured for the lifetime of equipment shipped in 2019-

2048. Because carbon dioxide emissions have a very long residence time in the

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atmosphere,\15\ the SCC values reflect future climate-related impacts resulting from the emission of one ton of carbon dioxide that continue well beyond 2100.

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\15\ The atmospheric lifetime of CO2 is estimated of the order of 30-95 years. Jacobson, MZ (2005). ``Correction to ``Control of fossil-fuel particulate black carbon and organic matter, possibly the most effective method of slowing global warming.'' '' J. Geophys. Res. 110. pp. D14105.

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Estimates of annualized benefits and costs of the proposed standards (over a 30-year period) are shown in Table I.4. The results under the primary estimate using the ASHRAE baseline are as follows. Using a 7-percent discount rate for benefits and costs other than CO2 reduction, for which DOE used a 3-percent discount rate along with the average SCC series that has a value of $40.5/t in 2015, the cost of the proposed standards is $29 million per year in increased equipment costs, while the benefits are $38 million per year in reduced equipment operating costs, $29 million from CO2 reductions, and $0.57 million from reduced NOX emissions. In this case, the annualized net benefit amounts to $38 million per year. Using a 3-

percent discount rate for all benefits and costs and the average SCC series that has a value of $40.5/t in 2015, the cost of the standards proposed in today's rule is $37 million per year in increased equipment costs, while the benefits are $58 million per year in reduced operating costs, $29 million from CO2 reductions, and $0.97 million in reduced NOX emissions. In this case, the net benefit amounts to $51 million per year.\16\ Results using the EPCA baseline are shown in Table I.5.

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\16\ All CO2 and NOX results shown in this paragraph are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOX, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

\17\ The CO2 and NOX results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOX, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

Table I.4--Annualized Benefits and Costs of Proposed Energy Conservation Standards for SPVUs

ASHRAE baseline

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Discount rate Primary Low net benefits High net

estimate* estimate* benefits

estimate*

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million 2013$/year

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Benefits

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Operating Cost Savings....... 7%......................... 38.............. 36.............. 39.

3%......................... 58.............. 55.............. 61.

CO2 Reduction Monetized Value 5%......................... 7.7............. 7.6............. 7.7.

($12.0/t case)**.

CO2 Reduction Monetized Value 3%......................... 29.............. 28.............. 29.

($40.5/t case)**.

CO2 Reduction Monetized Value 2.5%....................... 43.............. 42.............. 43.

($62.4/t case)**.

CO2 Reduction Monetized Value 3%......................... 89.............. 88.............. 89.

($119/t case)**.

NOX Reduction Monetized Value 7%......................... 0.57............ 0.56............ 0.57.

(at $2,684/ton)**. 3%......................... 0.97............ 0.97............ 0.98.

Total Benefitsdagger....... 7% plus CO2 range.......... 46 to 127....... 44 to 125....... 48 to 129.

7%......................... 67.............. 65.............. 69.

3% plus CO2 range.......... 67 to 148....... 63 to 144....... 70 to 151.

3%......................... 88.............. 84.............. 91.

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Costs

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Incremental Equipment Costs.. 7%......................... 29.............. 40.............. 28.

3%......................... 37.............. 53.............. 36.

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Net Benefits/Costs

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Totaldagger................ 7% plus CO2 range.......... 17 to 98........ 4 to 85......... 19 to 101.

7%......................... 38.............. 25.............. 40.

3% plus CO2 range.......... 30 to 111....... 11 to 91........ 34 to 115.

3%......................... 51.............. 31.............. 55.

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* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019-2048. These

results include benefits to customers which accrue after 2048 from the products purchased in 2019-2048. Costs

incurred by manufacturers, some of which may be incurred in preparation for the rule, are not directly

included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, and

High Benefits Estimates utilize projections of energy prices and building growth (leading to higher shipments)

from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In addition, incremental

equipment costs reflect constant real prices for the Primary Estimate, an increase in projected equipment

price trends for the Low Benefits Estimate, and a decline rate in projected equipment price trends for the

High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.2.a.

** The CO2 values represent global monetized SCC values, in 2013$, in 2015 under several scenarios. The first

three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates,

respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3%

discount rate. The SCC time series incorporates an escalation factor. The value for NOX (in 2013$) is an

average value.\17\

dagger Total benefits for both the 3% and 7% cases are derived using the series corresponding to the average

SCC with a 3% discount rate ($40.5/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2

range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values

are added to the full range of CO2 values.

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Table I.5--Annualized Benefits and Costs of Proposed Energy Conservation Standards for SPVUs

EPCA baseline

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----------------------------------------------------------------------------------------------------------------

Discount rate Primary Low net benefits High net

estimate* estimate* benefits

estimate*

-----------------------------------------------------

million 2013$/year

----------------------------------------------------------------------------------------------------------------

Benefits

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Operating Cost Savings....... 7%......................... 80.............. 76.............. 83.

3%......................... 121............. 114............. 126.

CO2 Reduction Monetized Value 5%......................... 16.............. 16.............. 16.

($12.0/t case)**.

CO2 Reduction Monetized Value 3%......................... 58.............. 58.............. 59.

($40.5/t case)**.

CO2 Reduction Monetized Value 2.5%....................... 87.............. 87.............. 88.

($62.4/t case)**.

CO2 Reduction Monetized Value 3%......................... 181............. 181............. 182.

($119/t case)**.

NOX Reduction Monetized Value 7%......................... 1.2............. 1.2............. 1.2.

(at $2,684/ton)**.

3%......................... 2.0............. 2.0............. 2.0.

Total Benefitsdagger....... 7% plus CO2 range.......... 97 to 262....... 93 to 257....... 100 to 266.

7%......................... 139............. 135............. 143.

3% plus CO2 range.......... 139 to 305...... 132 to 297...... 144 to 311.

3%......................... 182............. 174............. 187.

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Costs

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Incremental Equipment Costs.. 7%......................... 60.............. 79.............. 58.

3%......................... 70.............. 97.............. 68.

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Net Benefits/Costs

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Totaldagger................ 7% plus CO2 range.......... 37 to 203....... 14 to 179....... 42 to 208.

7%......................... 80.............. 56.............. 85.

3% plus CO2 range.......... 68 to 234....... 35 to 199....... 76 to 243.

3%......................... 111............. 77.............. 119.

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* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019-2048. These

results include benefits to customers which accrue after 2048 from the products purchased in 2019-2048. Costs

incurred by manufacturers, some of which may be incurred in preparation for the rule, are not directly

included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, and

High Benefits Estimates utilize projections of energy prices and building growth (leading to higher shipments)

from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In addition, incremental

equipment costs reflect constant real prices for the Primary Estimate, an increase in projected equipment

price trends for the Low Benefits Estimate, and a decline rate in projected equipment price trends for the

High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.2.a.

** The CO2 values represent global monetized SCC values, in 2013$, in 2015 under several scenarios. The first

three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates,

respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3%

discount rate. The SCC time series incorporates an escalation factor. The value for NOX (in 2013$) is an

average value.\18\

dagger Total benefits for both the 3% and 7% cases are derived using the series corresponding to the average

SCC with a 3% discount rate ($40.5/t case). In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2

range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values

are added to the full range of CO2 values.

DOE has tentatively concluded that, based upon clear and convincing evidence, the proposed standards for the equipment classes with levels more stringent than those presented in ASHRAE Standard 90.1-2013 represent the maximum improvement in energy efficiency that is technologically feasible and economically justified, and would result in the significant conservation of energy.\19\ DOE further notes that products achieving these standard levels are already commercially available for all equipment classes covered by this proposal.\20\ Based on the analyses described above, DOE has tentatively concluded that the benefits of the proposed standards to the Nation (energy savings, positive NPV of customer benefits, customer LCC savings, and emission reductions) would outweigh the burdens (loss of INPV for manufacturers). DOE also considered higher energy efficiency levels as trial standard levels, and is still considering them in this rulemaking. However, DOE has tentatively concluded that the potential burdens of the higher energy efficiency levels would outweigh the projected benefits.

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\18\ The CO2 and NOX results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in NOX, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

\19\ DOE based this decision to set more stringent levels by using 2013 ASHRAE as the base case.

\20\ As shown in section 3.8, chapter 3 of the Technical Support Document, for equipment less than 65,000 Btu/h, there are 42 SPVAC models and 69 SPVHP models available at 11 EER or higher.

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For the four equipment classes for which no models are available on the market at all, or for which there are no models with efficiency above those levels presented in ASHRAE 90.1-2013, DOE is proposing to adopt the levels in ASHRAE Standard 90.1-2013, per the statutory directive.

Based on consideration of the public comments DOE receives in response to this NOPR and related information collected and analyzed during the course of this rulemaking effort, DOE may adopt energy efficiency levels presented in this NOPR that are either higher or lower than the proposed standards, or some combination of level(s) that incorporate the proposed standards in part.

Page 78621

As noted previously, in compliance with EPCA, DOE based its determination to adopt more stringent standards on an analysis comparing these proposed standards with ASHRAE 2013 as the base case. DOE presents Table I.5 as requested in OMB Circular A-4.

II. Introduction

The following section briefly discusses the statutory authority underlying this proposal, as well as some of the relevant historical background related to the establishment of standards for single package vertical air conditioners and single package vertical heat pumps.
Authority

Title III, Part C \21\ of the Energy Policy and Conservation Act of 1975 (``EPCA'' or ``the Act''), Pub. L. 94-163 (42 U.S.C. 6311-6317, as codified), added by Pub. L. 95-619, Title IV, Sec. 441(a), established the Energy Conservation Program for Certain Industrial Equipment, which includes the single package vertical air conditioners and single package vertical heat pumps that are the subjects of this rulemaking.\22\ In general, this program addresses the energy efficiency of certain types of commercial and industrial equipment. Relevant provisions of the Act specifically include definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), labelling provisions (42 U.S.C. 6315), and the authority to require information and reports from manufacturers (42 U.S.C. 6316).

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\21\ For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1.

\22\ All references to EPCA in this document refer to the statute as amended through the American Energy Manufacturing Technical Corrections Act, Pub. L. 112-210 (enacted December 18, 2012).

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EPCA contains mandatory energy conservation standards for commercial heating, air-conditioning, and water-heating equipment. (42 U.S.C. 6313(a)) Specifically, the statute sets standards for small, large, and very large commercial package air-conditioning and heating equipment, packaged terminal air conditioners (PTACs) and packaged terminal heat pumps (PTHPs), warm-air furnaces, packaged boilers, storage water heaters, instantaneous water heaters, and unfired hot water storage tanks. Id. In doing so, EPCA established Federal energy conservation standards that generally correspond to the levels in ASHRAE Standard 90.1, as in effect on October 24, 1992 (i.e., ASHRAE Standard 90.1-1989), for each type of covered equipment listed in 42 U.S.C. 6313(a). The Energy Independence and Security Act of 2007 (EISA 2007), Pub. L. 110-240, amended EPCA by adding definitions and setting minimum energy conservation standards for single package vertical air conditioners (SPVACs) and single package vertical heat pumps (SPVHPs). (42 U.S.C. 6313(a)(10)(A)) The efficiency standards for SPVACs and SPVHPs established by EISA 2007 correspond to the levels contained in ASHRAE Standard 90.1-2004, which originated as addendum ``d'' to ASHRAE Standard 90.1-2001.

EPCA requires that DOE must conduct a rulemaking to consider amended energy conservation standards for a variety of enumerated types of commercial heating, ventilating, and air-conditioning equipment (of which SPVACs and SPVHPs are a subset) each time ASHRAE Standard 90.1 is updated with respect to such equipment. (42 U.S.C. 6313(a)(6)(A)) Such review is to be conducted in accordance with the procedures established for ASHRAE equipment under 42 U.S.C. 6313(a)(6). According to 42 U.S.C. 6313(a)(6)(A), for each type of equipment, EPCA directs that if ASHRAE Standard 90.1 is amended, DOE must publish in the Federal Register an analysis of the energy savings potential of amended energy efficiency standards within 180 days of the amendment of ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA further directs that DOE must adopt amended standards at the new efficiency level in ASHRAE Standard 90.1, unless clear and convincing evidence supports a determination that adoption of a more-stringent level would produce significant additional energy savings and be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) In addition, DOE notes that pursuant to the EISA 2007 amendments to EPCA, under 42 U.S.C. 6313(a)(6)(C), the agency must periodically review its already-

established energy conservation standards for ASHRAE equipment. In December 2012, this provision was further amended by the American Energy Manufacturing Technical Corrections Act (AEMTCA) to clarify that DOE's periodic review of ASHRAE equipment must occur ``every six years.'' (42 U.S.C. 6313(a)(6)(C)(i))

AEMTCA also modified EPCA to specify that any amendment to the design requirements with respect to the ASHRAE equipment, would trigger DOE review of the potential energy savings under U.S.C. 6313(a)(6)(A)(i). Additionally, AEMTCA amended EPCA to require that if DOE proposes an amended standard for ASHRAE equipment at levels more stringent than those in ASHRAE Standard 90.1, DOE, in deciding whether a standard is economically justified, must determine, after receiving comments on the proposed standard, whether the benefits of the standard exceed its burdens by considering, to the maximum extent practicable, the following seven factors:

(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;

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

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

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

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

(6) The need for national energy conservation; and

(7) Other factors the Secretary considers relevant. (42 U.S.C. 6313(a)(6)(B)(ii))

EISA 2007 amended EPCA to provide an independent basis for a one-

time review regarding SPVUs that is not tied to the conditions for initiating review specified by 42 U.S.C. 6313(a)(6)(A) or 42 U.S.C. 6313(a)(6)(C) described previously. Specifically, pursuant to 42 U.S.C. 6313(a)(10)(B), DOE must commence review of the most recently published version of ASHRAE Standard 90.1 with respect to SPVU standards in accordance with the procedures established under 42 U.S.C. 6313(a)(6) no later than 3 years after the enactment of EISA 2007. DOE notes that this provision was not tied to the trigger of ASHRAE publication of an updated version of Standard 90.1 or to a 6-year period from the issuance of the last final rule, which occurred on March 7, 2009 (74 FR 12058). DOE was simply obligated to commence its review by a specified date.

Because ASHRAE did not update its efficiency levels for SPVACs and SPVHPs in ASHRAE Standard 90.1-2010, DOE began this rulemaking by analyzing amended standards consistent with the procedures defined under 42 U.S.C. 6313(a)(6)(C). Specifically, pursuant to 42 U.S.C. 6313(a)(6)(C)(i)(II), DOE, must use the procedures established under subparagraph (B) when issuing a NOPR. The statutory

Page 78622

provision at 42 U.S.C. 6313(a)(6)(B)(ii), recently amended by AEMTCA, states that in deciding whether a standard is economically justified, DOE must determine, after receiving comments on the proposed standard, whether the benefits of the standard exceed its burdens by considering, to the maximum extent practicable, the following seven factors, as stated previously.

However, before DOE could finalize this NOPR, ASHRAE acted on October 9, 2013 to adopt ASHRAE Standard 90.1-2013, and this revision did contain amended standard levels for SPVUs, thereby triggering DOE's statutory obligation under 42 U.S.C. 6313(a)(6)(A) to promulgate an amended uniform national standard at those levels unless DOE determines that there is clear and convincing evidence supporting the adoption of more-stringent energy conservation standards than the ASHRAE levels. Consequently, DOE prepared an analysis of the energy savings potential of amended standards at the ASHRAE Standard 90.1 levels (as required by 42 U.S.C. 6313(a)(6)(A)(i)) and updated this NOPR and accompanying analyses to reflect appropriate statutory provision, timelines, and compliance dates.

DOE has tentatively concluded that following this rulemaking process will provide ``clear and convincing evidence'' that for two equipment classes for which the proposed standards are more stringent than those set forth in ASHRAE Standard 90.1-2013 would result in significant additional conservation of energy and would be technologically feasible and economically justified, as mandated by 42 U.S.C. 6313(a)(6). For the other four equipment classes, DOE has tentatively concluded to adopt the levels set forth in ASHRAE Standard 90.1-2013.

EPCA, as codified, also contains what is known as an ``anti-

backsliding'' provision, which prevents the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States of any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6313(a)(6)(B)(iii)(II))

Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the customer 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 applicable test procedure.

Additionally, when a type or class of covered equipment such as ASHRAE equipment, has two or more subcategories, DOE often specifies more than one standard level. DOE generally will adopt a different standard level than that which applies generally to such type or class of products for any group of covered products that have the same function or intended use if DOE determines that products within such group: (A) Consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and which justifies a higher or lower standard. In determining whether a performance-related feature justifies a different standard for a group of products, DOE generally considers such factors as the utility to the customer of the feature and other factors DOE deems appropriate. In a rule prescribing such a standard, DOE includes an explanation of the basis on which such higher or lower level was established. DOE followed a similar process in the context of this rulemaking.
Background

Single package vertical units primarily serve modular classroom buildings in educational facilities; telecommonunications and electronics enclosures; and offices and other miscellaneous commercial buildings. In almost all of these commercial building applications, the buildings served are expected to be of modular construction, because SPVUs, as packaged air conditioners installed on external building walls, do not impact site preparation costs for modular buildings, which may be relocated multiple times over the building's life. The vertically-oriented configuration of SPVUs allows the building mounting to be unobtrusive and minimizes impacts on modular building transportation requirements. These advantages do not apply to a significant extent in site-constructed buildings.

1. Current Standards

As noted above, EISA 2007 amended EPCA to establish separate equipment classes and minimum energy conservation standards for SPVACs and SPVHPs. (42 U.S.C. 6313(a)(10)(A)) DOE published a final rule technical amendment in the Federal Register on March 23, 2009, which codified into DOE's regulations the new SPVAC and SPVHP pump equipment classes and energy conservation standards for this equipment as prescribed by EISA 2007. 74 FR 12058. These standards apply to all SPVUs manufactured on or after January 1, 2010. The current standards are set forth in Table II.1.

Table II.1--Current Federal Energy Conservation Standards for Single

Package Vertical Air Conditioners and Heat Pumps

------------------------------------------------------------------------

Cooling capacity Btu/

Equipment type h Efficiency level

------------------------------------------------------------------------

Single Package Vertical Air =65,000 Btu/h and EER = 8.9.

Conditioner. =135,000 Btu/h and EER = 8.6.

Conditioner. =65,000 Btu/h and EER = 8.9.

Pump. =135,000 Btu/h and EER = 8.6.

Pump. = 135,000 Btu/h and =65,000 and =135,000 and =65,000 and =135,000 and =65,000 and =135,000 and =65,000 and =135,000 and =135,000 Btu/h and =65,000 Btu/h and

=65,000 Btu/h and =65,000 Btu/h and =65,000 Btu/h and =65,000 Btu/h and =65,000 Btu/h and =65 SPVHP, >=65

Efficiency level -------------------------------- kBtu/h and 65,000 Btu/h.

See the engineering analysis for

additional details on selections of

efficiency levels and cost.

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DOE analyzed the EPCA and ASHRAE baseline efficiency levels (reflecting the efficiency levels in ASHRAE Standard 90.1-2013) and up to four higher efficiency levels for SPVUs On the right side of the screen under Aggregated, select 1990-current. (Last accessed March 26, 2014).

\67\ Energy Information Administration, Natural Gas Prices (Available at: http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PCS_DMcf_a.htm) (Last accessed February 13, 2014).

\68\ Energy Information Administration, Commercial Building Energy Consumption Survey 2003, CBECS Public Use Microdata Files (Available at: ) (Last accessed February 12, 2014).

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DOE weighted the electricity and natural gas consumption and prices each business type paid in each State by the estimated percentages of SPVU equipment in each business type and by the population in each State to obtain weighted-average national electricity and natural gas costs for 2013. The State/building-type weights reflect the probabilities that a given unit of SPVU equipment shipped will operate with a given fuel price. The original State-by-State average commercial prices range from approximately $0.074 per kWh to approximately $0.341 per kWh for electricity and from approximately $6.81 per MBtu to $43.36 per MBtu for natural gas. See chapter 8 of the NOPR TSD for further details.

The electricity and natural gas price trends provide the relative change in electricity and natural gas costs for future years. DOE used the AEO 2013 reference case to provide the default electricity and natural gas price scenarios. DOE extrapolated the trend in values at the Census Division level from 2025 to 2040 of the projection for all five building types to establish prices

Page 78642

beyond 2040 (see section IV.F.2.g). DOE provides a sensitivity analysis of the LCC savings and PBP results to different fuel price scenarios using both the AEO 2013 high-price and low-price projections in appendix 8-C of the NOPR TSD.
1. Maintenance Costs
  
  Maintenance costs are the costs to the consumer of ensuring continued equipment operation. Maintenance costs include services such as cleaning heat-exchanger coils and changing air filters. DOE estimated annual routine maintenance costs for SPVU air conditioners as $311 per year (2013$) for capacities up to 135,000 Btu/h. For heat pumps less than 65,000 Btu/h capacity, maintenance costs reported in the RS Means CostWorks 2013 database were $345 per year; costs were $414 per year for larger capacities. Because data were not available to indicate how maintenance costs vary with equipment efficiency, DOE used preventive maintenance costs that remain constant as equipment efficiency increases.
2. Repair Costs
  
  The repair cost is the cost to the customer of replacing or repairing components that have failed in the SPVU equipment. DOE estimated the one-time repair cost in RS Means as equivalent to those for small packaged rooftop units: $2,594 (2013$) for both air conditioners and heat pumps less than 65,000 Btu/h capacity, and $3,245 for larger units. Based on frequency and type of major repairs in the RS Means database, DOE assumed that the repair would be a one-time event at about year 10 of the equipment life that involved replacing the supply fan motor, compressor, some bearings, and refrigerant. DOE then annualized the present value of the cost over the average equipment life of 15 years to obtain an annualized equivalent repair cost. DOE determined that the materials portion of annualized repair costs would increase in direct proportion with increases in equipment prices, because the replacement parts would be similar to the more expensive original equipment that they replaced. Because the price of SPVU equipment increases with efficiency, the cost for component repair is also expected to increase as the efficiency of equipment increases. See chapter 8 of the NOPR TSD for details on the development of repair cost estimates.
3. Equipment Lifetime
  
  DOE defines ``equipment lifetime'' as the age when a unit of SPVU equipment is retired from service. DOE reviewed available literature to establish typical equipment lifetimes, which showed a wide range of lifetimes from 10 to 25 years. The data did not distinguish between classes of SPVU equipment. Consequently, DOE used a distribution of lifetimes between 10 and 25 years, with an average of 15 years based on a review of a range of packaged cooling equipment lifetime estimates found in published studies and online documents. DOE applied this distribution to all classes of SPVU equipment analyzed. Chapter 8 of the NOPR TSD contains a detailed discussion of equipment lifetimes.
4. Discount Rate
  
  The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE determined the discount rate by estimating the cost of capital for purchasers of SPVU equipment. Most purchasers use both debt and equity capital to fund investments. Therefore, for most purchasers, the discount rate is the weighted-average cost of debt and equity financing, or the weighted-
  
  average cost of capital (WACC), less the expected inflation.
  
  To estimate the WACC of SPVU equipment purchasers, DOE used a sample of more than 340 companies grouped to be representative of operators of each of five commercial business types (health care, education, telecommunications, temporary office, and general office,) drawn from a database of 7,766 U.S. companies presented on the Damodaran Online Web site.\69\ This database includes most of the publicly-traded companies in the United States. The WACC approach for determining discount rates accounts for the current tax status of individual firms on an overall corporate basis. DOE did not evaluate the marginal effects of increased costs, and, thus, depreciation due to more expensive equipment, on the overall tax status.
  
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  \69\ Damodaran financial data used for determining cost of capital is available at: http://pages.stern.nyu.edu/~adamodar/ for commercial businesses (Last accessed February 12, 2014).
  
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  DOE used the final sample of companies to represent purchasers of SPVU equipment. For each company in the sample, DOE derived the cost of debt, percentage of debt financing, and systematic company risk from information on the Damodaran Online Web site. Damodaran estimated the cost of debt financing from the nominal long-term Federal government bond rate and the standard deviation of the stock price. DOE then determined the weighted average values for the cost of debt, range of values, and standard deviation of WACC for each category of the sample companies. Deducting expected inflation from the cost of capital provided estimates of the real discount rate by ownership category.
  
  For most educational buildings and a portion of the office buildings occupied by public schools, universities, and State and local government agencies, DOE estimated the cost of capital based on a 40-
  
  year geometric mean of an index of long-term tax-exempt municipal bonds (>20 years).\70\ Federal office space was assumed to use the Federal bond rate, derived as the 40-year geometric average of long-term (>10 years) U.S. government securities.\71\
  
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  \70\ Federal Reserve Bank of St. Louis, State and Local Bonds--
  
  Bond Buyer Go 20-Bond Municipal Bond Index (Last accessed February 12, 2014 (Available at: http://research.stlouisfed.org/fred2/series/MSLB20/downloaddata?cid=32995).
  
  \71\ Rate calculated with 1973-2013 data. Data source: U.S. Federal Reserve (Last accessed February 12, 2014) (Available at: http://www.federalreserve.gov/releases/h15/data.htm).
  
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  Based on this database, DOE calculated the weighted-average, after-
  
  tax discount rate for SPVU equipment purchases, adjusted for inflation, in each of the five business types, which were allocated to the three building types used in the analysis based on estimated market shares of modular buildings used by each business type. The allocation percentages came from a combination of manufacturer interviews and industry data published by the Modular Buildings Institute.72 73 74 75
  
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  \72\ Modular Building Institute, State of the Industry 2006 (Available at: http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014).
  
  \73\ Modular Building Institute, Commercial Modular Construction Report 2008 (Available at: http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014).
  
  \74\ Modular Building Institute, Commercial Modular Construction Report 2009 (Available at: http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014).
  
  \75\ Modular Building Institute, Relocatable Buildings 2011 Annual Report (Available at: http://www.modular.org/HtmlPage.aspx?name=analysis) (March 6, 2014).
  
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  Chapter 8 of the NOPR TSD contains the detailed calculations related to discount rates.
  
  3. Payback Period
  
  DOE also determined the economic impact of potential amended energy conservation standards on consumers by calculating the PBP of more-
  
  stringent efficiency levels relative to the base-case efficiency levels. The PBP measures the amount of time it takes the commercial customer to recover the assumed higher purchase expense of more-
  
  efficient equipment through lower operating costs. Similar to the LCC, the PBP is
  
  Page 78643
  
  based on the total installed cost and the operating expenses for each building type and State, weighted on the probability of shipment to each market. Because the simple PBP does not take into account changes in operating expense over time or the time value of money, DOE considered only the first year's operating expenses to calculate the PBP, unlike the LCC, which is calculated over the lifetime of the equipment. Chapter 8 of the NOPR TSD provides additional details about the PBP.
National Impact Analysis

The national impact analysis (NIA) evaluates the effects of a considered energy conservation standard from a national perspective rather than from the customer perspective represented by the LCC. This analysis assesses the net present value (NPV) (future amounts discounted to the present) and the national energy savings (NES) of total commercial consumer costs and savings that are expected to result from amended standards at specific efficiency levels.

The NES refers to cumulative energy savings for the lifetime of units shipped from 2019 through 2048. DOE calculated energy savings in each year relative to a base case, defined as DOE adoption of the efficiency levels specified by ASHRAE Standard 90.1-2013. DOE also calculated energy savings from adopting efficiency levels specified by ASHRAE Standard 90.1-2013 compared to the EPCA base case (i.e., the current Federal standards) for units shipped from 2015 through 2044. The NPV refers to cumulative monetary savings. DOE calculated net monetary savings in each year relative to the base case (ASHRAE Standard 90.1-2013) as the difference between total operating cost savings and increases in total installed cost. DOE accounted for operating cost savings until 2068, when the equipment installed in the 30th year after the compliance date of the amended standards should be retired. Cumulative savings are the sum of the annual NPV over the specified period.

1. Approach

The NES and NPV are a function of the total number of units in use and their efficiencies. Both the NES and NPV depend on annual shipments and equipment lifetime. Both calculations start by using the shipments estimate and the quantity of units in service derived from the shipments model.

To make the analysis more transparent to all interested parties, DOE used a spreadsheet tool, available on DOE's Web site,\76\ to calculate the energy savings and the national economic costs and savings from potential amended standards. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet.

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\76\ DOE's Web page on SPVUs can be found at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/35.

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Unlike the LCC analysis, the NES spreadsheet does not use distributions for inputs or outputs, but relies on national average equipment costs and energy costs developed from the LCC spreadsheet. DOE used the NES spreadsheet to perform calculations of energy savings and NPV using the annual energy consumption and total installed cost data from the LCC analysis. For efficiency levels higher than ASHRAE, DOE projected the energy savings, energy cost savings, equipment costs, and NPV of benefits for equipment sold in each SPVU class from 2019 through 2048. For the ASHRAE level, DOE project energy savings for equipment sold from 2015 through 2044. DOE does not calculate economic benefits for the ASHRAE level because it is statutorily required to use the ASHRAE level as the baseline. The projection provided annual and cumulative values for all four output parameters described above.
1. National Energy Savings
  
  DOE calculated the NES associated with the difference between the per-unit energy use under a standards-case scenario and the per-unit energy use in the base case. The average energy per unit used by the SPVUs in service gradually decreases in the standards case relative to the base case because more-efficient SPVUs are expected to gradually replace less-efficient ones.
  
  Unit energy consumption values for each equipment class are taken from the LCC spreadsheet for each efficiency level and weighted based on market efficiency distributions. To estimate the total energy savings for each efficiency level, DOE first calculated the delta unit energy consumption (i.e., the difference between the energy directly consumed by a unit of equipment in operation in the base case and the standards case) for each class of SPVUs for each year of the analysis period. The analysis period begins with the earliest expected compliance date of amended energy conservation standards (i.e., 2015), assuming DOE adoption of the baseline ASHRAE Standard 90.1-2013 efficiency levels. For the analysis of DOE's potential adoption of more-stringent efficiency levels, the analysis period does not begin until the compliance date of 2019, four years after DOE would likely issue a final rule requiring such standards. Second, DOE determined the annual site energy savings by multiplying the stock of each equipment class by vintage (i.e., year of shipment) by the delta unit energy consumption for each vintage (from step one). As mentioned in section IV.E, this includes an increase in gas usage for some SPVAC units sold with gas furnaces (where fan power was reduced to achieve higher efficiency levels). Third, DOE converted the annual site electricity savings into the annual amount of energy saved at the source of electricity generation (the source or primary energy), using a time series of conversion factors derived from the latest version of EIA's National Energy Modeling System (NEMS). Finally, DOE summed the annual primary energy savings for the lifetime of units shipped over a 30-year period to calculate the total NES. DOE performed these calculations for each efficiency level considered for SPVUs in this rulemaking.
  
  DOE has historically presented NES in terms of primary energy savings. In response to the recommendations of a committee on ``Point-
  
  of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards'' appointed by the National Academy of Science, DOE announced its intention to use full-fuel-cycle (FFC) measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (August 18, 2011). While DOE stated in that notice that it intended to use the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model to conduct the analysis, it also said it would review alternative methods, including the use of NEMS. After evaluating both models and the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in the Federal Register in which DOE explained its determination that NEMS is a more appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (August 17, 2012). DOE received one comment, which was supportive of the use of NEMS for DOE's FFC analysis.\77\
  
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  \77\ Docket ID: EERE-2010-BT-NOA-0028, comment by Kirk Lundblade.
  
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  The approach used for the NOPR, and the FFC multipliers that were applied, are described in appendix 10A of the NOPR TSD. NES results are presented in
  
  Page 78644
  
  both primary and FFC savings in section V.B.3.a.
  
  DOE considered whether a rebound effect is applicable in its NES analysis for SPVUs. A rebound effect occurs when an increase in equipment efficiency leads to increased demand for its service. For example, when a consumer realizes that a more-efficient air conditioner will lower the electricity bill, that person may opt for increased comfort in the home by lowering the temperature, thereby returning a portion of the energy cost savings. The NEMS model assumes an efficiency rebound to account for an increased demand for service due to the increase in cooling (or heating) efficiency.\78\ For the SPVU market, there are two ways that a rebound effect could occur: (1) Increased use of the air-conditioning equipment within the commercial buildings in which such units are installed; and (2) additional instances of air-conditioning of spaces that were not being cooled before. Because SPVUs are a commercial appliance, the person owning the equipment (i.e., the building owner) is usually not the person operating the equipment (i.e., the renter). Because the operator usually does not own the equipment, that person will not have the operating cost information necessary to influence their operation of the equipment. Therefore, DOE believes that the first instance is unlikely to occur. Similarly, the second instance is unlikely because a small change in efficiency is insignificant among the factors that determine how much floor space will be air-conditioned.
  
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  \78\ An overview of the NEMS model and documentation is found at: www.eia.doe.gov/oiaf/aeo/overview/index.html.
  
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  Issue 11: DOE seeks comment on whether a rebound effect should be included in the determination of annual energy savings. If a rebound effect should be included, DOE seeks data to assist in calculation of the rebound effect.
2. Net Present Value
  
  To estimate the NPV, DOE calculated the net impact as the difference between total operating cost savings and increases in total installed costs. DOE calculated the NPV of each considered standard level over the life of the equipment using the following three steps.
  
  First, DOE determined the difference between the equipment costs under the standard-level case and the base case in order to obtain the net equipment cost increase resulting from the higher standard level. As noted in section IV.F.2.a, DOE used a constant price assumption as the default price forecast; the cost to manufacture a given unit of higher efficiency neither increases nor decreases over time. In addition, DOE considered two alternative price trends in order to investigate the sensitivity of the results to different assumptions regarding equipment price trends. One of these used an exponential fit on the deflated Producer Price Index (PPI) for all other miscellaneous refrigeration and air-conditioning equipment, and the other is based on the ``deflator--other durables excluding medical'' that was forecasted for AEO 2013. The derivation of these price trends is described in appendix 10B of the NOPR TSD.
  
  Second, DOE determined the difference between the base-case operating costs and the standard-level operating costs in order to obtain the net operating cost savings from each higher efficiency level. Third, DOE determined the difference between the net operating cost savings and the net equipment cost increase in order to obtain the net savings (or expense) for each year. DOE then discounted the annual net savings (or expenses) to 2014 for SPVUs bought on or after 2019 and summed the discounted values to provide the NPV for an efficiency level.
  
  In accordance with the OMB's guidelines on regulatory analysis,\79\ DOE calculated NPV using both a 7-percent and a 3-percent real discount rate. The 7-percent rate is an estimate of the average before-tax rate of return on private capital in the U.S. economy. DOE used this discount rate to approximate the opportunity cost of capital in the private sector, because recent OMB analysis has found the average rate of return on capital to be near this rate. DOE used the 3-percent rate to capture the potential effects of standards on private consumption (e.g., through higher prices for products and reduced purchases of energy). This rate represents the rate at which society discounts future consumption flows to their present value. This rate can be approximated by the real rate of return on long-term government debt (i.e., yield on United States Treasury notes minus annual rate of change in the Consumer Price Index), which has averaged about 3 percent on a pre-tax basis for the past 30 years.
  
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  \79\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at: www.whitehouse.gov/omb/circulars_a004_a-4.)
  
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  2. Shipments Analysis
  
  In its shipments analysis, DOE developed shipment projections for SPVUs and, in turn, calculated equipment stock over the course of the analysis period. DOE used the shipments projection and the equipment stock to determine the NES. In order to account for the analysis periods of both the ASHRAE level and higher efficiency levels, the shipments portion of the spreadsheet model projects SPVU shipments from 2015 through 2048.
  
  To develop the shipments model, DOE started with 2005 shipment estimates from the Air-Conditioning and Refrigeration Institute (ARI, now AHRI) for units less than 65,000 Btu/h as published in a previous rulemaking,\80\ as more recent data are not available. DOE added additional shipments for SPVACs greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, which make up 3 percent of the market, based on manufacturer interviews. As there are no models on the market for SPVHP greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, or for any SPVUs greater than or equal to 135,000 Btu/h, DOE did not develop shipment estimates (or generate NES and NPV) for these equipment classes. See chapter 9 of the NOPR TSD for more details on the initial shipment estimates by equipment class that were used as the basis for the shipments projections discussed below.
  
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  \80\ U.S. Department of Energy--Office of Energy Efficiency and Renewable Energy, Technical Support Document: Energy Efficiency Program for Commercial and Industrial Equipment: Efficiency Standards for Commercial Heating, Air-Conditioning, and Water Heating Equipment Including Packaged Terminal Air-Conditioners and Packaged Terminal Heat Pumps, Small Commercial Packaged Boiler, Three-Phase Air-Conditioners and Heat Pumps ) (Last accessed April 3, 2013).
  
  \89\ Hoovers bond Company Information bond Industry Information bond Lists, D&B (2013) (Available at: http://www.hoovers.com/) (Last accessed April 3, 2013).
  
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  In phase 2 of the MIA, DOE prepared an industry cash-flow analysis to quantify the potential impacts of an amended energy conservation standard. In general, new or more-stringent energy conservation standards can affect manufacturer cash flow in three distinct ways: (1) Create a need for increased investment; (2) raise production costs per unit; and (3) alter revenue due to higher per-unit prices and possible changes in sales volumes.
  
  In phase 3 of the MIA, DOE conducted structured, detailed interviews with a representative cross-section of manufacturers. During these interviews, DOE discussed engineering, manufacturing, procurement, and financial topics to validate assumptions used in the GRIM and to identify key issues or concerns. See section IV.I.3 for a description of the key issues manufacturers raised during the interviews.
  
  Additionally, in phase 3, DOE evaluates subgroups of manufacturers that may be disproportionately impacted by standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash-flow analysis. For example, small manufacturers, niche players, or manufacturers exhibiting a cost structure that largely differs from the industry average could be more negatively affected. Thus, during Phase
  
  Page 78647
  
  3, DOE analyzed small manufacturers as a subgroup.
  
  The Small Business Administration (SBA) defines a small business for North American Industry Classification System (NAICS) code 333415, ``Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing,'' as having 750 employees or fewer. During its research, DOE identified one domestic company which manufactures equipment covered by this rulemaking and qualifies as a small business under the SBA definition. The small business subgroup is discussed in section VI.B of the preamble, and in chapter 12 of the NOPR TSD.
  
  2. GRIM Analysis
  
  As discussed previously, DOE uses the GRIM to quantify the changes in cash flow that result in a higher or lower industry value due to amended energy conservation standards. The GRIM analysis uses a discounted cash-flow methodology that incorporates manufacturer costs, markups, shipments, and industry financial information as inputs. The GRIM models changes in costs, distribution of shipments, investments, and manufacturer margins that could result from amended energy conservation standards. The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, beginning in 2014 (the base year of the analysis) and continuing to 2048. DOE calculated INPVs by summing the stream of annual discounted cash flows during this period. DOE applied a discount rate of 10.4 percent, which was derived from industry financials and then modified according to feedback received during manufacturer interviews.
  
  The GRIM calculates cash flows using standard accounting principles and compares changes in INPV between the base case and each TSL (the standards case). Essentially, the difference in INPV between the base case and a standards case represents the financial impact of the amended energy conservation standard on manufacturers. Additional details about the GRIM, the discount rate, and other financial parameters can be found in chapter 12 of the NOPR TSD.
3. GRIM Key Inputs
4. Manufacturer Production Costs
  
  Manufacturing a higher-efficiency product is typically more expensive than manufacturing a baseline product due to the use of more expensive components and larger quantities of raw materials. The changes in the manufacturer production cost (MPC) of the analyzed products can affect revenues, gross margins, and cash flow of the industry, making these product cost data key GRIM inputs for DOE's analysis.
  
  In the MIA, DOE used the MPCs for each considered efficiency level calculated in the engineering analysis, as described in section IV.C and further detailed in chapter 5 of the NOPR TSD. In addition, DOE used information from its teardown analysis, described in section IV.C, to disaggregate the MPCs into material, labor, and overhead costs. To calculate the MPCs for products higher than the baseline, DOE added the incremental material, labor, and overhead costs from the engineering cost-efficiency curves to the baseline MPCs. These cost breakdowns and product mark-ups were revised based on manufacturer comments received during MIA interviews.
  
  ii. Shipments Forecast
  
  The GRIM estimates manufacturer revenues based on total unit shipment forecasts and the distribution of shipments by equipment class. For the base-case analysis, the GRIM uses the NIA base-case shipments forecasts from 2014 (the base year for the MIA analysis) to 2048 (the last year of the analysis period). In the shipments analysis, DOE estimates the distribution of efficiencies in the base case for all equipment classes. See section IV.G.2 for additional details.
  
  For the standards-case shipment forecast, the GRIM uses the NIA standards-case shipment forecasts. The NIA assumes that product efficiencies in the base case that do not meet the energy conservation standard in the standards case ``roll up'' to meet the amended standard in the standard year. See section IV.G.2, above, for additional details.
  
  iii. Product and Capital Conversion Costs
  
  Amended energy conservation standards would cause manufacturers to incur one-time conversion costs to make necessary changes to their production facilities and bring product designs into compliance. DOE evaluated the level of conversion-related expenditures that would be needed to comply with each considered efficiency level in each equipment class. For the purpose of the MIA, DOE classified these conversion costs into two major groups: (1) Product conversion costs; and (2) capital conversion costs. Product conversion costs are one-time investments in research, development, testing, and marketing, focused on making product designs comply with the amended energy conservation standard. Capital conversion costs are one-time investments in property, plant, and equipment to adapt or change existing production facilities so that amended equipment designs can be fabricated and assembled.
  
  To determine the level of capital conversion expenditures manufacturers would incur to comply with amended energy conservation standards, DOE gathered data on the level of capital investment required at each efficiency level during manufacturer interviews. DOE validated manufacturer comments through estimates of capital expenditure requirements derived from the product teardown analysis and engineering model described in section IV.C.
  
  DOE assessed the product conversion costs at each considered efficiency level by integrating data from quantitative and qualitative sources. DOE considered market-share-weighted feedback from multiple manufacturers to determine conversion costs, such as R&D expenditures, at each efficiency level. Manufacturer numbers were aggregated to better reflect the industry as a whole and to protect confidential information.
  
  In general, DOE assumes that all conversion-related investments occur between the year of publication of the final rule and the year by which manufacturers must comply with the standard. The investment figures used in the GRIM can be found in section V.B.2 of the preamble. For additional information on the estimated product conversion and capital conversion costs, see chapter 12 of the NOPR TSD.
5. GRIM Scenarios
6. Markup Scenarios
  
  As discussed previously, manufacturer selling prices (MSPs) include direct manufacturing production costs (i.e., labor, materials, and overhead estimated in DOE's MPCs) and all non-production costs (i.e., SG&A, R&D, and interest), along with profit. To calculate the MSPs in the GRIM, DOE applied non-production cost markups to the MPCs estimated in the engineering analysis for each equipment class and efficiency level. Modifying these markups in the standards case yields different sets of impacts on manufacturers. For the MIA, DOE modeled two standards-case markup scenarios to represent the uncertainty regarding the potential impacts on prices and profitability for manufacturers following the implementation of amended energy conservation standards: (1) A
  
  Page 78648
  
  preservation of gross margin percentage; and (2) a preservation of operating profit. These scenarios lead to different markup values which, when applied to the input MPCs, result in varying revenue and cash flow impacts.
  
  Under the preservation-of-gross-margin-percentage scenario, DOE applied a single uniform ``gross margin percentage'' markup across all efficiency levels. As production costs increase with efficiency, this scenario implies that the absolute dollar markup will increase as well. DOE assumed the non-production cost markup--which includes SG&A expenses, research and development expenses, interest, and profit--to be 1.28 for SPVU equipment. This markup is consistent with the one DOE assumed in the base case for the GRIM. Manufacturers tend to believe it is optimistic to assume that they would be able to maintain the same gross margin percentage markup as their production costs increase. Therefore, DOE assumes that this scenario represents a high bound to industry profitability under an amended energy conservation standard.
  
  In the preservation-of-operating-profit scenario, as the cost of production goes up under a standards case, manufacturers are generally required to reduce their markups to a level that maintains base-case operating profit. DOE implemented this scenario in the GRIM by lowering the manufacturer markups at each TSL to yield approximately the same earnings before interest and taxes in the standards case as in the base case in the year after the compliance date of the amended standards. The implicit assumption behind this markup scenario is that the industry can only maintain its operating profit in absolute dollars after the standard.
  
  3. Manufacturer Interviews
  
  As part of the MIA, DOE discussed potential impacts of standards with three manufacturers of SPVUs. The interviewed manufacturers account for over 90 percent of the domestic SPVU market. In interviews, DOE asked manufacturers to describe their major concerns about this rulemaking. The following section highlights manufacturers' most significant concerns.
7. Size Constraints
  
  Manufacturers noted that higher efficiency standards could force them to increase the size of their SPVU equipment to levels that are not acceptable to their customers. The manufacturers stated that some critical design options, such as increasing the amount of heat exchanger surface area, would necessitate an increase in cabinet size and footprint. For example, in the modular classroom and modular office markets, any additional floor space taken up by a larger SPVU could not be used by students and tenants. In the telecom market, manufacturers noted that telecom operators have standard-sized telecom shelters and current SPVU designs already make use of all available wall space. Any increase in size would force their customers to redesign the layout of the shelters and the complex telecommunications electronics housed therein. These size constraints would affect manufacturers if the amended standards are increased beyond the levels set in ASHRAE Standard 90.1-2013.
  
  According to manufacturers, a change in cabinet size would be particularly problematic in the replacement market. Amended designs may no longer physically fit into existing installation locations. Some examples include units that are too wide to fit through standard-width doorways, that are too tall for the standard ceiling heights, and that protrude too far into classrooms or offices. Aside from the physical space constraints, manufacturers are concerned that air vents and wall plenums would no longer align. The use of sleeves or adaptors to reroute air flow would be unsightly, take up valuable space, and affect air flow in a manner that reduces product efficiency.
8. Alternative Products
  
  Multiple manufacturers stated that a large increase in efficiency could lead to price increases that would cause their customers to consider alternative products, such as unitary systems or commercial roof top units. The manufacturers argued that these systems are often less convenient for end-users due to the need for extensive duct work, the use of long refrigerant lines, and/or the reduced ability to control the flow of fresh air. These manufacturers were concerned that an increase in the energy conservation standard would raise the SPVU prices to the point where end-users would accept the drawbacks of alternative products. DOE did not receive any quantitative comments on the price point at which unitary systems and commercial systems typically become cost-competitive alternatives.
9. Compliance Tolerances
  
  Two manufacturers stated concerns about the tolerances required by compliance testing. They argued that SPVU manufacturers have no control over the variability in the performance of purchased components (such as compressors) or the variability of instrumentation within different test laboratories. As a result, the manufacturers stated that it is unrealistic for DOE to expect their products could test within the narrow confidence limits set forth at 10 CFR 429.43.
10. Constrained Innovation and Customization
  
  Multiple manufacturers noted that complying with more-stringent energy conservation standards would draw time, resources, and focus away from innovation, customization, and customer responsiveness. Manufacturers believe that the design, engineering, and testing resources used to comply with amended standards would be better invested in developing features requested by their customers. Furthermore, multiple manufacturers stated that higher standards push manufacturers toward similar designs. Manufacturers argued that DOE's energy conservation standards constrain their ability to customize products in ways that maximize efficiency based on the end user's specific use-case.
Emissions Analysis

In the emissions analysis, DOE estimates the reduction in power sector emissions of carbon dioxide (CO2), nitrogen oxides (NOX), sulfur dioxide (SO2), and mercury (Hg) from amended energy conservation standards for the considered SPVU equipment. In addition, DOE estimates emissions impacts in production activities (extracting, processing, and transporting fuels) that provide the energy inputs to power plants. These are referred to as ``upstream'' emissions. Together, these emissions account for the full-

fuel-cycle (FFC). In accordance with DOE's FFC Statement of Policy (76 FR 51281 (August 18, 2011)), this FFC analysis includes impacts on emissions of methane (CH4) and nitrous oxide (N2O), both of which are recognized as greenhouse gases.

DOE primarily conducted the emissions analysis using emissions factors for CO2 and most of the other gases derived from data in AEO 2013.\90\

Page 78649

Combustion emissions of CH4 and N2O were estimated using emissions intensity factors published by the Environmental Protection Agency (EPA) through its GHG Emissions Factors Hub.\91\ DOE developed separate emissions factors for power sector emissions and upstream emissions. DOE also calculated site and upstream emissions from the additional use of natural gas associated with some of the SPVU efficiency levels. The method that DOE used to derive emissions factors is described in chapter 13 of the NOPR TSD.

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\90\ Emissions factors based on the Annual Energy Outlook 2014 (AEO 2014), which became available too late for incorporation into this analysis, indicate that a significant decrease in the cumulative emission reductions of carbon dioxide and most other pollutants can be expected if the projections of power plant utilization assumed in AEO 2014 are realized. For example, the estimated amount of cumulative emission reductions of CO2 is expected to decrease by 33% from DOE's current estimate based on the projections in AEO 2014 relative to AEO 2013. The monetized benefits from GHG reductions would likely decrease by a comparable amount. DOE plans to use emissions factors based on the most recent AEO available for the next phase of this rulemaking, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

\91\ See: http://www.epa.gov/climateleadership/inventory/ghg-emissions.html.

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For CH4 and N2O, DOE calculated emissions reduction in tons and also in terms of units of carbon dioxide equivalent (CO2eq). Gases are converted to CO2eq by multiplying the physical units by the gas's global warming potential (GWP) over a 100-year time horizon. Based on the Fifth Assessment Report of the Intergovernmental Panel on Climate Change,\92\ DOE used GWP values of 28 for CH4 and 265 for N2O.

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\92\ IPCC, 2013: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.). Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. Chapter 8.

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EIA prepares the Annual Energy Outlook using NEMS. Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. AEO 2013 generally represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of December 31, 2012.

SO2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap-and-trade programs. Title IV of the Clean Air Act sets an annual emissions cap on SO2 for affected EGUs in the 48 contiguous States and the District of Columbia (DC). SO2 emissions from 28 eastern States and DC were also limited under the Clean Air Interstate Rule (CAIR; 70 FR 25162 (May 12, 2005)), which created an allowance-based trading program that operates along with the Title IV program. CAIR was remanded to the U.S. Environmental Protection Agency (EPA) by the U.S. Court of Appeals for the District of Columbia Circuit, but it remained in effect. See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008; North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). In 2011 EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the D.C. Circuit issued a decision to vacate CSAPR.\93\ The court ordered EPA to continue administering CAIR. The emissions factors used for this NOPR, which are based on AEO 2013, assume that CAIR remains a binding regulation through 2040.\94\

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\93\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 (D.C. Cir. 2012).

\94\ On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit and remanded the case for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain States due to their impacts in other downwind States was based on a permissible, workable, and equitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. See EPA v. EME Homer City Generation, No 12-1182, slip op. at 32 (U.S. April 29, 2014). Because DOE is using emissions factors based on AEO 2013 for this NOPR, the analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of SO2 emissions.

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The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO2 emissions covered by the existing cap-and-trade system, but it concluded that negligible reductions in power sector SO2 emissions would occur as a result of standards.

Beginning around 2016, however, SO2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the final MATS rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for SO2 (a non-HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and non-HAP acid gas; thus, SO2 emissions will be reduced as a result of the control technologies installed on coal-fired power plants to comply with the MATS requirements for acid gas. AEO 2013 assumes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 2016. Both technologies, which are used to reduce acid gas emissions, also reduce SO2 emissions. Under the MATS, emissions will be far below the cap that would be established by CAIR, so it is unlikely that excess SO2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO2 emissions by any regulated EGU. Therefore, DOE believes that energy efficiency standards will reduce SO2 emissions in 2016 and beyond.

CAIR established a cap on NOX emissions in 28 eastern States and the District of Columbia.\95\ Energy conservation standards are expected to have little effect on NOX emissions in those States covered by CAIR because excess NOX emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NOX emissions. However, standards would be expected to reduce NOX emissions in the States not affected by the caps, so DOE estimated NOX emissions reductions from the standards considered in the NOPR for these States.

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\95\ CSAPR also applies to NOX and it would supersede the regulation of NOX under CAIR. As stated previously, the current analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR with regard to DOE's analysis of NOX emissions is slight.

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The MATS limit mercury emissions from power plants, but they do not include emissions caps, and as such, DOE's energy conservation standards would likely reduce Hg emissions. DOE estimated mercury emissions reduction using emissions factors based on AEO 2013, which incorporates MATS.
Monetizing Carbon Dioxide and Other Emissions Impacts

As part of the development of this NOPR, DOE considered the estimated monetary benefits from the reduced emissions of CO2 and NOX that are expected to result from each of the considered efficiency levels. In order to make this calculation similar to the calculation of the NPV of customer benefit, DOE considered the reduced emissions expected to result over the lifetime of products shipped in the forecast period for each efficiency level. This section summarizes the basis for the monetary values used for CO2 and NOX emissions and presents the values considered in this rulemaking.

For this NOPR, DOE is relying on a set of values for the social cost of carbon (SCC) that was developed by an interagency process. A summary of the basis for those values is provided in the

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following subsection, and a more detailed description of the methodologies used is provided as an appendix to chapter 14 of the NOPR TSD.

1. Social Cost of Carbon

The SCC is an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year. It is intended to include (but is not limited to) changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services. Estimates of the SCC are provided in dollars per metric ton of carbon dioxide. A domestic SCC value is meant to reflect the value of damages in the United States resulting from a unit change in carbon dioxide emissions, while a global SCC value is meant to reflect the value of damages worldwide.

Under section 1(b)(6) of Executive Order 12866, ``Regulatory Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to the extent permitted by law, assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. The purpose of the SCC estimates presented here is to allow agencies to incorporate the monetized social benefits of reducing CO2 emissions into cost-benefit analyses of regulatory actions. The estimates are presented with an acknowledgement of the many uncertainties involved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts.

As part of the interagency process that developed the SCC estimates, technical experts from numerous agencies met on a regular basis to consider public comments, explore the technical literature in relevant fields, and discuss key model inputs and assumptions. The main objective of this process was to develop a range of SCC values using a defensible set of input assumptions grounded in the existing scientific and economic literatures. In this way, key uncertainties and model differences transparently and consistently inform the range of SCC estimates used in the rulemaking process.
1. Monetizing Carbon Dioxide Emissions
  
  When attempting to assess the incremental economic impacts of carbon dioxide emissions, the analyst faces a number of challenges. A recent report from the National Research Council points out that any assessment will suffer from uncertainty, speculation, and lack of information about: (1) Future emissions of greenhouse gases; (2) the effects of past and future emissions on the climate system; (3) the impact of changes in climate on the physical and biological environment; and (4) the translation of these environmental impacts into economic damages. As a result, any effort to quantify and monetize the harms associated with climate change will raise questions of science, economics, and ethics and should be viewed as provisional.
  
  Despite the limits of both quantification and monetization, SCC estimates can be useful in estimating the social benefits of reducing carbon dioxide emissions. The agency can estimate the benefits from reduced emissions in any future year by multiplying the change in emissions in that year by the SCC value appropriate for that year. The net present value of the benefits can then be calculated by multiplying the future benefits by an appropriate discount factor and summing across all affected years.
  
  It is important to emphasize that the interagency process is committed to updating these estimates as the science and economic understanding of climate change and its impacts on society improves over time. In the meantime, the interagency group will continue to explore the issues raised by this analysis and consider public comments as part of the ongoing interagency process.
2. Development of Social Cost of Carbon Values
  
  In 2009, an interagency process was initiated to offer a preliminary assessment of how best to quantify the benefits from reducing carbon dioxide emissions. To ensure consistency in how benefits are evaluated across agencies, the Administration sought to develop a transparent and defensible method, specifically designed for the rulemaking process, to quantify avoided climate change damages from reduced CO2 emissions. The interagency group did not undertake any original analysis. Instead, it combined SCC estimates from the existing literature to use as interim values until a more comprehensive analysis could be conducted. The outcome of the preliminary assessment by the interagency group was a set of five interim values: global SCC estimates for 2007 (in 2006$) of $55, $33, $19, $10, and $5 per metric ton of CO2. These interim values represented the first sustained interagency effort within the U.S. government to develop an SCC for use in regulatory analysis. The results of this preliminary effort were presented in several proposed and final rules.
3. Current Approach and Key Assumptions
  
  After the release of the interim values, the interagency group reconvened on a regular basis to generate improved SCC estimates. Specifically, the group considered public comments and further explored the technical literature in relevant fields. The interagency group relied on three integrated assessment models commonly used to estimate the SCC: the FUND, DICE, and PAGE models. These models are frequently cited in the peer-reviewed literature and were used in the last assessment of the Intergovernmental Panel on Climate Change. Each model was given equal weight in the SCC values that were developed.
  
  Each model takes a slightly different approach to model how changes in emissions result in changes in economic damages. A key objective of the interagency process was to enable a consistent exploration of the three models while respecting the different approaches to quantifying damages taken by the key modelers in the field. An extensive review of the literature was conducted to select three sets of input parameters for these models: climate sensitivity, socio-economic and emissions trajectories, and discount rates. A probability distribution for climate sensitivity was specified as an input into all three models. In addition, the interagency group used a range of scenarios for the socio-economic parameters and a range of values for the discount rate. All other model features were left unchanged, relying on the model developers' best estimates and judgments.
  
  The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from three integrated assessment models, at discount rates of 2.5 percent, 3 percent, and 5 percent. The fourth set, which represents the 95th-percentile SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from climate change further out in the tails of the SCC distribution. The values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 percent to 23 percent should be used to adjust the global SCC to calculate domestic effects, although preference is given to consideration of the global benefits of reducing CO2 emissions.
  
  Page 78651
  
  Table IV.9 presents the values in the 2010 interagency group report,\96\ which is reproduced in appendix 14-A of the NOPR TSD.
  
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  \96\ Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. Interagency Working Group on Social Cost of Carbon, United States Government (February 2010) (Available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).
  
  Table IV.9--Annual SCC Values From 2010 Interagency Report, 2010-2050
  
  In 2007 dollars per metric ton CO2
  
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  Discount rate %
  
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  5 3 2.5 3
  
  Year ---------------------------------------------------------------
  
  95th
  
  Average Average Average percentile
  
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  2010............................................ 4.7 21.4 35.1 64.9
  
  2015............................................ 5.7 23.8 38.4 72.8
  
  2020............................................ 6.8 26.3 41.7 80.7
  
  2025............................................ 8.2 29.6 45.9 90.4
  
  2030............................................ 9.7 32.8 50.0 100.0
  
  2035............................................ 11.2 36.0 54.2 109.7
  
  2040............................................ 12.7 39.2 58.4 119.3
  
  2045............................................ 14.2 42.1 61.7 127.8
  
  2050............................................ 15.7 44.9 65.0 136.2
  
  ----------------------------------------------------------------------------------------------------------------
  
  The SCC values used for the NOPR were generated using the most recent versions of the three integrated assessment models that have been published in the peer-reviewed literature.\97\ (See appendix 14-B of the NOPR TSD for further information.) Table IV.10 shows the updated sets of SCC estimates in five year increments from 2010 to 2050. Appendix 14-B of the NOPR TSD provides the full set of SCC estimates. The central value that emerges is the average SCC across models at the 3 percent discount rate. However, for purposes of capturing the uncertainties involved in regulatory impact analysis, the interagency group emphasizes the importance of including all four sets of SCC values.
  
  ---------------------------------------------------------------------------
  
  \97\ Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; revised November 2013) (Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
  
  Table IV.10--Annual SCC Values From 2013 Interagency Update, 2010-2050
  
  In 2007 dollars per metric ton CO2
  
  ----------------------------------------------------------------------------------------------------------------
  
  Discount rate %
  
  ---------------------------------------------------------------
  
  5 3 2.5 3
  
  Year ---------------------------------------------------------------
  
  95th
  
  Average Average Average percentile
  
  ----------------------------------------------------------------------------------------------------------------
  
  2010............................................ 11 32 51 89
  
  2015............................................ 11 37 57 109
  
  2020............................................ 12 43 64 128
  
  2025............................................ 14 47 69 143
  
  2030............................................ 16 52 75 159
  
  2035............................................ 19 56 80 175
  
  2040............................................ 21 61 86 191
  
  2045............................................ 24 66 92 206
  
  2050............................................ 26 71 97 220
  
  ----------------------------------------------------------------------------------------------------------------
  
  It is important to recognize that a number of key uncertainties remain, and that current SCC estimates should be treated as provisional and revisable since they will evolve with improved scientific and economic understanding. The interagency group also recognizes that the existing models are imperfect and incomplete. The National Research Council report mentioned above points out that there is tension between the goal of producing quantified estimates of the economic damages from an incremental ton of carbon and the limits of existing efforts to model these effects. There are a number of analytical challenges that are being addressed by the research community, including research programs housed in many of the Federal agencies participating in the interagency process to estimate the SCC. The interagency group intends to periodically review and reconsider those estimates to reflect increasing knowledge of the science and economics of climate impacts, as well as improvements in modeling.
  
  In summary, in considering the potential global benefits resulting from reduced CO2 emissions, DOE used the values from the 2013 interagency report, adjusted to 2013$ using the Gross Domestic Product price deflator. For each of the four cases specified, the values used for emissions in 2015 were $12.0, $40.5, $62.4, and $119 per metric ton avoided (values expressed in 2013$). DOE derived values after 2050 using the relevant growth rates for the 2040-2050 period in the interagency update.
  
  DOE multiplied the CO2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calculate a present value
  
  Page 78652
  
  of the stream of monetary values, DOE discounted the values in each of the four cases using the specific discount rate that had been used to obtain the SCC values in each case.
  
  2. Valuation of Other Emissions Reductions
  
  As noted above, DOE has taken into account how amended energy conservation standards would reduce NOX emissions in those 22 States not affected by emissions caps. DOE estimated the monetized value of NOX emissions reductions resulting from each of the TSLs considered for the NOPR based on estimates found in the relevant scientific literature. Estimates of monetary value for reducing NOX from stationary sources range from $476 to $4,893 per ton (2013$).\98\ DOE calculated monetary benefits using a medium value for NOX emissions of $2,684 per short ton (in 2013$), and real discount rates of 3 percent and 7 percent.
  
  ---------------------------------------------------------------------------
  
  \98\ U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities, Washington, DC. Available at: www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf.
  
  ---------------------------------------------------------------------------
  
  DOE is evaluating appropriate monetization of avoided SO2 and Hg emissions in energy conservation standards rulemakings. It has not included such monetization in the current analysis.
  
  L. Utility Impact Analysis
  
  In the utility impact analysis, DOE analyzes the changes in electric installed capacity and generation that result for each trial standard level. The utility impact analysis uses a variant of NEMS,\99\ which is a public domain, multi-sectored, partial equilibrium model of the U.S. energy sector. DOE uses a variant of this model, referred to as NEMS-BT,\100\ to account for selected utility impacts of new or amended energy conservation standards. DOE's analysis consists of a comparison between model results for the most recent AEO Reference Case and for cases in which energy use is decremented to reflect the impact of potential standards. The energy savings inputs associated with each TSL come from the NIA. Chapter 15 of the NOPR TSD describes the utility impact analysis.
  
  ---------------------------------------------------------------------------
  
  \99\ For more information on NEMS, refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2003, DOE/
  
  EIA-0581(2003), March, 2003.
  
  \100\ DOE/EIA approves use of the name ``NEMS'' to describe only an official version of the model without any modification to code or data. Because this analysis entails some minor code modifications and the model is run under various policy scenarios that are variations on DOE/EIA assumptions, DOE refers to it by the name ``NEMS-BT'' (``BT'' is DOE's Building Technologies Program, under whose aegis this work has been performed).
  
  ---------------------------------------------------------------------------
Employment Impact Analysis

Employment impacts include direct and indirect impacts. Direct employment impacts are any changes in the number of employees of manufacturers of the products subject to standards; the MIA addresses those impacts. Indirect employment impacts are changes in national employment that occur due to the shift in expenditures and capital investment caused by the purchase and operation of more-efficient appliances. Indirect employment impacts from standards consist of the jobs created or eliminated in the national economy due to: (1) Reduced spending by end users on energy; (2) reduced spending on new energy supply by the utility industry; (3) increased customer spending on the purchase of new products; and (4) the effects of those three factors throughout the economy.

One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statistics developed by the Labor Department's Bureau of Labor Statistics (BLS). BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy.\101\ There are many reasons for these differences, including wage differences and the fact that the utility sector is more capital-

intensive and less labor-intensive than other sectors. Energy conservation standards have the effect of reducing customer utility bills. Because reduced customer expenditures for energy likely lead to increased expenditures in other sectors of the economy, the general effect of efficiency standards is to shift economic activity from a less labor-intensive sector (i.e., the utility sector) to more labor-

intensive sectors (e.g., the retail and service sectors). Thus, based on the BLS data alone, DOE believes net national employment may increase because of shifts in economic activity resulting from amended energy conservation standards for SPVUs.

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\101\ See Bureau of Economic Analysis, ``Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (RIMS II),'' U.S. Department of Commerce (1992).

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For the amended standard levels considered in the NOPR, DOE estimated indirect national employment impacts using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 3.1.1 (ImSET).\102\ ImSET is a special-purpose version of the ``U.S. Benchmark National Input-Output'' (I-O) model, which was designed to estimate the national employment and income effects of energy-saving technologies. The ImSET software includes a computer-

based I-O model having structural coefficients that characterize economic flows among the 187 sectors. ImSET's national economic I-O structure is based on a 2002 U.S. benchmark table, specially aggregated to the 187 sectors most relevant to industrial, commercial, and residential building energy use. DOE notes that ImSET is not a general equilibrium forecasting model, and understands the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over-estimate actual job impacts over the long run. For the NOPR, DOE used ImSET only to estimate short-term (through 2023) employment impacts.

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\102\ M. J. Scott, O. V. Livingston, P. J. Balducci, J. M. Roop, and R. W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies, PNNL-18412, Pacific Northwest National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).

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For more details on the employment impact analysis, see chapter 16 of the NOPR TSD.

V. Analytical Results and Conclusions

The following section addresses the results from DOE's analyses with respect to potential energy conservation standards for SPVUs in this rulemaking. It addresses the TSLs examined by DOE, the projected impacts of each of these levels if adopted as energy conservation standards for SPVUs, and the proposed standard levels that DOE sets forth in the NOPR. Additional details regarding DOE's analyses are contained in the TSD supporting this NOPR.
Trial Standard Levels

DOE developed Trial Standard Levels (TSLs) that combine efficiency levels for each equipment class of SPVACs and SPVHPs. Table V.1 presents the efficiency EERs for each equipment class in the EPCA and ASHRAE baseline and each TSL. TSL 1 consists of efficiency level 1 for equipment classes less than 65,000 Btu/h. TSL 2 consists

Page 78653

of efficiency level 2 for equipment classes less than 65,000 Btu/h. TSL 3 consists of efficiency level 3 for equipment classes less than 65,000 Btu/h. TSL 4 consists of efficiency level 4 (max-tech) for equipment classes less than 65,000 Btu/h. For SPVACs between 65,000 and 135,000 Btu/h, there are no models on the market above the ASHRAE level, and for SPVHPs between 65,000 and 135,000 Btu/h and SPVUs greater than or equal to 135,000 Btu/h and less than 240,000 Btu/h, there are no models on the market at all, and, therefore, DOE had no basis with which to develop higher efficiency levels or conduct analyses. As a result, for each TSL, the EER (and COP) for these equipment classes is shown as the ASHRAE standard level of 10.0 EER (and 3.0 COP for heat pumps).

Table V.1--EPCA Baseline, ASHRAE Baseline, and Trial Standard Levels for SPVUs

--------------------------------------------------------------------------------------------------------------------------------------------------------

Trial standard levels EER(/COP)

Equipment class EPCA baseline ASHRAE ---------------------------------------------------------------

baseline 1 2 3 4

--------------------------------------------------------------------------------------------------------------------------------------------------------

SPVAC =65,000 Btu/h and =65,000 Btu/h and =135,000 Btu/h and =135,000 Btu/h and =65,000 Btu/h and =65,000 Btu/h and =135,000 Btu/h and =135,000 Btu/h and =65,000 Btu/h to =65,000 Btu/h to =65,000 Btu/h to 2, NOX, and Hg emissions reductions for each TSL in chapter 13 of the NOPR TSD. As discussed in section IV.J, DOE did not include NOX emissions reduction from power plants in States subject to CAIR, because an energy conservation standard would not affect the overall level of NOX emissions in those States due to the emissions caps mandated by CSAPR.

Table V.16--Cumulative Emissions Reduction for Potential Standards for SPVUs

----------------------------------------------------------------------------------------------------------------

TSL

---------------------------------------------------------------

1 2 3 4

----------------------------------------------------------------------------------------------------------------

Power Sector and Site Emissions*

----------------------------------------------------------------------------------------------------------------

CO2 (million metric tons)....................... 8.0 20 32 34

SO2 (thousand tons)............................. 22 53 86 90

NOX (thousand tons)............................. 3.6 8.9 14 14

Hg (tons)....................................... 0.03 0.06 0.10 0.11

N2O (thousand tons)............................. 0.11 0.27 0.44 0.46

CH4 (thousand tons)............................. 0.60 1.4 2.4 2.5

----------------------------------------------------------------------------------------------------------------

Page 78662

Upstream Emissions

----------------------------------------------------------------------------------------------------------------

CO2 (million metric tons)....................... 0.28 0.68 1.1 1.2

SO2 (thousand tons)............................. 0.06 0.15 0.24 0.26

NOX (thousand tons)............................. 3.9 9.4 16 17

Hg (tons)....................................... 0.0002 0.0004 0.0006 0.0006

N2O (thousand tons)............................. 0.003 0.007 0.011 0.012

CH4 (thousand tons)............................. 24 57 94 101

----------------------------------------------------------------------------------------------------------------

Total Emissions

----------------------------------------------------------------------------------------------------------------

CO2 (million metric tons)....................... 8.3 20 33 35

SO2 (thousand tons)............................. 22 53 86 91

NOX (thousand tons)............................. 7.4 18 30 31

Hg (tons)....................................... 0.03 0.06 0.11 0.11

N2O (thousand tons)............................. 0.11 0.28 0.45 0.47

CH4 (thousand tons)............................. 24 59 97 103

----------------------------------------------------------------------------------------------------------------

* Includes emissions from additional gas use of more-efficient SPVUs.

Note: These results are based on emissions factors in AEO 2013, the most recent version available at the time of

this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative

emissions reductions for CO2, estimated at 33%, and an increase in NOX, estimated at 13%. In the next phase of

this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may

not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

As part of the analysis for this NOPR, DOE estimated monetary benefits likely to result from the reduced emissions of CO2 and NOX estimated for each of the TSLs considered for SPVUs. As discussed in section IV.K, for CO2, DOE used values for the SCC developed by an interagency process. The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets are based on the average SCC from three integrated assessment models, at discount rates of 2.5 percent, 3 percent, and 5 percent. The fourth set, which represents the 95th-percentile SCC estimate across all three models at a 3-percent discount rate, is included to represent higher-than-expected impacts from temperature change further out in the tails of the SCC distribution. The four SCC values for CO2 emissions reductions in 2015, expressed in 2013$, are $12.0/ton, $40.5/

ton, $62.4/ton, and $119/ton. The values for later years are higher due to increasing emissions-related costs as the magnitude of projected climate change increases.

Table V.17 presents the global value of CO2 emissions reductions at each TSL using the ASHRAE baseline, while results using the EPCA baseline are available in chapter 14 of the NOPR TSD. DOE calculated domestic values as a range from 7 percent to 23 percent of the global values, and these results are presented in chapter 14 of the NOPR TSD for both the ASHRAE and EPCA baselines.

Table V.17--Global Present Value of CO2 Emissions Reduction for Potential Standards for SPVUs

----------------------------------------------------------------------------------------------------------------

SCC Scenario*

-----------------------------------------------------------------------------------------

million 2013$

TSL -----------------------------------------------------------------------------------------

5% discount rate, 3% discount rate, 2.5% discount rate, 3% discount rate,

average average average 95th percentile

----------------------------------------------------------------------------------------------------------------

Power Sector and Site Emissions **

----------------------------------------------------------------------------------------------------------------

1 50 241 386 747

2 120 584 937 1812

3 202 969 1552 3006

4 216 1035 1656 3209

----------------------------------------------------------------------------------------------------------------

Upstream Emissions

----------------------------------------------------------------------------------------------------------------

1 1.8 8.5 14 26

2 4.3 21 33 64

3 7.2 34 55 107

4 7.8 37 59 114

----------------------------------------------------------------------------------------------------------------

Total Emissions

----------------------------------------------------------------------------------------------------------------

1 52 249 400 773

2 124 605 970 1875

3 209 1003 1607 3112

4 224 1072 1715 3324

----------------------------------------------------------------------------------------------------------------

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4 and $119

per metric ton (2013$).\108\

** Includes site emissions associated with additional use of natural gas by more-efficient SPVUs.

Page 78663

DOE is well aware that scientific and economic knowledge about the contribution of CO2 and other greenhouse gas (GHG) emissions to changes in the future global climate and the potential resulting damages to the world economy continues to evolve rapidly. Thus, any value placed in this rulemaking on reducing CO2 emissions is subject to change. DOE, together with other Federal agencies, will continue to review various methodologies for estimating the monetary value of reductions in CO2 and other GHG emissions. This ongoing review will consider the comments on this subject that are part of the public record for this and other rulemakings, as well as other methodological assumptions and issues. However, consistent with DOE's legal obligations, and taking into account the uncertainty involved with this particular issue, DOE has included in this NOPR the most recent values and analyses resulting from the interagency review process.

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\108\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%. The monetized benefits from GHG reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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DOE also estimated a range for the cumulative monetary value of the economic benefits associated with NOX emissions reductions anticipated to result from amended standards for the SPVU equipment that is the subject of this NOPR. The dollar-per-ton values that DOE used are discussed in section IV.K. Table V.18 presents the present value of cumulative NOX emissions reductions for each TSL using the ASHRAE baseline calculated using the average dollar-per-ton values and 7-percent and 3-percent discount rates. Results using the EPCA baseline are available in chapter 14 of the NOPR TSD.

Table V.18--Present Value of NOX Emissions Reduction for Potential

Standards for SPVUs \109\

------------------------------------------------------------------------

million 2013$

TSL -------------------------------------------------

3% Discount rate 7% Discount rate

------------------------------------------------------------------------

Power Sector and Site Emissions **

------------------------------------------------------------------------

1 3.6 1.0

2 9.1 2.6

3 15 4.2

4 15 4.3

------------------------------------------------------------------------

Upstream Emissions

------------------------------------------------------------------------

1 4.8 2.0

2 11 4.7

3 19 8.2

4 21 9.0

------------------------------------------------------------------------

Total Emissions

------------------------------------------------------------------------

1 8.4 3.0

2 21 7.3

3 34 12

4 36 13

------------------------------------------------------------------------

* Includes site emissions associated with additional use of natural gas

by more-efficient SPVUs.

The NPV of the monetized benefits associated with emissions reductions can be viewed as a complement to the NPV of the consumer savings calculated for each TSL considered in this rulemaking. Table V.19 presents the NPV values that result from adding the estimates of the potential economic benefits resulting from reduced CO2 and NOX emissions in each of four valuation scenarios to the NPV of consumer savings calculated for each TSL considered in this rulemaking using the ASHRAE baseline, at both a 7-percent and a 3-

percent discount rate. The CO2 values used in the columns of each table correspond to the four scenarios for the valuation of CO2 emission reductions discussed above.

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\109\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in an increase in NOX emissions reductions, estimated at 13%. The monetized benefits from NOX reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

Table V.19--SPVU TSLs: Net Present Value of Consumer Savings Combined With Net Present Value of Monetized

Benefits From CO2 and NOX Emissions Reductions

----------------------------------------------------------------------------------------------------------------

Consumer NPV at 3% discount rate added with:

--------------------------------------------------------------------------------------------

SCC Value of $40.5/ SCC Value of $62.4/ SCC Value of $119/

TSL SCC Value of $12.0/metric metric ton CO2* and metric ton CO2* and metric ton CO2* and

ton CO2* and medium value medium value for medium value for medium value for

for NOX** NOX** NOX** NOX**

----------------------------------------------------------------------------------------------------------------

1 0.32 0.52 0.67 1.0

2 0.59 1.1 1.4 2.3

3 (0.26) 0.54 1.1 2.6

4 (0.84) 0.005 0.65 2.3

----------------------------------------------------------------------------------------------------------------

1 0.14 0.34 0.49 0.86

Page 78664

2 0.24 0.72 1.1 2.0

3 (0.15) 0.65 1.3 2.8

4 (0.54) 0.31 0.95 2.6

----------------------------------------------------------------------------------------------------------------

\1\ Billion 2013$.

Note: Parentheses indicate negative values.

* These label values represent the global SCC in 2015, in 2013$. The present values have been calculated with

scenario-consistent discount rates.\110\

** Medium Value corresponds to $2,684 per ton of NOX emissions.

Although adding the value of consumer savings to the values of emission reductions provides a valuable perspective, two issues should be considered. First, the national operating cost savings are domestic U.S. customer monetary savings that occur as a result of market transactions, while the value of CO2 reductions is based on a global value. Second, the assessments of operating cost savings and the SCC are performed with different methods that use quite different time frames for analysis. The national operating cost savings is measured for the lifetime of products shipped in 2019-2048. The SCC values, on the other hand, reflect the present value of future climate-

related impacts resulting from the emission of one metric ton of CO2 in each year. These impacts continue well beyond 2100.

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\110\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and in increase in cumulative emissions reductions for NOX, estimated at 13%. The monetized benefits from GHG reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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7. Other Factors

The Secretary of Energy, in determining whether a standard is economically justified, may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) No other factors were considered in this analysis.
Proposed Standards

EPCA contains criteria for prescribing new or amended energy conservation standards. For commercial HVAC equipment such as SPVUs, DOE must adopt as national standards the levels in amendments to ASHRAE Standard 90.1 unless DOE determines, supported by clear and convincing evidence, that standards more stringent than those levels ``would result in significant additional conservation of energy and be technologically feasible and economically justified.'' (42 U.S.C. 6313(a)(6)(A)(ii)(II)) In determining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering the seven statutory factors discussed previously. (42 U.S.C. 6313(a)(6)(B)(ii))

In this rulemaking, DOE has evaluated whether standards more stringent than the efficiency levels in ASHRAE Standard 90.1-2013 for SPVUs are justified under the above criteria. As stated in sections III.C.1 and III.D.2, DOE has tentatively determined, based on clear and convincing evidence, that all of the more-stringent standard levels considered in this rulemaking are technologically feasible and would save significant additional amounts of energy. For this NOPR, DOE considered the impacts of amended standards for SPVUs at each TSL, beginning with the maximum technologically feasible level, to determine whether that level was economically justified. Where the max-tech level was not justified, DOE then considered the next-most-efficient level and undertook the same evaluation until it reached the highest efficiency level that is both technologically feasible and economically justified and saves a significant amount of energy.

To aid the reader in understanding the benefits and/or burdens of each TSL, tables in this section summarize the quantitative analytical results for each TSL, based on the assumptions and methodology discussed herein. The efficiency levels contained in each TSL are described in section V.A. In addition to the quantitative results presented in the tables, DOE also considers other burdens and benefits that affect economic justification. These include the impacts on identifiable subgroups of consumers who may be disproportionately affected by a national standard, and impacts on employment. Section V.B.1.b presents the estimated impacts of each TSL for these subgroups. DOE discusses the impacts on direct employment in SPVU manufacturing in section V.B.2.b, and discusses the indirect employment impacts in section V.B.3.c.

1. Benefits and Burdens of Trial Standard Levels Considered for SPVUs

Table V.20, Table V.21, and Table V.22 summarize the quantitative impacts estimated for each TSL for SPVUs using the ASHRAE baseline. The national impacts are measured over the lifetime of SPVUs purchased in the 30-year period that begins in the year of compliance with amended standards (2019-2048). The energy savings, emissions reductions, and value of emissions reductions refer to full-fuel-cycle results. Results for the proposed standard level using the EPCA baseline can be found in Tables V.24 through V.28.

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\111\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2 emissions reductions is a decrease of 33%, while the estimated change for NOX emissions reductions is an increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

Page 78665

Table V.20--Summary of Analytical Results for SPVUs: National Impacts \111\

--------------------------------------------------------------------------------------------------------------------------------------------------------

Category TSL 1 TSL 2 TSL 3 TSL 4

--------------------------------------------------------------------------------------------------------------------------------------------------------

National Energy Savings quads....... 0.09....................... 0.23....................... 0.37....................... 0.39.

--------------------------------------------------------------------------------------------------------------------------------------------------------

NPV of Customer Benefits (2013$ billion)

--------------------------------------------------------------------------------------------------------------------------------------------------------

3% discount rate.................... 0.26....................... 0.44....................... (0.50)..................... (1.10).

7% discount rate.................... 0.09....................... 0.11....................... (0.37)..................... (0.78).

--------------------------------------------------------------------------------------------------------------------------------------------------------

Cumulative Emissions Reduction (Total FFC Emissions)

--------------------------------------------------------------------------------------------------------------------------------------------------------

CO2 (million metric tons)........... 8.3........................ 20......................... 33......................... 35.

SO2 (thousand tons)................. 22......................... 53......................... 86......................... 91.

NOX (thousand tons)................. 7.4........................ 18......................... 30......................... 31.

Hg (tons)........................... 0.03....................... 0.06....................... 0.11....................... 0.11.

N2O (thousand tons)................. 0.11....................... 0.28....................... 0.45....................... 0.47.

CH4 (thousand tons)................. 24......................... 59......................... 97......................... 103.

--------------------------------------------------------------------------------------------------------------------------------------------------------

Value of Emissions Reduction (Total FFC Emissions)

--------------------------------------------------------------------------------------------------------------------------------------------------------

CO2 (2013$ million)*................ 52 to 773.................. 124 to 1875................ 209 to 3112................ 224 to 3324.

NOX--3% discount rate (2013$ 8.4........................ 21......................... 34......................... 36

million).

NOX--7% discount rate (2013$ 3.0........................ 7.3........................ 12......................... 13.

million).

--------------------------------------------------------------------------------------------------------------------------------------------------------

* Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions.

Note: Parentheses indicate negative values.

Table V.21--NPV of Consumer Benefits by Equipment Class

----------------------------------------------------------------------------------------------------------------

Trial Standard Level

Equipment class Discount rate ---------------------------------------------------------------

(%) 1 2 3 4

----------------------------------------------------------------------------------------------------------------

SPVAC........................... 3 0.13 0.13 (0.64) (1.05)

2, 31 thousand tons of NOX, and 0.11 tons of Hg. The estimated monetary value of the CO2 emissions reductions at TSL 4 ranges from $224 million to $3,324 million.\112\

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\112\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2 emissions reductions is a decrease of 33%, while the estimated change for NOX emissions reductions is an increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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At TSL 4, the average LCC savings ranges from a negative $825 to a negative $177 depending on equipment class. The fraction of consumers with positive LCC benefits range from 13 percent for SPVACs less than 65,000 Btu/h to 32 percent for SPVHPs less than 65,000 Btu/h.

At TSL 4, the projected change in INPV ranges from a decrease of $33.4 million to an increase of $10.9 million. At TSL 4, DOE recognizes the risk of negative impacts if manufacturers' expectations concerning reduced profit margins are realized. If the lower bound of the range of impacts is reached, as DOE expects, TSL 4 could result in a net loss of up to 91.7 percent in INPV for manufacturers.

Accordingly, the Secretary tentatively concludes that at TSL 4 for SPVUs, the benefits of energy savings, emission reductions, and the estimated monetary value of the CO2 emissions reductions would be outweighed by negative NPV of consumer benefit overall, negative LCC savings for both equipment classes (SPVAC and SPVHP less than 65,000 Btu/h), and the significant burden on the industry. Consequently, DOE has concluded that TSL 4 is not economically justified.

Next, DOE considered TSL 3, which would save an estimated total of 0.37 quads of energy, an amount DOE considers significant. TSL 3 has an estimated NPV of consumer benefit of negative $0.37 billion using a 7-

percent discount rate, and negative $0.50 billion using a 3-percent discount rate.

The cumulative emissions reductions at TSL 3 are 33 million metric tons of CO2, 30 thousand tons of NOX, and 0.11 tons of Hg. The estimated monetary value of the CO2 emissions reductions at TSL 3 ranges from $209 million to $3,112 million.\113\

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\113\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2 emissions reductions is a decrease of 33%, while the estimated change for NOX emissions reductions is an increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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At TSL 3, the average LCC savings are range from a negative $24 to a positive $819 depending on equipment class. The fraction of consumers with positive LCC benefits ranged from 38 percent for SPVACs less than 65,000 Btu/h to 92 percent for SPVHPs less than 65,000 Btu/h.

At TSL 3, the projected change in INPV ranges from a decrease of $9.0 million to an increase of $12.7 million. If the lower bound of the range of impacts is reached, TSL 3 could result in a net loss of up to 24.7 percent in INPV for manufacturers.

Accordingly, the Secretary tentatively concludes that at TSL 3 for SPVUs, the benefits of energy savings, emission reductions, and the estimated monetary value of the CO2 emissions reductions would be outweighed by the negative NPV of consumer benefits, negative LCC savings for SPVAC less than 65,000 Btu/h, and the negative INPV on manufacturers. Consequently, DOE has tentatively concluded that TSL 3 is not economically justified.

Next, DOE considered TSL 2, which would save an estimated total of 0.23 quads of energy, an amount DOE considers significant. TSL 2 has an estimated NPV of consumer benefit of $0.11 billion using a 7-percent discount rate, and $0.44 billion using a 3-percent discount rate.

The cumulative emissions reductions at TSL 2 are 20 million metric tons of CO2, 18 thousand tons of NOX, and 0.06 tons of Hg. The estimated monetary value of the CO2 emissions reductions at TSL 3 ranges from $124 million to $1,875 million.\114\

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\114\ These results are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant change in cumulative emissions reductions for CO2 and most other pollutants. For example, the estimated change for CO2 emissions reductions is a decrease of 33%, while the estimated change for NOX emissions reductions is an increase of 13%. The monetized benefits from GHG reductions would likely change by a comparable amount. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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At TSL 2, the average LCC savings range from $179 to $424 depending on equipment class. The fraction of consumers with positive LCC benefits range from 62 percent for SPVACs less than 65,000 Btu/h to 98 percent for SPVHPs less than 65,000 Btu/h.

At TSL 2, the projected change in INPV ranges from a decrease of $3.3 million to an increase of $1.5 million. At TSL 2, DOE recognizes the risk of negative impacts if manufacturers' expectations concerning reduced profit margins are realized. If the lower bound of the range of impacts is reached, as DOE expects, TSL 2 could result in a net loss of up to 9.0 percent in INPV for manufacturers.

After considering the analysis and weighing the benefits and the burdens, DOE has tentatively concluded that at TSL 2 for SPVUs, the benefits of energy savings, positive NPV of consumer benefit, positive average consumer LCC savings, emission reductions, and the estimated monetary value of the emissions reductions would outweigh the potential reduction in INPV for manufacturers. The Secretary of Energy has tentatively concluded that TSL 2 would save a significant amount of energy, is technologically feasible and economically justified, and is supported by clear and convincing evidence. For the above reasons, DOE proposes to

Page 78667

adopt the energy conservation standards for SPVUs at TSL 2. Table V.23 presents the proposed energy conservation standards for SPVUs. As mentioned previously, for SPVHPs greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h and for SPVUs greater than or equal to 135,000 Btu/h and less than 240,000 Btu/h, there are no models on the market, and, therefore, DOE had no basis with which to develop higher efficiency levels or conduct analyses. For SPVACs greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, there are no models on the market higher than the ASHRAE 90.1-2013 level, and, therefore, DOE has no clear and convincing evidence with which to adopt higher levels.

As a result, DOE is proposing amended standards for SPVUs equivalent to those in ASHRAE Standard 90.1-2013 for these four equipment classes, as required by law.

Table V.23--Proposed Energy Conservation Standards for SPVUs

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Equipment class Cooling capacity Btu/h Efficiency level

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Single Package Vertical Air Conditioner.. =65,000 Btu/h and =135,000 Btu/h and =65,000 Btu/h and =135,000 Btu/h and =65,000 Btu/h to 2 emission reductions.\115\ The value of the CO2 reductions, otherwise known as the Social Cost of Carbon (SCC), is calculated using a range of values per metric ton of CO2 developed by a recent interagency process.

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\115\ DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized values. First, DOE calculated a present value in 2014, the year used for discounting the NPV of total consumer costs and savings, for the time-series of costs and benefits using discount rates of 3 and 7 percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates. From the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in 2013 that yields the same present value. The fixed annual payment is the annualized value. Although DOE calculated annualized values, this does not imply that the time-

series of cost and benefits from which the annualized values were determined would be a steady stream of payments.

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Although combining the values of operating savings and CO2 reductions provides a useful perspective, two issues should be considered. First, the national operating savings are domestic U.S. consumer monetary savings that occur as a result of market transactions, while the value of CO2 reductions is based on a global value. Second, the assessments of operating cost savings and SCC are performed with different methods that use different time frames for analysis. The national operating cost savings is measured for the lifetime of products shipped in 2019-2048. The SCC values, on the other hand, reflect the present value of future climate-

related impacts resulting from the emission of one metric ton of CO2 in each year. These impacts continue well beyond 2100.

Table V.29 shows the annualized values for the proposed standards for SPVUs compared to the ASHRAE baselines. The results under the primary estimate are as follows. (All monetary values below are expressed in 2013$.) Using a 7-percent discount rate for benefits and costs other than CO2 reduction, for which DOE used a 3-

percent discount rate along with the SCC series corresponding to a value of $40.5/ton in 2015, the cost of the SPVU standards proposed in the NOPR is $29 million per year in increased equipment costs, while the benefits are $38 million per year in reduced equipment operating costs, $29 million in CO2 reductions, and $0.57 million in reduced NOX emissions. In this case, the net benefit amounts to $38 million per year. Using a 3-percent discount rate for all benefits and costs and the SCC series corresponding to a value of $40.5/ton in 2015, the cost of the SPVU standards proposed in the NOPR is $37 million per year in increased equipment costs, while the benefits are $58 million per year in reduced operating costs, $29 million in CO2 reductions, and $0.97 million in reduced NOX emissions. In this case, the net benefit amounts to $51 million per year.\116\

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\116\ All CO2 and NOX results shown in this paragraph are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in cumulative NOX reductions, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

Table V.29--Annualized Benefits and Costs of Proposed Standards (TSL 2) for SPVUs

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million 2013$/year

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Discount rate High net benefits

Primary estimate* Low net benefits estimate* estimate*

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Benefits:

Operating Cost Savings.......... 7% 38 36 39

3% 58 55 61

CO2 Reduction Monetized Value 5% 7.7 7.6 7.7

($12.0/t case)**.

CO2 Reduction Monetized Value 3% 29 28 29

($40.5/t case)**.

CO2 Reduction Monetized Value 2.5% 43 42 43

($62.4/t case)**.

CO2 Reduction Monetized Value 3% 89 88 89

$119/t case)**.

NOX Reduction at $2,684/ton**... 7% 0.57 0.56 0.57

3% 0.97 0.97 0.98

Total Benefitsdagger.......... 7% plus CO2 range 46 to 127 44 to 125 48 to 129

7% 67 65 69

3% plus CO2 range 67 to 148 63 to 144 70 to 151

3% 88 84 91

Costs:

Incremental Equipment Costs..... 7% 29 40 28

3% 37 53 36

Net Benefits/Costs:

Total:.......................... 7% plus CO2 range 17 to 98 4 to 85 19 to 101

7% 38 25 40

3% plus CO2 range 30 to 111 11 to 91 34 to 115

Page 78670

3% 51 31 55

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* This table presents the annualized costs and benefits associated with SPVUs shipped in 2019-2048. These results include benefits to consumers which

accrue after 2048 from the products purchased in 2019-2048. Costs incurred by manufacturers, some of which may be incurred in preparation for the

rule, are not directly included, but are indirectly included as part of incremental equipment costs. The Primary, Low Benefits, and High Benefits

Estimates utilize projections of energy prices and building growth from the AEO 2013 Reference case, Low Estimate, and High Estimate, respectively. In

addition, incremental equipment costs reflect constant real prices for the Primary Estimate, an increase for projected equipment price trends for the

Low Benefits Estimate, and a decline for projected equipment price trends for the High Benefits Estimate. The methods used to derive projected price

trends are explained in section IV.F.2.a.

** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios. The values of $12.0, $40.5, and $62.4 per

metric ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $119/t represents the

95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The

value for NOX (in 2013$) is the average of the low and high values used in DOE's analysis.\117\

dagger Total benefits for both the 3-percent and 7-percent cases are derived using the series corresponding to SCC value of $40.5/t. In the rows

labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those

values are added to the full range of CO2 values.

VI. Procedural Issues and Regulatory Review
Review Under Executive Orders 12866 and 13563

Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify the problem that it intends to address, including, where applicable, the failures of private markets or public institutions that warrant new agency action, as well as to assess the significance of that problem. The problems that the proposed standards address are as follows:

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\117\ All CO2 and NOX results shown in this paragraph are based on emissions factors in AEO 2013, the most recent version available at the time of this analysis. Use of emissions factors in AEO 2014 would result in a significant decrease in cumulative emissions reductions for CO2, estimated at 33%, and an increase in cumulative NOX reductions, estimated at 13%. In the next phase of this rulemaking, DOE plans to use emissions factors based on the most recent AEO available, which may or may not be AEO 2014, depending on the timing of the issuance of the next rulemaking document.

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(1) There are external benefits resulting from improved energy efficiency of SPVUs that are not captured by the users of such equipment. These benefits include externalities related to environmental protection and energy security that are not reflected in energy prices, such as reduced emissions of greenhouse gases. DOE attempts to quantify some of the external benefits through use of Social Cost of Carbon values.

In addition, the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) has determined that this regulatory action is a ``significant regulatory action'' under Executive Order 12866. DOE has also prepared a regulatory impact analysis (RIA) for the proposed rule.

DOE has also reviewed this regulation pursuant to Executive Order 13563, issued on January 18, 2011 (76 FR 3281 (Jan. 21, 2011)). Executive Order 13563 is supplemental to and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, agencies are required by Executive Order 13563 to: (1) Propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.

DOE emphasizes as well that Executive Order 13563 requires agencies to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. In its guidance, the Office of Information and Regulatory Affairs has emphasized that such techniques may include identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes. For the reasons stated in the preamble, DOE believes that the NOPR is consistent with these principles, including the requirement that, to the extent permitted by law, benefits justify costs and that net benefits are maximized.
Review Under the Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of an initial regulatory flexibility analysis (IRFA) for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, ``Proper Consideration of Small Entities in Agency Rulemaking,'' 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the General Counsel's Web site (www.energy.gov/gc/office-general-counsel).

DOE has determined that it cannot certify that the proposed rule, if promulgated, would not have a significant effect on a substantial number of small manufacturers. Therefore, DOE has prepared an initial regulatory flexibility analysis (IRFA), as presented in sections VI.B.1 through VI.B.4, for this rulemaking.

Page 78671

1. Description and Estimated Number of Small Entities Regulated

For manufacturers of SPVUs, the Small Business Administration (SBA) has set a size threshold, which defines those entities classified as ``small businesses'' for the purposes of the statute. DOE used the SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. 65 FR 30836, 30848 (May 15, 2000), as amended at 65 FR 53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. The size standards are listed by North American Industry Classification System (NAICS) code and industry description and are available at http://www.sba.gov/content/table-small-business-size-standards. SPVU manufacturing is classified under NAICS 333415, ``Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing.'' The SBA sets a threshold of 750 employees or less for an entity to be considered as a small business for this category.

DOE reviewed the proposed energy conservation standards for SPVUs considered in the notice of proposed rulemaking under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. 68 FR 7990. To better assess the potential impacts of this rulemaking on small entities, DOE conducted a more focused inquiry of the companies that could be small business manufacturers of equipment covered by this rulemaking. DOE used available public information to identify potential small manufacturers. DOE's research involved industry trade association membership directories (including AHRI), the DOE certification database, individual company Web sites, and marketing research tools (e.g., Hoovers reports) to create a list of companies that manufacture or sell SPVU systems covered by this rulemaking. DOE also asked stakeholders and industry representatives if they were aware of any other small manufacturers during manufacturer interviews and at previous DOE public meetings. DOE reviewed the publicly-available data and contacted companies on its list, as necessary, to determine whether they met the SBA's definition of a small business manufacturer of SPVU equipment. DOE screened out companies that did not offer equipment covered by this rulemaking, did not meet the definition of a ``small business,'' or are foreign-owned and operated.

DOE identified seven companies that produce equipment covered under the single package vertical unit energy conservation standard rulemaking. Two of the seven companies are foreign-owned and operated. Of the remaining five businesses, two companies met the SBA definition of a ``small business.'' One small business manufacturer has the largest market share in the SPVU industry and 48 percent of the active listings in the AHRI Directory.\118\ The other has a more modest market share and 5 percent of active listings in the AHRI Directory.

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\118\ Based on model listings in the AHRI directory accessed on June 6, 2012 (Available at: http://www.ahridirectory.org/ahridirectory/pages/ac/defaultSearch.aspx).

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2. Description and Estimate of Compliance Requirements

At the time of analysis, the domestic small manufacturer with the large market share had 229 active listings. Fifty-four of those listings, or 24 percent, would meet the proposed standards. The other 76 percent of the listings would not meet the proposed standard. The small manufacturer would need to either redesign those products or drop those products and move their customers to more-efficient offerings. However, DOE notes that the small manufacturer had more product listings than any other manufacturer that could meet the proposed standard.

The domestic small manufacturer with the smaller market share had 27 active listings. None of those listings would meet the proposed standards. At the proposed standard level, this manufacturer would need to redesign its entire product offering or leave the SPVU market.

If small manufacturers chose to redesign their products that do not meet the proposed standard, they would need to make capital conversion and product conversion investments. DOE estimated an average total conversion cost of $1.49 million per manufacturer. DOE expects this investment, which is roughly 12% of an average manufacturer's annual revenue, to be made over the four-year period between the publication of the final rule and the effective date of the standard. Since small businesses may have a greater difficulty obtaining credit or may obtain less favorable terms than larger businesses, the small manufacturers may face higher overall costs if they choose to finance the conversion costs resulting from the change in standard.

DOE notes that the small manufacturer with the larger market share produces more SPVU units than its larger competitors. The company could potentially spread the conversion costs over a larger number of units than its competitors. However, the small manufacturer did express concern in MIA interviews that such an effort would tie up their available engineering resources and prevent them from focusing on technology advancements and customer-driven feature requests. Larger manufacturers, which do not have the same shipment volumes as the small manufacturer, may have fewer engineers dedicated to SPVU equipment but potentially could marshal engineering and testing resources across their organization. The concern about adequate availability of engineering resources would also likely apply to the small manufacturer with the smaller market share.

Smaller manufacturers generally pay higher prices for purchased parts, such as BPMs, relative to larger competitors. Even the small manufacturer with the larger market share, and the highest number of SPVU shipments of any manufacturer in the industry, could pay higher prices for component than the larger competition. If their competitors have centralized sourcing, those companies could combine component purchases for SPVU product lines with purchases for other non-SPVU product lines and obtain higher volume discounts than those available to small manufacturers.

Due to the potential conversion costs, the potential engineering and testing effort, and the potential increases in component prices that result from a standard, DOE conducted this regulatory flexibility analysis. Based on DOE's analysis, including interviews with manufacturers, the Department believes one of the identified small businesses would be able to meet the proposed standard. That small manufacturer has the strong market share, technical expertise, and the production capability to meet the amended standard. The company successfully competes in both the current baseline-efficiency and premium-efficiency market segments. The other small business has significantly less market share and does not compete in the premium-

efficiency market today. Given the lack of existing product that meets the standard, potential conversion costs, and disadvantages in financing costs as well as in pricing for sourced components, the second small business may face headwinds in meeting the proposed standard.

Page 78672

3. Duplication, Overlap, and Conflict with Other Rules and Regulations

DOE is not aware of any rules or regulations that duplicate, overlap, or conflict with the rule being considered.

4. Significant Alternatives to the Rule

The discussion in section VI.B.2 analyzes impacts on small businesses that would result from DOE's proposed rule. In addition to the other TSLs being considered, the proposed rulemaking TSD includes a regulatory impact analysis (RIA). For SPVUs, the RIA discusses the following policy alternatives: (1) No change in standard; (2) consumer rebates; (3) consumer tax credits; (4) manufacturer tax credits; (5) voluntary energy efficiency targets; (6) early replacement; and (7) bulk government purchases. While these alternatives may mitigate to some varying extent the economic impacts on small entities compared to the standards, DOE determined that the energy savings of these regulatory alternatives are from 0.01 to 0.5 percent smaller than those that would be expected to result from adoption of the proposed standard levels. Thus, DOE rejected these alternatives and is proposing the standards set forth in this rulemaking. (See chapter 17 of the NOPR TSD for further detail on the policy alternatives DOE considered.)
Review Under the Paperwork Reduction Act of 1995

Manufacturers of single package vertical air conditioners and single package vertical heat pumps must certify to DOE that their products comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their equipment according to the applicable DOE test procedures for SPVACs and SPVHPs, including any amendments adopted for those test procedures on the date that compliance is required. DOE has established regulations for the certification and recordkeeping requirements for all covered customer products and commercial equipment, including SPVACs and SPVHPs. 76 FR 12422 (March 7, 2011). The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been approved by OMB under OMB Control Number 1910-1400. Public reporting burden for the certification is estimated to average 20 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
Review Under the National Environmental Policy Act of 1969

Pursuant to the National Environmental Policy Act (NEPA) of 1969, DOE has determined that the proposed rule fits within the category of actions included in Categorical Exclusion (CX) B5.1 and otherwise meets the requirements for application of a CX. See 10 CFR part 1021, App. B, B5.1(b); 1021.410(b) and Appendix B, B(1)-(5). The proposed rule fits within the category of actions because it is a rulemaking that establishes energy conservation standards for customer products or industrial equipment, and for which none of the exceptions identified in CX B5.1(b) apply. Therefore, DOE has made a CX determination for this rulemaking, and DOE does not need to prepare an Environmental Assessment or Environmental Impact Statement for this proposed rule. DOE's CX determination for this proposed rule is available at http://cxnepa.energy.gov/.
Review Under Executive Order 13132

Executive Order 13132, ``Federalism,'' imposes certain requirements on Federal agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. 64 FR 43255 (August 10, 1999). The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process that it will follow in the development of such regulations. 65 FR 13735. DOE has examined this proposed rule and has tentatively determined that it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this proposed rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA (42 U.S.C. 6297). Therefore, Executive Order 13132 requires no further action.
Review Under Executive Order 12988

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, ``Civil Justice Reform,'' imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a clear legal standard for affected conduct rather than a general standard; and (4) promote simplification and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this proposed rule meets the relevant standards of Executive Order 12988.
Review Under the Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Pub. L. 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a proposed regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the

Page 78673

private sector, of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed ``significant intergovernmental mandate,'' and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect them. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820. DOE's policy statement is also available at www.energy.gov/gc/office-general-counsel.

Although the proposed rule, which proposes amended energy conservation standards for SPVUs, does not contain a Federal intergovernmental mandate, it may require annual expenditures of $100 million or more by the private sector. Specifically, the proposed rule would likely result in a final rule that could require expenditures of $100 million or more, including: (1) Investment in research and development and in capital expenditures by SPVUs manufacturers in the years between the final rule and the compliance date for the amended standards, and (2) incremental additional expenditures by consumers to purchase higher-efficiency SPVUs, starting at the compliance date for the applicable standard.

Section 202 of UMRA authorizes a Federal agency to respond to the content requirements of UMRA in any other statement or analysis that accompanies the proposed rule. 2 U.S.C. 1532(c). The content requirements of section 202(b) of UMRA relevant to a private sector mandate substantially overlap the economic analysis requirements that apply under section 325(o) of EPCA and Executive Order 12866. The SUPPLEMENTARY INFORMATION section of the NOPR and the ``Regulatory Impact Analysis'' section of the TSD for this proposed rule respond to those requirements.

Under section 205 of UMRA, the Department is obligated to identify and consider a reasonable number of regulatory alternatives before promulgating a rule for which a written statement under section 202 is required. 2 U.S.C. 1535(a). DOE is required to select from those alternatives the most cost-effective and least burdensome alternative that achieves the objectives of the proposed rule unless DOE publishes an explanation for doing otherwise, or the selection of such an alternative is inconsistent with law. As required by 42 U.S.C. 6313(a), the proposed rule would establish amended energy conservation standards for SPVUs that are designed to achieve the maximum improvement in energy efficiency that DOE has determined to be both technologically feasible and economically justified. A full discussion of the alternatives considered by DOE is presented in the ``Regulatory Impact Analysis'' section of the TSD for the proposed rule.
Review Under the Treasury and General Government Appropriations Act, 1999

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

Pursuant to Executive Order 12630, ``Governmental Actions and Interference with Constitutionally Protected Property Rights,'' 53 FR 8859 (March 15, 1988), DOE has determined that this proposed rule would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Review Under the Treasury and General Government Appropriations Act, 2001

Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review most disseminations of information to the public under information quality guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has reviewed this NOPR under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.
Review Under Executive Order 13211

Executive Order 13211, ``Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects for any proposed significant energy action. A ``significant energy action'' is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.

DOE has tentatively concluded that this regulatory action, which sets forth proposed energy conservation standards for SPVUs, is not a significant energy action because the proposed standards are not likely to have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects on this proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review

On December 16, 2004, OMB, in consultation with the Office of Science and Technology Policy (OSTP), issued its Final Information Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 2005). The Bulletin establishes that certain scientific information shall be peer reviewed by qualified specialists before it is disseminated by the Federal Government, including influential scientific information related to agency regulatory actions. The purpose of the bulletin is to enhance the quality and credibility of the Government's scientific information. Under the Bulletin, the energy conservation standards rulemaking analyses are ``influential scientific information,'' which the Bulletin defines as ``scientific information the agency reasonably can determine will have or does have a clear and substantial impact on important public policies or private sector decisions.'' Id. at 2667.

In response to OMB's Bulletin, DOE conducted formal in-progress peer reviews of the energy conservation standards development process and

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analyses and has prepared a Peer Review Report pertaining to the energy conservation standards rulemaking analyses. Generation of this report involved a rigorous, formal, and documented evaluation using objective criteria and qualified and independent reviewers to make a judgment as to the technical/scientific/business merit, the actual or anticipated results, and the productivity and management effectiveness of programs and/or projects. The ``Energy Conservation Standards Rulemaking Peer Review Report'' dated February 2007 has been disseminated and is available at the following Web site: energy.gov/eere/buildings/peer-review.

VII. Public Participation
Attendance at the Public Meeting

The time, date, and location of the public meeting are listed in the DATES and ADDRESSES sections at the beginning of this proposed rule. If you plan to attend the public meeting, please notify Ms. Brenda Edwards at (202) 586-2945 or Brenda.Edwards@ee.doe.gov. Please note that foreign nationals participating in the public meeting are subject to advance security screening procedures which require advance notice prior to attendance at the public meeting. If a foreign national wishes to participate in the public meeting, please inform DOE as soon as possible by contacting Ms. Regina Washington at (202) 586-1214 or by email: foreignvisit@ee.doe.gov so that the necessary procedures can be completed. Please also note that any person wishing to bring a laptop computer into the Forrestal Building will be required to obtain a property pass. Visitors should avoid bringing laptops, or allow an extra 45 minutes

In addition, you can attend the public meeting via webinar. Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE's Web site at: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=107. Participants are responsible for ensuring their systems are compatible with the webinar software.
Procedure for Submitting Requests to Speak and Prepared General Statements for Distribution

Any person who has an interest in the topics addressed in this notice, or who is representative of a group or class of persons that has an interest in these issues, may request an opportunity to make an oral presentation at the public meeting. Such persons may hand-deliver requests to speak to the address shown in the ADDRESSES section at the beginning of this proposed rule between 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays. Requests may also be sent by mail or email to: Ms. Brenda Edwards, U.S. Department of Energy, Building Technologies Program, Mailstop EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121, or Brenda.Edwards@ee.doe.gov. Persons who wish to speak should include with their request a computer diskette or CD-ROM in WordPerfect, Microsoft Word, PDF, or text (ASCII) file format that briefly describes the nature of their interest in this rulemaking and the topics they wish to discuss. Such persons should also provide a daytime telephone number where they can be reached.

DOE requests persons scheduled to make an oral presentation to submit an advance copy of their statements at least one week before the public meeting. DOE may permit persons who cannot supply an advance copy of their statement to participate, if those persons have made advance alternative arrangements with the Building Technologies Program. As necessary, requests to give an oral presentation should ask for such alternative arrangements.
Conduct of the Public Meeting

DOE will designate a DOE official to preside at the public meeting and may also use a professional facilitator to aid discussion. The meeting will not be a judicial or evidentiary-type public hearing, but DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 6306). A court reporter will be present to record the proceedings and prepare a transcript. DOE reserves the right to schedule the order of presentations and to establish the procedures governing the conduct of the public meeting. There shall not be discussion of proprietary information, costs or prices, market share, or other commercial matters regulated by U.S. anti-trust laws. After the public meeting, interested parties may submit further comments on the proceedings, as well as on any aspect of the rulemaking, until the end of the comment period.

The public meeting will be conducted in an informal, conference style. DOE will present summaries of comments received before the public meeting, allow time for prepared general statements by participants, and encourage all interested parties to share their views on issues affecting this rulemaking. Each participant will be allowed to make a general statement (within time limits determined by DOE), before the discussion of specific topics. DOE will allow, as time permits, other participants to comment briefly on any general statements.

At the end of all prepared statements on a topic, DOE will permit participants to clarify their statements briefly and comment on statements made by others. Participants should be prepared to answer questions by DOE and by other participants concerning these issues. DOE representatives may also ask questions of participants concerning other matters relevant to this rulemaking. The official conducting the public meeting will accept additional comments or questions from those attending, as time permits. The presiding official will announce any further procedural rules or modification of the above procedures that may be needed for the proper conduct of the public meeting.

A transcript of the public meeting will be included in the docket, which can be viewed as described in the Docket section at the beginning of this proposed rule and will be accessible on the DOE Web site. In addition, any person may buy a copy of the transcript from the transcribing reporter.
Submission of Comments

DOE will accept comments, data, and information regarding this proposed rule before or after the public meeting, but no later than the date provided in the DATES section at the beginning of this proposed rule. Interested parties may submit comments, data, and other information using any of the methods described in the ADDRESSES section at the beginning of this proposed rule.

Submitting comments via www.regulations.gov. The www.regulations.gov Web page will require you to provide your name and contact information. Your contact information will be viewable to DOE Building Technologies staff only. Your contact information will not be publicly viewable except for your first and last names, organization name (if any), and submitter representative name (if any). If your comment is not processed properly because of technical difficulties, DOE will use this information to contact you. If DOE cannot read your comment due to technical difficulties and cannot contact you for clarification, DOE may not be able to consider your comment.

However, your contact information will be publicly viewable if you include it in the comment itself or in any documents attached to your comment. Any information that you do not want

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to be publicly viewable should not be included in your comment, nor in any document attached to your comment. Otherwise, persons viewing comments will see only first and last names, organization names, correspondence containing comments, and any documents submitted with the comments.

Do not submit to www.regulations.gov information for which disclosure is restricted by statute, such as trade secrets and commercial or financial information (hereinafter referred to as Confidential Business Information (CBI)). Comments submitted through www.regulations.gov cannot be claimed as CBI. Comments received through the Web site will waive any CBI claims for the information submitted. For information on submitting CBI, see the Confidential Business Information section below.

DOE processes submissions made through www.regulations.gov before posting. Normally, comments will be posted within a few days of being submitted. However, if large volumes of comments are being processed simultaneously, your comment may not be viewable for up to several weeks. Please keep the comment tracking number that www.regulations.gov provides after you have successfully uploaded your comment.

Submitting comments via email, hand delivery/courier, or mail. Comments and documents submitted via email, hand delivery, or mail also will be posted to www.regulations.gov. If you do not want your personal contact information to be publicly viewable, do not include it in your comment or any accompanying documents. Instead, provide your contact information in a cover letter. Include your first and last names, email address, telephone number, and optional mailing address. The cover letter will not be publicly viewable as long as it does not include any comments.

Include contact information each time you submit comments, data, documents, and other information to DOE. If you submit via mail or hand delivery/courier, please provide all items on a CD, if feasible, in which case it is not necessary to submit printed copies. No telefacsimiles (faxes) will be accepted.

Comments, data, and other information submitted to DOE electronically should be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format. Provide documents that are not secured, that are written in English, and that are free of any defects or viruses. Documents should not contain special characters or any form of encryption and, if possible, they should carry the electronic signature of the author.

Campaign form letters. Please submit campaign form letters by the originating organization in batches of between 50 to 500 form letters per PDF or as one form letter with a list of supporters' names compiled into one or more PDFs. This reduces comment processing and posting time.

Confidential Business Information. Pursuant to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit via email, postal mail, or hand delivery/courier two well-marked copies: one copy of the document marked ``confidential'' including all the information believed to be confidential, and one copy of the document marked ``non-confidential'' with the information believed to be confidential deleted. Submit these documents via email or on a CD, if feasible. DOE will make its own determination about the confidential status of the information and treat it according to its determination.

Factors of interest to DOE when evaluating requests to treat submitted information as confidential include: (1) A description of the items; (2) whether and why such items are customarily treated as confidential within the industry; (3) whether the information is generally known by or available from other sources; (4) whether the information has previously been made available to others without obligation concerning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) when such information might lose its confidential character due to the passage of time; and (7) why disclosure of the information would be contrary to the public interest.

It is DOE's policy that all comments may be included in the public docket, without change and as received, including any personal information provided in the comments (except information deemed to be exempt from public disclosure).
Issues on Which DOE Seeks Comment

Although DOE welcomes comments on any aspect of this proposal, DOE is particularly interested in receiving comments and views of interested parties concerning the following issues:

1. DOE seeks comment on its tentative conclusion that the creation of a space-constrained equipment class for SPVUs is not warranted. (See section III.B.1 of this preamble for additional information.)

2. DOE seeks comment on the EER and COP pairings for SPVHPs and its method of deriving the pairings. (See section IV.C.1 of this preamble for additional information.)

3. DOE requests comment on its elimination of technologies from consideration based upon the criteria using in the screening analysis. (See section IV.B of the preamble for additional information.)

4. DOE seeks comment as to whether switching to a BPM motor at 10 EER represents the most probable option of achieving that efficiency level for manufacturers. (See section IV.C.2 of this preamble for additional information.)

5. DOE seeks comment on its derivation of the cost efficiency curves for SPVHPs and SPVACs with a cooling capacity >=65,000 Btu/h and =65,000 Btu/h and =135,000 Btu/h and =65,000 Btu/h and AC......................... EER = 8.9.................. January 1, 2010.

conditioners and single package =135,000 Btu/h and AC......................... EER = 8.6.................. January 1, 2010.

conditioners and single package =65,000 Btu/h and =135,000 Btu/h and =65,000 Btu/h and AC......................... EER = 10.0................. October 9, 2015.

conditioners and single package =135,000 Btu/h and AC......................... EER = 10.0................. October 9, 2016.

conditioners and single package =65,000 Btu/h and AC......................... EER = 10.0................. October 9, 2015.

conditioners and single package =135,000 Btu/h and AC......................... EER = 10.0................. October 9, 2016.

conditioners and single package

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Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards for Single Package Vertical Air Conditioners and Single Package Vertical Heat Pumps

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