Energy Conservation Program: Energy Conservation Standards for Residential Water Heaters, Direct Heating Equipment, and Pool Heaters, 20112-20236 [2010-7611]
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
DEPARTMENT OF ENERGY
10 CFR Part 430
[Docket Number EE–2006–BT–STD–0129]
RIN 1904–AA90
Energy Conservation Program: Energy
Conservation Standards for
Residential Water Heaters, Direct
Heating Equipment, and Pool Heaters
AGENCY: Office of Energy Efficiency and
Renewable Energy, Department of
Energy.
ACTION: Final rule.
The U.S. Department of
Energy (DOE) is amending the existing
energy conservation standards for
residential water heaters (other than
tabletop and electric instantaneous
models), gas-fired direct heating
equipment, and gas-fired pool heaters. It
has determined that the amended
energy conservation standards for these
products would result in significant
conservation of energy, and are
technologically feasible and
economically justified.
DATES: The effective date of this rule is
June 15, 2010. Compliance with the
amended standards established for
residential water heaters in today’s final
rule is required starting on April 16,
2015, and compliance with the
standards established for DHE and pool
heaters is required starting on April 16,
2013.
ADDRESSES: For access to the docket to
read background documents, the
technical support document, transcripts
of the public meetings in this
proceeding, or comments received, visit
the U.S. Department of Energy, Resource
Room of the Building Technologies
Program, 950 L’Enfant Plaza, SW., 6th
Floor, Washington, DC 20024, (202)
586–2945, between 9 a.m. and 4 p.m.,
Monday through Friday, except Federal
holidays. Please call Ms. Brenda
Edwards at the above telephone number
for additional information regarding
visiting the Resource Room. You may
also obtain copies of certain previous
rulemaking documents in this
proceeding (i.e., framework document,
notice of public meeting and
announcement of a preliminary
technical support document (TSD),
notice of proposed rulemaking), draft
analyses, public meeting materials, and
related test procedure documents from
the Office of Energy Efficiency and
Renewable Energy’s Web site at: https://
www1.eere.energy.gov/buildings/
appliance_standards/residential/
waterheaters.html.
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SUMMARY:
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FOR FURTHER INFORMATION CONTACT: Mr.
Mohammed Khan, U.S. Department of
Energy, Energy Efficiency and
Renewable Energy, Building
Technologies Program, EE–2J, 1000
Independence Avenue, SW.,
Washington, DC 20585–0121.
Telephone: (202) 586–7892. E-mail:
Mohammed.Khan@ee.doe.gov.
Mr. Eric Stas, U.S. Department of
Energy, Office of the General Counsel,
GC–71, 1000 Independence Avenue,
SW., Washington, DC 20585–0121.
Telephone: (202) 586–9507. E-mail:
Eric.Stas@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of the Final Rule and Its Benefits
A. The Energy Conservation Standard
Levels
B. Benefits and Costs to Purchasers of the
Three Heating Products
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
C. Impact on Manufacturers
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
D. National Benefits
E. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for the
Three Heating Products
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible
Levels
C. Energy Savings
D. Economic Justification
1. Specific Criteria
a. Economic Impact on Consumers and
Manufacturers
b. Life-Cycle Costs
c. Energy Savings
d. Lessening of Utility or Performance of
Products
e. Impact of Any Lessening of Competition
f. Need of the Nation To Conserve Energy
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of
Comments on Methodology
A. Market and Technology Assessment
1. DOE’s Determinations as to the Inclusion
of Products in This Rulemaking
a. Whether Certain Products Are Covered
Under the Act
b. Covered Products Not Included in This
Rulemaking
2. Product Classes
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
B. Screening Analysis
1. Comments on the Screening Analysis
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2. Heat Pump Water Heater and
Condensing Gas-Fired Storage Water
Heater Discussion
a. Condensing Gas-Fired Water Heaters
b. Heat Pump Water Heaters
C. Engineering Analysis
1. Representative Products for Analysis
2. Efficiency Levels Analyzed
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
3. Cost Assessment Methodology
a. Manufacturer Production Cost
b. Manufacturer Selling Price
4. Engineering Analysis Results
5. Scaling to Additional Rated Storage
Capacities
6. Water Heater Energy Efficiency
Equations
D. Markups To Determine Product Price
E. Energy Use Characterization
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
F. Life-Cycle Cost and Payback Period
Analyses
1. Product Price
2. Installation Cost
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
3. Annual Energy Use
4. Energy Prices
5. Energy Price Trend
6. Repair and Maintenance Costs
7. Product Lifetime
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
8. Discount Rates
9. Compliance Date
10. Product Energy Efficiency in the Base
Case
11. Inputs to Payback Period Analysis
G. National Impact Analysis—National
Energy Savings and Net Present Value
Analysis
1. General
2. Shipments
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
d. Impact of Standards on Shipments
3. Base-Case and Standards-Case Efficiency
Distributions
4. National Energy Savings
a. Annual Unit Energy Consumption
b. Site-to-Source Energy Conversion
5. Consumer Net Present Value
a. Increased Total Installed Costs and
Operating Cost Savings
b. Discount Rates
H. Consumer Subgroup Analysis
I. Manufacturer Impact Analysis
1. Water Heater Conversion Costs
2. Manufacturer Markups and Markup
Scenarios
3. Pool Heater Conversion Costs
4. Employment
5. Access to Capital
J. Employment Impact Analysis
K. Utility Impact Analysis
1. Effects of Standards on Energy Prices
and Associated Benefits
L. Environmental Assessment
M. Monetizing Carbon Dioxide and Other
Emissions Impacts
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1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Social Cost of Carbon Values Used in
Past Regulatory Analyses
c. Approach and Key Assumptions
2. Monetary Values of Non-Carbon
Emissions
V. Discussion of Other Comments
A. Trial Standard Levels and Proposed
Standards
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
B. Compliance Date of Amended Standards
VI. Analytical Results and Conclusions
A. Trial Standard Levels
1. Water Heaters
2. Direct Heating Equipment
3. Gas-Fired Pool Heaters
B. Significance of Energy Savings
C. Economic Justification
1. Economic Impact on Consumers
a. Life-Cycle Costs and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impact on Manufacturers
a. Cash-Flow Analysis Results for Water
Heaters
b. Cash-Flow Analysis Results for Direct
Heating Equipment
c. Cash-Flow Analysis Results for Pool
Heaters
d. Impacts on Employment
e. Impacts on Manufacturing Capacity
f. Cumulative Regulatory Burden
g. Impacts on Manufacturers That Are
Small Businesses
3. National Net Present Value of Consumer
Costs and Benefits and National
Employment Impacts
4. Impact on Utility or Performance of
Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
D. Conclusion
1. Overview
2. Water Heaters
3. Direct Heating Equipment
4. Pool Heaters
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility
Act
C. Review Under the Paperwork Reduction
Act of 1995
D. Review Under the National
Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates
Reform Act of 1995
H. Review Under the Treasury and General
Government Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General
Government Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality
Bulletin for Peer Review
M. Congressional Notification
VIII. Approval of the Office of the Secretary
I. Summary of the Final Rule and Its
Benefits
A. The Energy Conservation Standard
Levels
The Energy Policy and Conservation
Act, as amended (42 U.S.C. 6291 et seq.;
EPCA or the Act), provides that any new
or amended energy conservation
standard the Department of Energy
(DOE) prescribes for covered consumer
products, including residential water
heaters, direct heating equipment
(DHE), and pool heaters (collectively
referred to in this document as the
‘‘three heating products’’) must be
designed to ‘‘achieve the maximum
improvement in energy efficiency * * *
which the Secretary [of Energy]
determines is technologically feasible
and economically justified.’’ (42 U.S.C.
6295(o)(2)(A)) Furthermore, the new or
amended standard must ‘‘result in
significant conservation of energy.’’ (42
U.S.C. 6295(o)(3)(B)) The standards in
today’s final rule, which apply to
certain types of the three heating
products, satisfy these requirements.
Table I.1 shows the standard levels
DOE is adopting today. These standards
will apply to the types of the three
heating products listed in the table and
manufactured for sale in the United
States, or imported into the United
States, on or after April 16, 2015 in the
case of water heaters, or on or after
April 15, 2013 in the case of direct
heating equipment and pool heaters.
TABLE I.1—AMENDED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL WATER HEATERS, DIRECT HEATING
EQUIPMENT, AND POOL HEATERS
Product class
Standard level
Residential water heaters*
Gas-fired Storage .................
Electric Storage ....................
Oil-fired Storage ...................
Gas-fired Instantaneous .......
For tanks with a Rated Storage Volume at or below 55
gallons:
EF = 0.675¥(0.0015 × Rated Storage Volume in gallons).
For tanks with a Rated Storage Volume at or below 55
gallons:
EF = 0.960¥(0.0003 × Rated Storage Volume in gallons).
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
For tanks with a Rated Storage Volume above 55 gallons:
EF = 0.8012¥(0.00078 × Rated Storage Volume in
gallons).
For tanks with a Rated Storage Volume above 55 gallons:
EF = 2.057¥(0.00113 × Rated Storage Volume in gallons) .
Product class
Standard level
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Direct heating equipment**
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
wall fan type up to 42,000 Btu/h .............................................................................................................................
wall fan type over 42,000 Btu/h ..............................................................................................................................
wall gravity type up to 27,000 Btu/h .......................................................................................................................
wall gravity type over 27,000 Btu/h up to 46,000 Btu/h .........................................................................................
wall gravity type over 46,000 Btu/h ........................................................................................................................
floor up to 37,000 Btu/h ..........................................................................................................................................
floor over 37,000 Btu/h ...........................................................................................................................................
room up to 20,000 Btu/h .........................................................................................................................................
room over 20,000 Btu/h up to 27,000 Btu/h ...........................................................................................................
room over 27,000 Btu/h up to 46,000 Btu/h ...........................................................................................................
room over 46,000 Btu/h ..........................................................................................................................................
hearth up to 20,000 Btu/h .......................................................................................................................................
hearth over 20,000 Btu/h and up to 27,000 Btu/h ..................................................................................................
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AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
=
=
=
=
=
=
=
=
=
=
=
=
=
75%
76%
65%
66%
67%
57%
58%
61%
66%
67%
68%
61%
66%
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
Product class
Standard level
Gas hearth over 27,000 Btu/h and up to 46,000 Btu/h ..................................................................................................
Gas hearth over 46,000 Btu/h ........................................................................................................................................
AFUE = 67%
AFUE = 68%
Pool heaters
Gas-fired .........................................................................................................................................................................
Thermal Efficiency = 82%
* EF is the ‘‘energy factor,’’ and the ‘‘Rated Storage Volume’’ equals the water storage capacity of a water heater (in gallons), as specified by
the manufacturer.
** Btu/h is ‘‘British thermal units per hour,’’ and AFUE is ‘‘Annual Fuel Utilization Efficiency.’’
B. Benefits and Costs to Purchasers of
the Three Heating Products
1. Water Heaters
Table I.2 presents the implications of
today’s standards for consumers of
residential water heaters. The economic
impacts of the standards on consumers,
as measured by the average life-cycle
cost (LCC) savings, are positive, even
though the standards may increase some
initial costs. For example, a typical gas
storage water heater has an average
installed price of $1,079 and average
lifetime operating costs (discounted) of
$2,473. To meet the amended standards,
DOE estimates that the average installed
price of such equipment will increase
by $120, which will be offset by savings
of $143 in average lifetime operating
costs (discounted).
TABLE I.2—IMPLICATIONS OF STANDARDS FOR PURCHASERS OF RESIDENTIAL WATER HEATERS
Average baseline installed
price**
$
Product class
Energy conservation standard
EF *
Gas-Fired Storage Water Heater ......
0.62 (40 gallons) ..............................
0.76 (56 gallons) ..............................
Weighted ..........................................
0.95 (50 gallons) ..............................
2.0 (56 gallons) ................................
Weighted ..........................................
0.62 (32 gallons) ..............................
0.82 (0 gallons) ................................
Electric Storage Water Heater ..........
Oil-Fired Storage Water Heater ........
Gas-Fired
Instantaneous
Water
Heater.
Average installed price
increase
$
$1,072
1,261
1,079
554
729
569
1,974
1,779
$92
805
120
140
974
213
67
601
Average lifecycle cost
savings***
$
$6
77
18
10
626
64
295
6
Median payback period
years
2.0
9.8
2.3
6.9
6.0
6.8
0.5
14.8
* The values are for the representative storage volumes (40 gallons for gas-fired storage water heaters, 50 gallons for electric storage water
heaters, 32 gallons for oil-fired storage water heaters, and 0 gallons for gas-fired instantaneous water heaters). The standard level is represented
by an energy-efficiency equation, which specifies an EF level over the entire storage volume range.
** For a baseline model.
*** The average life-cycle cost savings refers to the average savings in the discounted life-cycle costs of owning and operating the product due
to the standard. This value represents the net benefit (or cost) of a more-efficient product after considering both the increased installed price and
the lifetime operating cost savings.
2. Direct Heating Equipment
Table I.3 presents the implications of
today’s standards for consumers of
direct heating equipment. The economic
impacts of the standards on consumers,
as measured by the average LCC savings,
are positive, even though the standards
may increase some initial costs. For
example, a typical gas wall fan DHE has
an average installed price of $1,832 and
average lifetime operating costs
(discounted) of $5,544. To meet the
amended standards, DOE estimates that
the average installed price of such
equipment will increase by $81, which
will be more than offset by savings of
$249 in average lifetime operating costs
(discounted).
TABLE I.3—IMPLICATIONS OF STANDARDS FOR PURCHASERS OF DIRECT HEATING EQUIPMENT AT THE REPRESENTATIVE
RATED INPUT CAPACITY RANGE
Energy conservation
standard*
AFUE (%)
Product class
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Gas
Gas
Gas
Gas
Gas
Wall Fan .......................................................................
Wall Gravity ..................................................................
Floor .............................................................................
Room ............................................................................
Hearth ...........................................................................
Average baseline installed
price**
$
76
66
58
67
67
Average installed price
increase
$
$1,832
1,433
2,209
1,208
1,603
$81
61
54
83
82
Average lifecycle cost
savings***
$
$102
21
13
60
112
Median payback period
Years
3.2
7.5
10.7
4.5
0.0
* The values are for the representative input capacity ranges (>42,000 Btu/h for wall fan, >27,000 Btu/h and ≤46,000 Btu/h for wall gravity,
>37,000 Btu/h for floor, >27,000 Btu/h and ≤46,000 Btu/h for room, and >27,000 Btu/h and ≤46,000 Btu/h for hearth). The standard levels vary
by input capacity range.
** For a baseline model.
*** The average life-cycle cost savings refers to the average savings in the discounted life-cycle costs of owning and operating the product due
to the standard. This value represents the net benefit (or cost) of a more-efficient product after considering both the increased installed price and
the lifetime operating cost savings.
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3. Pool Heaters
Table I.4 presents the implications of
today’s standards for consumers of pool
heaters. The economic impacts of the
standards on consumers, as measured
by the average LCC savings, are positive,
even though the standards may increase
some initial costs. For example, a
typical pool heater has an average
installed price of $3,240 and average
lifetime operating costs (discounted) of
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$5,099. To meet the amended standards,
DOE estimates that the average installed
price of such equipment will increase
by $103, which will be offset by savings
of $226 in average lifetime operating
costs (discounted).
TABLE I.4—IMPLICATIONS OF STANDARDS FOR PURCHASERS OF POOL HEATERS AT 250,000 Btu/h
Energy conservation
standard*
Thermal Efficiency (%)
Product class
Gas-fired ..............................................................................
Average baseline installed
price**
$
82
Average installed price
increase
$
$3,240
$103
Average lifecycle cost
savings***
$
$22
Median payback period
Years
8.6
* The values are for the representative input capacity of 250,000 Btu/h.
** For a baseline model.
*** The average life-cycle cost savings refers to the average savings in the discounted life-cycle costs of owning and operating the product due
to the standard. This value represents the net benefit (or cost) of a more-efficient product after considering both the increased installed price and
the lifetime operating cost savings.
C. Impact on Manufacturers
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1. Water Heaters
Using a real corporate discount rate of
8.9 percent for gas-fired and electric
storage water heaters, 7.6 percent for oilfired storage water heaters, and 9.5
percent for gas-fired instantaneous
water heaters, which DOE calculated by
examining the financial statements of
residential water heater manufacturers,
DOE estimates the industry net present
value (INPV) of the manufacturing
industry to be $880 million for gas-fired
and electric storage water heaters, $9
million for oil-fired storage water
heaters, and $648 million for gas-fired
instantaneous water heaters (all figures
in 2009$). DOE expects the impact of
the standards on the INPV of
manufacturers of gas-fired and electric
storage water heaters to range from a
loss of 2.9 percent to a loss of 13.9
percent (a loss of $25.9 million to a loss
of $122.6 million). DOE expects the
impact of the standards on the INPV of
manufacturers of oil-fired storage water
heaters to range from a loss of 2.0
percent to a loss of 4.2 percent (a loss
of $0.2 million to a loss of $0.4 million).
DOE expects the impact of the standards
on the INPV of manufacturers of gasfired instantaneous water heaters to
range from an increase of 0.4 percent to
a loss of 0.2 percent (an increase of $2.3
million to a loss of $1.2 million). Based
on DOE’s interviews with the major
manufacturers of residential water
heaters, DOE expects minimal plant
closings or loss of employment as a
result of the standards. At the amended
standard level, DOE does not expect
significant impacts on competition in
the overall water heater market. For gasfired and electric storage water heaters,
DOE believes there are primarily three
major manufacturers who have
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established market positions. In
addition, DOE believes there is another
major appliance manufacturer with
significant resources that has recently
announced intentions to scale its efforts
in the water heating market. For oilfired storage water heaters and gas-fired
instantaneous water heaters, DOE
believes the standards-case market can
at least sustain the base-case level of
competition.
2. Direct Heating Equipment
Using a real corporate discount rate of
8.5 percent, which DOE calculated by
examining the financial statements of
direct heating equipment
manufacturers, DOE estimates the INPV
of the manufacturing industry to be $17
million for traditional direct heating
equipment and $77 million for hearth
direct heating equipment (both figures
in 2009$). DOE expects the impact of
the standards on the INPV of
manufacturers of traditional direct
heating equipment to range from a loss
of 7.2 percent to a loss of 23.6 percent
(a loss of $1.2 million to a loss of $3.9
million). DOE expects the impact of the
standards on the INPV of manufacturers
of hearth direct heating equipment to
range from a loss of 0.3 percent to a loss
of 1.2 percent (a loss of $0.2 million to
a loss of $0.9 million). Based on DOE’s
interviews with the major
manufacturers of both traditional and
hearth direct heating equipment, DOE
expects minimal plant closings or loss
of employment as a result of the
standards. DOE believes the impact of
the amended standards on competition
in the traditional and hearth DHE
market will not be significant because
small manufacturers will be able to
upgrade enough product lines to meet
the standard, which in combination
with product lines that currently meet
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the standard, will enable them to remain
viable competitors.
3. Pool Heaters
Using a real corporate discount rate of
7.4 percent, which DOE calculated by
examining the financial statements of
pool heater manufacturers, DOE
estimates the INPV of the manufacturing
industry to be $49 million for gas-fired
pool heaters (figures in 2009$). DOE
expects the impact of the standards on
the INPV of manufacturers of gas-fired
pool heaters to range from an increase
of 0.5 percent to a loss of 1.7 percent (an
increase of $0.3 million to a loss of $0.8
million). Based on DOE’s interviews
with the major manufacturers of pool
heaters, DOE expects minimal plant
closings or loss of employment as a
result of the standards. DOE does not
believe there will be any lessening of
competition in the pool heater market as
a result of the standards established by
today’s final rule, because all of the
manufacturers already offer at least one
product line that meets or exceeds the
standard level promulgated by today’s
final rule.
D. National Benefits
DOE estimates the standards will save
approximately 2.81 quads (quadrillion
or 1015) British thermal units (Btu) of
energy over a 30-year period: 2.58 quads
for residential water heaters during
2015–2045, and 0.21 and 0.02 quads for
DHE and pool heaters, respectively,
during 2013–2043. The total of 2.81
quads is equivalent to all the energy
consumed by nearly 15 million
American households in a single year.
By 2045, DOE expects the energy
savings from today’s standards to
eliminate the need for approximately
three new 250 MW power plants.
These energy savings will result in
cumulative greenhouse gas emission
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reductions of approximately 164 million
tons (Mt) of carbon dioxide (CO2), or an
amount equal to that produced by
approximately 46 million cars every
year. Additionally, the standards will
help alleviate air pollution by resulting
in cumulative emissions reductions of
approximately 125 kilotons (kt) for
nitrogen oxides (NOX) and 0.54 tons for
power plant mercury (Hg).
The estimated monetary value of the
cumulative CO2 emissions reductions,
based on a range of values from a recent
interagency process, is $560 to $8,725
million. The estimated monetary value
of the cumulative CO2 emissions
reductions, based on the central value
from the interagency process, is $2,861
million. The estimated net present
monetary value of the other emissions
reductions (discounted to 2010 using a
7-percent discount rate and expressed in
2009$) is $12.2 to 125 million for NOX.
At a 3-percent discount rate, the
estimated net present value of these
emissions reductions is $27.2 to 284
million for NOX.
The national NPV of consumer benefit
of today’s standards is $1.98 billion
using a 7-percent discount rate and
$10.11 billion using a 3-percent
discount rate, cumulative from 2013 to
2043 for DHE and pool heaters, and
from 2015 to 2045 for water heaters, in
2009$. This is the estimated present
value of future operating cost savings
minus the estimated increased costs of
purchasing and installing the three
types of heating products, discounted to
2010.
The benefits and costs of today’s rule
can also be expressed in terms of
annualized values from 2013 to 2043 for
DHE and pool heaters, and from 2015 to
2045 for water heaters. Estimates of
annualized values for the three types of
heating products are shown in Table I.5,
Table I.6, and Table I.7. The annualized
monetary benefits are the sum of the
annualized national economic value of
operating cost savings (energy,
maintenance, and repair), expressed in
2009$, plus the monetary value of the
benefits of CO2 and NOX emission
reductions. For the value of CO2
emission reductions, DOE uses the
global Social Cost of Carbon (SCC)
calculated using the average value
derived using a 3-percent discount rate
(equivalent to $21.40 per metric ton of
CO2 emitted in 2010, in 2007$). This
value is a central value from a recent
interagency process. The derivation of
this value is discussed in section IV.M.
The monetary benefits of cumulative
emissions reductions are reported in
2009$ so that they can be compared
with the other costs and benefits in the
same dollar units.
Although the above consideration of
benefits provides a valuable perspective,
please note the following: (1) The
national operating cost savings are
domestic U.S. consumer monetary
savings found in market transactions,
while the value of CO2 reductions is
based on a global value. Also, note that
the central value is only one of four SCC
developed by the interagency
workgroup. Other marginal SCC values
for 2010 are $4.70, $35.10, and $64.90
per metric ton (2007$ for emissions in
2010), which reflect different discount
rates and, for the highest value, the
possibility of higher-than-expected
impacts further out in the tails of the
SCC distribution. (2) The assessments of
operating cost savings and CO2 savings
are performed with different computer
models, leading to different time frames
for analysis. The national operating cost
savings is measured for the lifetime of
heating products shipped in the period
2013–2043 (for DHE and pool heaters)
or 2015–2045 (for water heaters). The
value of CO2, on the other hand, reflects
the present value of all future climaterelated impacts (out to 2300) due to
emitting a ton of carbon dioxide in each
year of the forecast period.
Using a 7-percent discount rate and
the central SCC value, the combined
cost of the standards adopted in today’s
final rule for heating products is $1,285
million per year in increased equipment
and installation costs, while the
annualized benefits are $1,500 million
per year in reduced equipment
operating costs, $169 million in CO2
reductions, and $7.7 million in reduced
NOX emissions. At a 7-percent discount
rate, the net benefit amounts to $391
million per year. Using a 3-percent
discount rate and the central SCC value,
the cost of the standards adopted in
today’s rule is $1,249 million per year
in increased equipment and installation
costs, while the benefits of today’s
standards are $1,843 million per year in
reduced operating costs, $169 million in
CO2 reductions, and $9.2 million in
reduced NOX emissions. At a 3-percent
discount rate, the net benefit amounts to
$771 million per year.
TABLE I.5—ANNUALIZED BENEFITS AND COSTS FOR WATER HEATERS (TSL 5)
Units
Primary estimate
(AEO reference
case)
Category
Low estimate
(low energy price
case)
High estimate
(high energy
price case)
Year dollars
Disc. rate
Period covered (2015–
2045)
Benefits
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Energy
Annualized
(millions$/year).
Monetized
1407.0
1275.5
1537.5
2009
7%
30
1729.6
43.5
1556.1
43.5
1902.9
43.5
2009
2009
3%
5%
30
30
158.6
158.6
158.6
2009
3%
30
245.7
245.7
245.7
2009
2.5%
30
483.8
483.8
483.8
2009
3%
30
7.0
7.0
7.0
2009
7%
30
8.5
1457.5–1897.8
8.5
1326–1766.3
8.5
1588–2028.3
2009
2009
3%
7% range
30
30
1572.7
1896.7
1441.1
1723.2
1703.2
2070.0
2009
2009
7%
3%
CO2 Monetized Value (at $4.7/Metric Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/
Metric Ton, millions$/year)*.
NOx Monetized Value (at $2,437/
Metric Ton, millions$/year).
Total Monetary Benefits (millions$/
year)**.
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TABLE I.5—ANNUALIZED BENEFITS AND COSTS FOR WATER HEATERS (TSL 5)—Continued
Units
Primary estimate
(AEO reference
case)
1781.5–2221.8
Category
Low estimate
(low energy price
case)
1608–2048.3
High estimate
(high energy
price case)
Year dollars
Disc. rate
Period covered (2015–
2045)
1954.9–2395.2
2009
3% range
30
Costs
Annualized Monetized (millions$/
year).
1250.3
1184.5
1321.6
2009
7%
30
1216.6
1145.7
1295.6
2009
3%
30
Net Benefits/Costs
207.2–647.5
141.5–581.8
266.4–706.7
2009
7% range
30
322.4
680.1
565–1005.3
Annualized Monetized, including
CO2 Benefits (million$/year)**.
256.6
577.5
462.3–902.6
381.5
774.4
659.3–1099.6
2009
2009
2009
7%
3%
3% range
30
30
30
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7,
$21.4, and $35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of
$64.9 per ton represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate (averaged across three Integrated Assessment Models (IAMs)), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as
‘‘7% Range’’ and ‘‘3% Range’’ calculate consumer and NOX cases with the labeled discount rate but add these values to the full range of CO2
values with the $4.7/ton value at the low end, and the $64.9/ton value at the high end.
TABLE I.6—ANNUALIZED BENEFITS AND COSTS FOR DIRECT HEATING EQUIPMENT
[TSL 2]
Units
Primary estimate
(AEO reference
case)
Category
Low estimate
(low energy price
case)
High estimate
(high energy
price case)
Year dollars
Disc. rate
Period
covered
(2013–2043)
Benefits
Energy
Annualized
(millions$/year).
Monetized
Total Monetary Benefits (millions$/
year)**.
78.8
84.6
2009
7%
30
100.6
2.5
96.3
2.5
103.6
2.5
2009
2009
3%
5%
30
30
9.2
9.2
9.2
2009
3%
30
14.3
14.3
14.3
2009
2.5%
30
28.1
28.1
28.1
2009
3%
30
0.6
0.6
0.6
2009
7%
30
0.6
85.2–110.8
0.6
81.8–107.4
0.6
87.7–113.2
2009
2009
3%
7% range
30
30
91.9
110.4
103.7–129.3
CO2 Monetized Value (at $4.7/Metric Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/
Metric Ton, millions$/year)*.
NOX Monetized Value (at $2,437/
Metric Ton, millions$/year).
82.2
88.5
106.2
99.5–125
94.4
113.4
106.7–132.3
2009
2009
2009
7%
3%
3% range
........................
........................
30
Costs
jlentini on DSKJ8SOYB1PROD with RULES2
Annualized Monetized (millions$/
year).
27.7
27.7
27.7
2009
7%
30
26.0
26.0
26.0
2009
3%
30
Net Benefits/Costs
Annualized Monetized, including
CO2 Benefits (millions$/year)**.
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54.1–79.7
60–85.6
2009
7% range
30
64.3
84.4
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60.8
80.1
66.7
87.4
2009
2009
7%
3%
30
30
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TABLE I.6—ANNUALIZED BENEFITS AND COSTS FOR DIRECT HEATING EQUIPMENT—Continued
[TSL 2]
Units
Primary estimate
(AEO reference
case)
77.7–103.2
Category
Low estimate
(low energy price
case)
High estimate
(high energy
price case)
73.4–99
Year dollars
80.7–106.3
2009
Disc. rate
3% range
Period
covered
(2013–2043)
30
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7,
$21.4, and $35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of
$64.9 per ton represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate (averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ‘‘7% Range’’ and ‘‘3% Range’’ calculate consumer and NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value at
the low end, and the $64.9/ton value at the high end.
TABLE I.7—ANNUALIZED BENEFITS AND COSTS FOR POOL HEATERS
[TSL 2]
Units
Primary
estimate (AEO
reference case)
Category
Low estimate
(low energy price
case)
High estimate
(high energy
price case)
Year dollars
Disc. rate
Period
covered
(2013–2043)
Benefits
Energy
Annualized
(millions$/year).
Monetized
Total Monetary Benefits (millions$/
year)**.
10.1
10.9
2009
7%
30
12.5
0.2
12.0
0.2
12.9
0.2
2009
2009
3%
5%
30
30
0.8
0.8
0.8
2009
3%
30
1.3
1.3
1.3
2009
2.5%
30
2.4
2.4
2.4
2009
3%
30
0.1
0.1
0.1
2009
7%
30
0.1
10.8–13
0.1
10.4–12.6
0.1
11.1–13.3
2009
2009
3%
7% range
30
30
11.4
13.4
12.8–15
CO2 Monetized Value (at $4.7/Metric Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/
Metric Ton, millions$/year)*.
NOX Monetized Value (at $2,437/
Metric Ton, millions$/year).
10.6
11.0
12.8
12.3–14.4
11.7
13.7
13.2–15.3
2009
2009
2009
7%
3%
3% range
........................
........................
30
Costs
Annualized Monetized (millions$/
year).
6.9
6.9
6.9
2009
7%
30
6.7
6.7
6.7
2009
3%
30
Net Benefits/Costs
3.9–6.1
3.4–5.6
4.2–6.4
2009
7% range
30
4.5
6.7
6.1–8.3
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Annualized Monetized, including
CO2 Benefits (millions$/year)**.
4.0
6.2
5.6–7.8
4.8
7.1
6.5–8.7
2009
2009
2009
7%
3%
3% range
30
30
30
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7,
$21.4, and $35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of
$64.9 per ton represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate (averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ‘‘7% Range’’ and ‘‘3% Range’’ calculate consumer and NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value at
the low end, and the $64.9/ton value at the high end.
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TABLE I.8—SUM OF ANNUALIZED BENEFITS AND COSTS FOR HEATING PRODUCTS STANDARDS
Primary estimate
(AEO reference
case)
Category
Low estimate
(low energy price
case)
High estimate
(high energy
price case)
Units
Disc.
rate
Year dollars
Period covered
Benefits
Energy
Annualized
(millions$/year).
Monetized
1499.8
1364.4
1633.0
2009
7%
30
1842.7
46.2
1664.4
46.2
2019.4
46.2
2009
2009
3%
5%
30
30
168.6
168.6
168.6
2009
3%
30
261.3
261.3
261.3
2009
2.5%
30
514.2
514.2
514.2
2009
3%
30
7.6
7.6
7.6
2009
7%
30
9.2
1553.5–2021.6
9.2
1418.2–1886.3
9.2
1686.8–2154.8
2009
2009
3%
7% range
30
30
1676.0
2020.5
1898–2366.1
1540.6
1842.2
1719.8–2187.7
1809.2
2197.2
2074.8–2542.8
2009
2009
2009
7%
3%
3% range
........................
........................
30
CO2 Monetized Value (at $4.7/Metric Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/
Metric Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/
Metric Ton, millions$/year)*.
NOX Monetized Value (at $2,437/
Metric Ton, millions$/year).
Total Monetary Benefits (millions$/
year)**.
Costs
Annualized Monetized ....................
(millions$/year) ...............................
1284.9
1356.3
2009
7%
30
1249.3
268.7–736.7
1178.4
199–667.1
1328.3
330.6–798.7
2009
2009
3%
7% range
30
30
391.1
771.2
648.8–1116.8
Annualized Monetized, including
CO2 Benefits (millions$/year)**.
1219.1
321.5
663.8
541.3–1009.4
453.0
868.9
746.5–1214.6
2009
2009
2009
7%
3%
3% range
30
30
30
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7,
$21.4, and $35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of
$64.9 per ton represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate (averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ‘‘7% Range’’ and ‘‘3% Range’’ calculate consumer and NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value at
the low end, and the $64.9/ton value at the high end.
E. Conclusion
Based upon the analysis culminating
in this final rule, DOE has concluded
that the benefits (energy savings,
consumer LCC savings, positive national
NPV, and emissions reductions) to the
Nation of today’s amended standards
outweigh their costs (a potential loss of
manufacturer INPV and consumer LCC
increases for some users of the three
heating products). Table 1.9 below
summarizes total annualized monetized
benefits and costs for these energy
conservation standards. Today’s
standards also represent the maximum
improvement in energy efficiency that is
technologically feasible and
economically justified, and will result
in significant energy savings for all three
types of the heating products. At
present, residential water heaters, DHE,
and pool heaters that meet the new
standard levels are either commercially
available or available as prototypes.
TABLE I.9—SUMMARY ANNUALIZED MONETIZED BENEFITS AND COSTS
Category
($million/year)
Discount rate
Benefits*
1676.0
2020.5
7%
3%
1284.9
1249.3
7%
3%
391.1
771.2
7%
3%
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Costs
Net Benefits/Costs*
*Annualized Monetized, including monetized CO2 and NOX benefits.
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II. Introduction
A. Authority
Title III of EPCA sets forth a variety
of provisions designed to improve
energy efficiency. Part A1 of Title III (42
U.S.C. 6291–6309) provides for the
Energy Conservation Program for
Consumer Products Other Than
Automobiles. The program covers
consumer products and certain
commercial products (all of which are
referred to hereafter as ‘‘covered
products’’), including the three heating
products that are the subject of this
rulemaking. (42 U.S.C. 6292(a)(4), (9),
(11)) DOE publishes today’s final rule
pursuant to Part A of Title III, which
also provides for test procedures,
labeling, and energy conservation
standards for the three heating products
and certain other types of products, and
authorizes DOE to require information
and reports from manufacturers. The
test procedures for water heaters, vented
DHE, and pool heaters appear at Title 10
of the Code of Federal Regulations (CFR)
part 430, subpart B, appendices E, O,
and P, respectively.
EPCA prescribes specific energy
conservation standards for the three
heating products. (42 U.S.C. 6295(e)(1)–
(3)) The statute further directs DOE to
conduct two cycles of rulemakings to
determine whether to amend these
standards. (42 U.S.C. 6295(e)(4)) This
rulemaking represents the second round
of amendments to the water heater
standards, and the first round of
amendments to the DHE and pool heater
standards. The notice of proposed
rulemaking (NOPR) in this proceeding
(the December 2009 NOPR; 74 FR
65852, 65858–59, 65866 (Dec. 11, 2009),
and section II.B.2 below, provide
additional detail on the nature and
statutory history of the requirements for
the three types of heating products.
EPCA also provides criteria for
prescribing amended standards for
covered products generally, including
the three heating products. As indicated
above, any such amended standard must
be designed to achieve the maximum
improvement in energy efficiency that is
technologically feasible and
economically justified. (42 U.S.C.
6295(o)(2)(A)) Additionally, EPCA
provides specific prohibitions on
prescribing such standards. DOE may
not prescribe an amended standard for
any of the three heating products for
which it has not established a test
procedure. (42 U.S.C. 6295(o)(3)(A))
Further, DOE may not prescribe a
1 This part was originally titled Part B. It was
redesignated Part A in the United States Code for
editorial reasons.
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standard if DOE determines by rule that
such standard would not result in
‘‘significant conservation of energy,’’ or
‘‘is not technologically feasible or
economically justified.’’ (42 U.S.C.
6295(o)(3)(B))
EPCA also provides that in deciding
whether a standard is economically
justified for covered products, DOE
must, after receiving comments on the
proposed standard, determine whether
the benefits of the standard exceed its
burdens by considering, to the greatest
extent practicable, the following seven
factors:
1. The economic impact of the
standard on manufacturers and
consumers of the products subject to the
standard;
2. The savings in operating costs
throughout the estimated average life of
the covered products in the type (or
class) compared to any increase in the
price, initial charges, or maintenance
expenses for the covered products that
are likely to result from the imposition
of the standard;
3. The total projected amount of
energy (or, as applicable, water) savings
likely to result directly from the
imposition of the standard;
4. Any lessening of the utility or the
performance of the covered products
likely to result from the imposition of
the standard;
5. The impact of any lessening of
competition, as determined in writing
by the Attorney General, that is likely to
result from the imposition of the
standard;
6. The need for national energy and
water conservation; and
7. Other factors the Secretary of
Energy (Secretary) considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII))
In addition, EPCA, as amended,
establishes a rebuttable presumption
that any standard for covered products
is economically justified if the Secretary
finds that ‘‘the additional cost to the
consumer of purchasing a product
complying with an energy conservation
standard level will be less than three
times the value of the energy (and as
applicable, water) savings during the
first year that the consumer will receive
as a result of the standard,’’ as calculated
under the test procedure in place for
that standard. (42 U.S.C.
6295(o)(2)(B)(iii))
EPCA also contains what is
commonly known as an ‘‘antibacksliding’’ provision. (42 U.S.C.
6295(o)(1)) This provision mandates
that the Secretary not prescribe any
amended standard that either increases
the maximum allowable energy use or
decreases the minimum required energy
efficiency of a covered product. EPCA
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further provides that the Secretary may
not prescribe an amended 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 product type (or class) with
performance characteristics (including
reliability), features, sizes, capacities,
and volumes that are substantially the
same as those generally available in the
United States at the time of the
Secretary’s finding. (42 U.S.C.
6295(o)(4))
Under 42 U.S.C. 6295(q)(1), EPCA
specifies requirements applicable to
promulgating standards for any type or
class of covered product that has two or
more subcategories. Under this
provision, DOE must specify a different
standard level than that which applies
generally to such type or class of
product for any group of products
‘‘which have the same function or
intended use, if * * * products within
such group—(A) consume a different
kind of energy from that consumed by
other covered products within such type
(or class); or (B) have a capacity or other
performance-related feature which other
products within such type (or class) do
not have and such feature justifies a
higher or lower standard’’ than applies
or will apply to the other products. (42
U.S.C. 6295(q)(1)) In determining
whether a performance-related feature
justifies such a different standard for a
group of products, DOE must consider
‘‘such factors as the utility to the
consumer of such a feature’’ and other
factors DOE deems appropriate. Id. Any
rule prescribing such a standard must
include an explanation of the basis on
which DOE established such higher or
lower level. (42 U.S.C. 6295(q)(2))
Section 310(3) of the Energy
Independence and Security Act of 2007
(EISA 2007; Pub. L. 110–140) amended
EPCA to prospectively require that
energy conservation standards address
standby mode and off mode energy use.
Specifically, when DOE adopts new or
amended standards for a covered
product after July 1, 2010, the final rule
must, if justified by the criteria for
adoption of standards in section 325(o)
of EPCA, incorporate standby mode and
off mode energy use into a single
standard if feasible, or otherwise adopt
a separate standard for such energy use
for that product. (42 U.S.C. 6295(gg)(3))
Because DOE is adopting today’s final
rule before July 2010, this requirement
does not apply in this rulemaking, and
DOE has not specifically addressed
standby mode or off mode energy use
here. DOE is currently working on a test
procedure rulemaking to address the
measurement of standby mode and off
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mode energy consumption for the three
types of heating products that are the
subject of this rulemaking.
Finally, Federal energy conservation
requirements for covered products
generally supersede State laws or
regulations concerning energy
conservation testing, labeling, and
standards. (42 U.S.C. 6297(a)–(c)) DOE
can, however, grant waivers of Federal
preemption for particular State laws or
regulations, in accordance with the
procedures and other provisions of
section 327(d) of the Act. (42 U.S.C.
6297(d))
B. Background
1. Current Standards
On January 17, 2001, DOE published
a final rule prescribing the current
Federal energy conservation standards
for residential water heaters
manufactured on or after January 20,
2004, which set minimum energy
factors (EFs) that vary based on the
storage volume of the water heater, the
type of energy it uses (i.e., gas, oil, or
electricity), and whether it is a storage,
instantaneous, or tabletop model. 66 FR
4474; 10 CFR 430.32(d). EPCA
prescribes the Federal energy
conservation standards for DHE and
pool heaters. For DHE, these consist of
minimum annual fuel utilization
efficiency (AFUE) levels, each of which
applies to a type of unit (i.e., wall fan,
wall gravity, floor, or room) and heating
capacity range. (42 U.S.C. 6295(e)(3)); 10
CFR 430.32(i). For pool heaters, the
Federal energy conservation standard
prescribed by EPCA includes a single
minimum thermal efficiency level. (42
U.S.C. 6295(e)(2)); 10 CFR 430.32(k).
Table II.1, Table II.2, and Table II.3
present the current Federal energy
conservation standards for residential
water heaters, DHE, and pool heaters,
respectively. The water heater
standards, set forth in 10 CFR 430.32(d),
consist of minimum energy factors (EF)
that vary based on the rated storage
volume of the water heater, the type of
energy it uses (i.e., gas, oil, or
electricity), and whether it is a storage,
instantaneous, or tabletop model. The
DHE standards, set forth in 42 U.S.C.
6295(e)(3) and 10 CFR 430.32(i), consist
of minimum annual fuel utilization
efficiency (AFUE) levels, each of which
applies to a particular type of gas-fired
product (i.e., wall fan, wall gravity,
floor, room) and input heating capacity
range. (Although electric DHE are
available, no Federal energy
conservation standards exist for these
products, and today’s final rule contains
no such standards. For a more detailed
discussion of DHE coverage under
EPCA, see 74 FR 65852, 65866 (Dec. 11,
2009) (the December 2009 NOPR)). The
pool heater standards, set forth at 42
U.S.C. 6295(e)(2) and 10 CFR 430.32(k),
consist of a thermal efficiency level.
(Similar to the situation with DHE, this
standard applies only to gas-fired
products. Although electric pool heaters
are available, no Federal energy
conservation standards currently exist
for other pool heaters, and today’s final
rule contains no such standard. For a
more detailed discussion of pool heater
coverage, see 74 FR 65852, 65866–67
(Dec. 11, 2009).)
TABLE II.1—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL WATER HEATERS
Product class
Energy factor as of January 20, 2004
Gas-Fired Storage Water Heater .............................................................
Oil-Fired Storage Water Heater ...............................................................
Electric Storage Water Heater .................................................................
Tabletop Water Heater .............................................................................
Gas-Fired Instantaneous Water Heater ...................................................
Instantaneous Electric Water Heater .......................................................
EF
EF
EF
EF
EF
EF
=
=
=
=
=
=
0.67—(0.0019 × Rated Storage Volume in gallons)
0.59—(0.0019 × Rated Storage Volume in gallons)
0.97—(0.00132 × Rated Storage Volume in gallons)
0.93—(0.00132 × Rated Storage Volume in gallons)
0.62—(0.0019 × Rated Storage Volume in gallons)
0.93—(0.00132 × Rated Storage Volume in gallons)
TABLE II.2—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR DIRECT HEATING EQUIPMENT
Annual fuel utilization efficiency,
as of Jan. 1,
1990
%
Direct heating equipment design type
Product class
Btu/h
Gas Wall Fan ...........................................
Up to 42,000 ..............................................................................................................
Over 42,000 ...............................................................................................................
Up to 10,000 ..............................................................................................................
Over 10,000 and up to 12,000 ..................................................................................
Over 12,000 and up to 15,000 ..................................................................................
Over 15,000 and up to 19,000 ..................................................................................
Over 19,000 and up to 27,000 ..................................................................................
Over 27,000 and up to 46,000 ..................................................................................
Over 46,000 ...............................................................................................................
Up to 37,000 ..............................................................................................................
Over 37,000 ...............................................................................................................
Up to 18,000 ..............................................................................................................
Over 18,000 and up to 20,000 ..................................................................................
Over 20,000 and up to 27,000 ..................................................................................
Over 27,000 and up to 46,000 ..................................................................................
Over 46,000 ...............................................................................................................
Gas Wall Gravity .....................................
Gas Floor .................................................
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Gas Room ...............................................
TABLE II.3—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR POOL HEATERS
Product class
Thermal efficiency as of January 1, 1990
Gas-Fired Pool Heater .............................................................................
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74
59
60
61
62
63
64
65
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
2. History of Standards Rulemaking for
the Three Heating Products
Prior to being amended in 1987, EPCA
included water heaters and home
heating equipment as covered products.
The amendments to EPCA effected by
the National Appliance Energy
Conservation Act of 1987 (NAECA; Pub.
L. 100–12) included replacing the term
‘‘home heating equipment’’ with ‘‘direct
heating equipment,’’ adding pool heaters
as a covered product, establishing
standards for the three heating products,
and requiring that DOE determine
whether these standards should be
amended. (42 U.S.C. 6295(e)(1)–(4)) As
indicated above, DOE amended the
statutorily-prescribed standards for
water heaters in 2001 (66 FR 4474 (Jan.
17, 2001)), but has not amended the
statutory standards for DHE or pool
heaters.
DOE commenced this rulemaking on
September 27, 2006, by publishing on
its Web site its ‘‘Rulemaking Framework
for Residential Water Heaters, Direct
Heating Equipment, and Pool Heaters.’’
(A PDF of the framework document is
available at https://www.eere.energy.gov/
buildings/appliance_standards/
residential/pdfs/heating_equipment
framework_092706.pdf.) DOE also
published a notice announcing the
availability of the framework document
and a public meeting and requesting
comments on the matters raised in the
document. 71 FR 67825 (Nov. 24, 2006).
The framework document described the
procedural and analytical approaches
that DOE anticipated using to evaluate
potential energy conservation standards
for the three heating products and
identified various issues to be resolved
in conducting the rulemaking. DOE held
the framework document public
meeting on January 16, 2009.
On January 5, 2009, having
considered these comments, gathered
additional information, and performed
preliminary analyses as to standards for
the three heating products, DOE
announced an informal public meeting
and the availability on its Web site of a
preliminary technical support document
(preliminary TSD). 74 FR 1643 (Jan. 13,
2009). The preliminary TSD is available
at: https://www1.eere.energy.gov/
buildings/appliance_standards/
residential/
water_pool_heaters_prelim_tsd.html.
The preliminary TSD discussed the
comments DOE had received at the
framework stage of this rulemaking and
described the actions DOE had taken,
the analytical framework DOE was
using, and the content and results of
DOE’s preliminary analyses. Id. at 1644,
1645. DOE convened the public meeting
to discuss and receive comments on: (1)
These subjects, (2) DOE’s proposed
product classes, (3) potential standard
levels that DOE might consider, and (4)
other issues participants believed were
relevant to the rulemaking. Id. at 1643,
1646. DOE also invited written
comments on these matters. The public
meeting took place on February 9, 2009.
Many interested parties participated,
and submitted written comments during
the comment period.
On December 11, 2009, DOE
published a NOPR to consider
amending the existing residential water
heater, direct heating equipment, and
pool heater energy conservation
standards. 74 FR 65852. Shortly after,
DOE also published on its Web site the
complete TSD for the proposed rule,
which incorporated the completed
analyses DOE conducted and technical
documentation for each analysis. The
TSD included the LCC spreadsheet, the
national impact analysis spreadsheet,
and the manufacturer impact analysis
(MIA) spreadsheet—all of which are
available at: https://
www1.eere.energy.gov/buildings/
appliance_standards/residential/
water_pool_heaters_nopr.html. In the
December 2009 NOPR, DOE proposed
amended energy conservation standards
for the three heating products as
follows:
TABLE II.4—PROPOSED AMENDED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL WATER HEATERS, DIRECT
HEATING EQUIPMENT, AND POOL HEATERS
Product Class
Proposed Standard Level
Residential Water Heaters*
Gas-fired Storage ....................................................................................
For tanks with a Rated Storage
Volume at or below 60 gallons:
EF = 0.675 ¥ (0.0012 × Rated
Storage Volume in gallons).
For tanks with a Rated Storage
Volume above 60 gallons:
EF = 0.717 ¥ (0.0019 × Rated
Storage Volume in gallons).
Electric Storage .......................................................................................
For tanks with a Rated Storage
Volume at or below 80 gallons:
EF = 0.96 ¥ (0.0003 × Rated
Storage Volume in gallons).
For tanks with a Rated Storage
Volume above 80 gallons:
EF = 1.088 ¥ (0.0019 × Rated
Storage Volume in gallons).
Oil-fired Storage ......................................................................................
Gas-fired Instantaneous ..........................................................................
EF = 0.68 ¥ (0.0019 × Rated Storage Volume in gallons).
EF = 0.82 ¥ (0.0019 × Rated Storage Volume in gallons).
Direct Heating Equipment **
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Product Class
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Proposed Standard Level
wall fan type up to 42,000 Btu/h ............................................................................................................................
wall fan type over 42,000 Btu/h .............................................................................................................................
wall gravity type up to 27,000 Btu/h ......................................................................................................................
wall gravity type over 27,000 Btu/h up to 46,000 Btu/h ........................................................................................
wall gravity type over 46,000 Btu/h .......................................................................................................................
floor up to 37,000 Btu/h .........................................................................................................................................
floor over 37,000 Btu/h ..........................................................................................................................................
room up to 20,000 Btu/h ........................................................................................................................................
room over 20,000 Btu/h up to 27,000 Btu/h ..........................................................................................................
room over 27,000 Btu/h up to 46,000 Btu/h ..........................................................................................................
room over 46,000 Btu/h .........................................................................................................................................
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AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
=
=
=
=
=
=
=
=
=
=
=
76%.
77%.
70%.
71%.
72%.
57%.
58%.
62%.
67%.
68%.
69%.
Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
Gas
Gas
Gas
Gas
hearth
hearth
hearth
hearth
up to 20,000 Btu/h ......................................................................................................................................
over 20,000 Btu/h and up to 27,000 Btu/h .................................................................................................
over 27,000 Btu/h and up to 46,000 Btu/h .................................................................................................
over 46,000 Btu/h .......................................................................................................................................
AFUE
AFUE
AFUE
AFUE
=
=
=
=
20123
61%.
66%.
67%.
68%.
Pool Heaters
Product Class
Proposed Standard Level
Gas-fired ........................................................................................................................................................................
Thermal Efficiency = 84%.
* EF is the ‘‘energy factor,’’ and the ‘‘Rated Storage Volume’’ equals the water storage capacity of a water heater (in gallons), as specified by
the manufacturer.
** Btu/h is ‘‘British thermal units per hour,’’ and AFUE is ‘‘Annual Fuel Utilization Efficiency.’’
In the December 2009 NOPR, DOE
identified 24 specific issues on which it
was particularly interested in receiving
the comments and views of interested
parties. 74 FR 65852, 65994–95 (Dec. 11,
2009). In addition, DOE also specifically
requested comments and data that
would allow DOE to further bring clarity
to the issues surrounding heat pump
water heaters and condensing water
heaters, and determine how the issues
discussed in the December 2009 NOPR
could be adequately addressed prior to
the compliance date of an amended
national energy conservation standard
for water heaters that would effectively
require the use of such technology. 74
FR 65852, 65966–67 (Dec. 11, 2009).
DOE also held a public meeting in
Washington, DC, on January 7, 2010, to
hear oral comments on and solicit
information on the issues just
mentioned and any other matters
relevant to the proposed rule. Finally,
DOE received many written comments
on these and other issues in response to
the December 2009 NOPR, which are
further presented and addressed
throughout today’s notice. The
December 2009 NOPR included
additional, detailed background
information on the history of this
rulemaking. See 74 FR at 65852, 65859–
60 (Dec. 11, 2009).
III. General Discussion
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A. Test Procedures
As noted above, DOE’s test
procedures for residential water heaters,
vented DHE, and pool heaters are set
forth at 10 CFR part 430, subpart B,
appendices E, O, and P, respectively.
These test procedures are currently used
to determine whether the three heating
products comply with applicable energy
conservation standards and as a basis
for manufacturers’ representations as to
the energy efficiency of these products.
During this rulemaking, interested
parties have asserted that the residential
water heater test procedure does not: (1)
Reflect actual use of these water heaters
by consumers; (2) permit accurate (i.e.,
consistent and repeatable) measurement
of the efficiencies of electric resistance
water heaters that have an EF of 0.95 EF
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and above; or (3) include all of the costeffective efficiency measures available
for water heaters. 74 FR 65852, 65860–
61 (Dec. 11, 2009).
As to the first point, DOE believes the
test procedure does reflect actual use of
water heaters. It employs a hot water
draw model, and data that incorporate
correction factors that account for actual
use of water heaters in U.S. homes. 74
FR 65852, 65860 (Dec. 11, 2009). As to
the second point, concerning accuracy
of the test procedure, DOE explains in
the December 2009 NOPR that
manufacturer certification of several
electric resistance water heaters with
EFs of 0.95, as well as DOE testing of
such models, demonstrate that the DOE
test procedure can accurately measure
the efficiencies of units at that level that
use conventional, electric resistance
technologies. 74 FR 65852, 65680–81
(Dec. 11, 2009). As the December 2009
NOPR also indicates, units with
efficiencies significantly above that
level must use advanced technologies,
for which the test procedure also
permits accurate measurement of EF
levels. 74 FR 65852, 65681 (Dec. 11,
2009). Thus, because today’s standards
for electric water heaters have two
substantially different tiers—for
capacities at or below 55 gallons,
minimum EF levels equivalent to 0.95 at
the representative storage capacity, and
for larger capacities substantially higher
minimum EF levels—DOE confirms that
the existing test procedure will
accurately determine the efficiencies of
both models using conventional
technologies to meet the lower tier and
models that will have to use advanced
technologies to meet the higher tier.
Finally, the only specific cost-effective
efficiency measure that commenters
cited as being absent from DOE’s water
heater test procedure is insulation on
the tank bottom. 74 FR 65852, 65861
(Dec. 11, 2009). To the contrary,
however, the test procedure addresses
and gives credit for inclusion of such
insulation in water heaters. 10 CFR part
430, subpart B, appendix E, section 5.
Although DOE recognizes that the test
procedure does not reflect certain recent
advances in energy saving technology, it
is aware of no evidence that such
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technologies actually do or would result
in significant, cost-effective energy
savings under normal operating
conditions for water heaters. Hence,
omission of these technologies from the
test procedure does not affect the
efficiency levels considered in this
rulemaking. DOE received no comments
on this issue at the NOPR stage. Thus,
DOE continues to believe, as stated in
the December 2009 NOPR, that the
appropriate time to address such
omission is during the next revision of
the test procedure.
As to the DHE and pool heater test
procedures, in the December 2009
NOPR, DOE proposed that its test
procedures for vented DHE be applied
to establish the efficiencies of vented
gas hearth DHE. 74 FR 65852, 65861
(Dec. 11, 2009). DOE received no
comments from interested parties
raising any concern in this rulemaking
about application of the DOE test
procedures for vented DHE to other
types of this product. In addition, DOE
received no comments regarding
application of its test procedures for
pool heaters.
EPCA, as amended by EISA 2007,
requires DOE to amend the test
procedures for the three types of heating
products to include provisions for
measurement of the products’ standby
mode and off mode energy
consumption. (42 U.S.C.
6295(gg)(2)(B)(v)) DOE is actively
working on a separate rulemaking to
amend its test procedures for the three
types of heating products to incorporate
these measurements of standby mode
and off mode energy consumption in the
future.
B. Technological Feasibility
1. General
As stated above, any standard that
DOE establishes for any of the three
heating products must be
technologically feasible. (42 U.S.C.
6295(o)(2)(A) and (3)(B)) DOE considers
a design or technology option to be
technologically feasible if it is in use by
the respective industry or if research has
progressed to the development of a
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working prototype. ‘‘Technologies
incorporated in commercial products or
in working prototypes will be
considered technologically feasible.’’ 10
CFR part 430, subpart C, appendix A,
section 4(a)(4)(i). Once DOE has
determined that particular technology
options are technologically feasible, it
evaluates each technology option in
light of the following additional
screening criteria: (1) Practicability to
manufacture, install, or service; (2)
adverse impacts on product utility or
availability; and (3) adverse impacts on
health or safety.
This final rule considers the same
technology options as those evaluated in
the December 2009 NOPR. (See chapter
3 and 4 of the TSD accompanying this
notice.) All of these technologies have
been used or are in use in commerciallyavailable products, or exist in working
prototypes. Also, these technologies all
incorporate materials and components
that are commercially available in
today’s supply markets for the products
covered by this final rule. DOE received
several comments on the technology
options considered in the rulemaking
and the preliminary conclusions drawn
by applying the four screening criteria
to them. A detailed discussion of the
comment and response can be found in
section IV.B. Therefore, DOE
determined that all of the efficiency
levels evaluated in this notice are
technologically feasible.
2. Maximum Technologically Feasible
Levels
As required by 42 U.S.C. 6295(p)(1),
in developing the December 2009
NOPR, DOE identified the efficiency
levels that would achieve the maximum
improvements in energy efficiency that
are technologically feasible (max-tech
levels) for the three heating products. 74
FR 65852, 65861–62 (Dec. 11, 2009).
(See chapter 5 of the TSD.) Except for
the levels for electric and gas-fired
storage water heaters and gas wall
gravity DHE, DOE received no
comments on the December 2009
proposed rule to lead DOE to consider
changes to these levels. Therefore, for
today’s final rule, the max-tech levels
for all classes of the three heating
products, except for the electric and gasfired water heaters and gas wall gravity
DHE, are the max-tech levels identified
in the December 2009 NOPR.
The max-tech levels considered for
today’s rule are provided in Table III.1.
See section IV.C.2 for additional details
of the max-tech efficiency levels and
discussion of related comments from
interested parties on the December 2009
NOPR.
TABLE III.1—MAX-TECH EFFICIENCY LEVELS FOR THE RESIDENTIAL HEATING PRODUCTS RULEMAKING FOR THE
REPRESENTATIVE PRODUCTS
Product class
Representative product
Max-Tech efficiency level
Residential Water Heaters
Gas-Fired Storage Water Heater .....................................
Electric Storage Water Heater .........................................
Oil-Fired Storage Water Heater .......................................
Gas-Fired Instantaneous Water Heater ...........................
Rated Storage Volume
Rated Storage Volume
Rated Storage Volume
Rated Storage Volume
ity = 199,999 Btu/h.
=
=
=
=
40 Gallons ..............................
50 Gallons ..............................
32 Gallons ..............................
0 Gallons, Rated Input Capac-
EF
EF
EF
EF
=
=
=
=
0.77.
2.35.
0.68.
0.95.
Direct Heating Equipment
Gas Wall Fan Type ..........................................................
Gas Wall Gravity Type .....................................................
Gas Floor Type ................................................................
Gas Room Type ...............................................................
Gas Hearth Type ..............................................................
Rated Input Capacity = Over 42,000 Btu/h .....................
Rated Input Capacity = Over 27,000 Btu/h and up to
46,000 Btu/h.
Rated Input Capacity = Over 37,000 Btu/h .....................
Rated Input Capacity = Over 27,000 Btu/h and up to
46,000 Btu/h.
Rated Input Capacity = Over 27,000 Btu/h and up to
46,000 Btu/h.
AFUE = 80%.
AFUE = 70%.
Rated Input Capacity = 250,000 Btu/h ............................
Thermal Efficiency = 95%.
AFUE = 58%.
AFUE = 83%.
AFUE = 93%.
Pool Heaters
Gas-Fired ..........................................................................
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C. Energy Savings
DOE forecasted energy savings over a
30-year analysis period in its national
impact analysis (NIA) through the use of
an NIA spreadsheet tool, as discussed in
the December 2009 NOPR. 74 FR 65862,
65908–14, 65954 (Dec. 11, 2009).
One of the criteria that governs DOE’s
adoption of standards for covered
products is that the standard must result
in ‘‘significant conservation of energy.’’
(42 U.S.C. 6295(o)(3)(B)) While EPCA
does not define the term ‘‘significant,’’
the U.S. Court of Appeals for the District
of Columbia Circuit, in Natural
Resources Defense Council v.
Herrington, 768 F.2d 1355, 1373 (DC
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Cir. 1985), indicated that Congress
intended ‘‘significant’’ energy savings in
this context to be savings that were not
‘‘genuinely trivial.’’ DOE’s estimates of
the energy savings for energy
conservation standards at each of the
TSLs considered for today’s rule
indicate that the energy savings each
would achieve are nontrivial. Therefore,
DOE considers these savings
‘‘significant’’ within the meaning of
Section 325 of EPCA.
D. Economic Justification
The following section discusses how
DOE has addressed each of the seven
factors that it uses to determine if
energy conservation standards are
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economically justified. The comments
DOE received on specific analyses and
DOE’s response to those comments are
summarized and presented throughout
section IV.
1. Specific Criteria
As noted earlier, EPCA provides
seven factors to evaluate in determining
whether an energy conservation
standard for covered products is
economically justified. (42 U.S.C.
6295(o)(2)(B)(i)) The following sections
summarize how DOE has addressed
each of those seven factors in evaluating
efficiency standards for the three
heating products.
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a. Economic Impact on Consumers and
Manufacturers
As required by EPCA, DOE
considered the economic impact of
potential standards on consumers and
manufacturers of the three heating
products. (42 U.S.C. 6295(o)(2)(B)(i)(I))
For consumers, DOE measured the
economic impact as the change in
installed cost and life-cycle operating
costs (i.e., the change in LCC). (See
section IV.F and VI.C.1.a, and chapter 8
of the final rule TSD.) DOE investigated
the impacts on manufacturers through
the manufacturer impact analysis (MIA).
(See sections IV.I and VI.C.2 of today’s
final rule, and chapter 12 of the final
rule TSD.) The economic impact on
consumers and manufacturers is
discussed in detail in the December
2009 NOPR. 74 FR 65852, 65862–63,
65897–908, 65915–22, 65932–54,
65984–92 (Dec. 11, 2009).
b. Life-Cycle Costs
As required by EPCA, DOE
considered the life-cycle costs of the
three heating products. (42 U.S.C.
6295(o)(2)(B)(i)(II)) LCC is discussed at
length in the December 2009 NOPR. 74
FR 65852, 65863, 65897–908, 65915,
65932–35 (Dec. 11, 2009). DOE
calculated the sum of the purchase price
(including associated installation costs)
and the operating expense (including
energy, maintenance, and repair
expenditures), discounted over the
lifetime of the equipment, to estimate
the range in LCC benefits that
consumers would expect to achieve due
to standards.
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c. Energy Savings
Although significant conservation of
energy is a separate statutory
requirement for imposing an energy
conservation standard, EPCA also
requires DOE, in determining the
economic justification of a proposed
standard, to consider the total projected
energy savings that are expected to
result directly from the standard. (42
U.S.C. 6295(o)(2)(B)(i)(III)) As in the
December 2009 NOPR, for today’s final
rule, DOE used the NIA spreadsheet
results in its consideration of total
projected savings that are directly
attributable to the standard levels DOE
considered. 74 FR 65852, 65862, 65908–
14, 65954 (Dec. 11, 2009).
d. Lessening of Utility or Performance of
Products
In selecting today’s standard levels,
DOE did not consider trial standard
levels for the three heating products that
would lessen the utility or performance
of such products. (42 U.S.C.
6295(o)(2)(B)(i)(IV)). As explained in the
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December 2009 NOPR, DOE determined
that none of the trial standard levels
under considerations would reduce the
utility or performance of the products
subject to this rulemaking. 74 FR 65852,
65863, 65956 (Dec. 11, 2009).
e. Impact of Any Lessening of
Competition
DOE considers any lessening of
competition that is likely to result from
standards. Accordingly, as discussed in
the December 2009 NOPR (74 FR 65852,
65863, 65956 (Dec. 11, 2009)), DOE
requested that the Attorney General
transmit to the Secretary, not later than
60 days after publication of the
proposed rule, a written determination
of the impact, if any, of any lessening
of competition likely to result from the
standards proposed in the December
2009 NOPR, together with an analysis of
the nature and extent of such impact.
(42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii))
To assist the Attorney General in
making such a determination, DOE
provided the U.S. Department of Justice
(DOJ) with copies of the December 2009
proposed rule and the NOPR TSD for
review. The Attorney General’s
determination is discussed in section
VI.C.5 below, and is reprinted at the end
of this rule. DOJ did not believe the
standards proposed in the December
2009 NOPR for water heaters and pool
heaters would likely lead to a lessening
of competition. However, DOJ was
concerned about the potential of the
proposed standards to impact
competition in the traditional DHE
categories if no more than one or two
DHE manufacturers chose to continue to
produce products in any one of the
categories. DOJ requested that DOE
consider the potential impact on
competition in determining the final
standards for these categories. (DOJ, No.
99 at pp. 1–2) 2 DOJ’s comment and
DOE’s response are further described in
section VI.C.5.
f. Need of the Nation To Conserve
Energy
In considering standards for the three
heating products, the Secretary must
consider the need of the Nation to
conserve energy. (42 U.S.C.
6295(o)(2)(B)(i)(VI)) The Secretary
recognizes that energy conservation
2 ‘‘DOJ, No. 99 at pp. 1–2’’ refers to: (1) To a
statement that was submitted by the U.S.
Department of Justice. It was recorded in the
Resource Room of the Building Technologies
Program in the docket under ‘‘Energy Conservation
Program: Energy Conservation Standards for
Residential Water Heaters, Direct Heating
Equipment, and Pool Heaters,’’ Docket Number
EERE–2006–BT–STD–0129, as comment number
99; and (2) a passage that appears on pages 1
through 2 of that statement.
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benefits the Nation in several important
ways. The non-monetary benefits of
standards are likely to be reflected in
improvements to the security and
reliability of the Nation’s energy system.
Today’s standards will also result in
environmental benefits. As discussed in
detail in the December 2009 NOPR (74
FR 65852, 65863, 65923–29, 65956–61
(Dec. 11, 2009)) and in sections IV.K,
IV.L, and IV.M, DOE has considered
these factors in considering whether to
adopt standards for the three heating
products, primarily through its utility
impact analysis, environmental
assessment, and monetization of
anticipated emissions reductions.
g. Other Factors
EPCA directs the Secretary of Energy,
in determining whether a standard is
economically justified, to consider any
other factors that the Secretary deems to
be relevant. (42 U.S.C.
6295(o)(2)(B)(i)(VII)) In adopting today’s
standards, the Secretary considered the
potential impact of standards on certain
identifiable groups of consumers who
might be disproportionately impacted
by any national energy conservation
standard level. For certain water heaters
and DHE, DOE considered the impacts
of standards on low-income households
and senior-only households, and of
these water heaters, DOE also
considered the impacts of standards on
households in multi-family housing and
in manufactured homes. 74 FR 65852,
65863, 65934–35, 65961–62 (Dec. 11,
2009).
In addition, DOE considered the
uncertainties associated with whether,
in order to adequately serve the water
heater market: (1) Manufacturers could
ramp up production of heat pump water
heaters; (2) heat pump component
manufacturers could increase
production; and (3) enough servicers
and installers of water heaters could be
retrained. 74 FR 65852, 65863–64,
65877–78, 65962, 65965–66 (Dec. 11,
2009). Lastly, DOE considered the issues
identified in the December 2009 NOPR
surrounding the product division used
in the two-slope energy-efficiency
equations, promulgation of different
standards for a subset of products, the
heat pump water heater market, as well
as the condensing water heater market.
74 FR 65852, 65966–67 (Dec. 11, 2009).
These issues are addressed as presented
below in section VI.D.2.
2. Rebuttable Presumption
As set forth in 42 U.S.C.
6295(o)(2)(B)(iii), EPCA states that there
is a rebuttable presumption that an
energy conservation standard is
economically justified if the increased
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installed cost for a product that meets
the standard is less than three times the
value of the first-year energy (and, as
applicable, water) savings resulting from
the standard, as calculated under the
applicable DOE test procedure. DOE’s
LCC and payback period (PBP) analyses
generate values that calculate the
payback period for consumers of
potential energy conservation standards,
which include, but are not limited to,
the payback period contemplated under
the rebuttable presumption test
described above. However, DOE
routinely conducts a full economic
analysis that considers the full range of
impacts, including those to the
consumer, manufacturer, Nation, and
environment, as required under 42
U.S.C. 6295(o)(2)(B)(i). The results of
this analysis serve as the basis for DOE
to definitively evaluate the economic
justification for a potential standard
level (thereby supporting or rebutting
the results of any preliminary
determination of economic
justification). The results of DOE’s PBP
analysis can be found in sections
VI.C.1.a and VI.C.1.c.
jlentini on DSKJ8SOYB1PROD with RULES2
IV. Methodology and Discussion of
Comments on Methodology
DOE used several analytical tools that
it developed previously and adapted for
use in this rulemaking. One is a
spreadsheet that calculates LCC and
PBP. Another tool calculates national
energy savings and national NPV that
would result from the adoption of
energy conservation standards. DOE
also used the Government Regulatory
Impact Model (GRIM), along with other
methods, in its MIA to determine the
impacts on manufacturers of standards
for the three heating products. Finally,
DOE developed an approach using the
Energy Information Administration’s
(EIA) National Energy Modeling
System 3 (NEMS) to estimate the
impacts of such standards on utilities
3 The NEMS model simulates the energy sector of
the U.S. economy. EIA uses NEMS to prepare its
AEO, a widely-known energy forecast for the
United States. The EIA approves the use of the
name NEMS to describe only an AEO version of the
model without any modification to code or data.
For more information on NEMS, refer to The
National Energy Modeling System: An Overview
1998. DOE/EIA–0581 (98) (Feb. 1998) (available at:
https://tonto.eia.doe.gov/FTPROOT/forecasting/
058198.pdf). The version of NEMS used for
appliance standards analysis is called NEMS–BT.
Because the present analysis entails some minor
code modifications and runs the model under
various policy scenarios that deviate from AEO
assumptions, the name ‘‘NEMS–BT’’ refers to the
model as used here. (‘‘BT’’ stands for DOE’s Building
Technologies Program.) NEMS–BT offers a
sophisticated picture of the effect of standards
because it accounts for the interactions between the
various energy supply and demand sectors and the
economy as a whole.
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and the environment. Chapters 3
through 16 of the TSD and the
December 2009 NOPR discuss each of
these analytical tools in detail. 74 FR
65852, 65897–919, 65923–29 (Dec. 11,
2009).
As a basis for this final rule, DOE has
continued to use the spreadsheets and
approaches explained in the December
2009 NOPR. DOE used the same general
methodology as applied in the
December 2009 NOPR, but revised some
of the assumptions and inputs for the
final rule in response to stakeholder
comments. The following sections
discuss these comments and revisions.
A. Market and Technology Assessment
When beginning an energy
conservation standards rulemaking,
DOE develops information that provides
an overall picture of the market for the
products concerned, including the
purpose of the products, the industry
structure, and market characteristics.
This activity includes both quantitative
and qualitative assessments based
primarily on publicly-available
information. DOE presented its market
and technology assessment for this
rulemaking in the December 2009 NOPR
and chapter 3 of the NOPR TSD. 74 FR
65852, 65864–72 (Dec. 11, 2009). The
assessment included product
definitions, delineation of the products
included in the rulemaking, product
classes, manufacturers, quantities and
types of products offered for sale, retail
market trends, and regulatory and nonregulatory initiative programs. As
discussed below, commenters raised a
variety of issues related to the market
and technology assessment, to which
DOE responds in the following sections.
1. DOE’s Determinations as to the
Inclusion of Products in This
Rulemaking
a. Whether Certain Products Are
Covered Under the Act
i. Solar-Powered Water Heaters and Pool
Heaters
As fully explained in the December
2009 NOPR, DOE has concluded that it
presently lacks authority to prescribe
standards for these products because
EPCA currently covers only water
heaters and pool heaters that use
electricity or fossil fuels, and because
any energy conservation standard
currently adopted under EPCA for these
two products must address or be based
on the quantity of these fuels, but not
solar power, that the product consumes.
74 FR 65852, 65864 (Dec. 11, 2009). In
addition, DOE currently lacks authority
to adopt standards for solar-powered
water heaters because EPCA’s definition
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of ‘‘water heater’’ includes only products
that use ‘‘oil, gas, or electricity to heat
potable water.’’ (42 U.S.C. 6291(27); 10
CFR 430.2) Because DOE did not receive
additional feedback from interested
parties, DOE did not change its position
on solar-powered water heaters and
pool heaters as presented in the
December 2009 NOPR and summarized
above.
ii. Add-On Heat Pump Water Heaters
DOE did not propose in the December
2009 NOPR to adopt standards for a
residential product that is commonly
known as an add-on heat pump water
heater. This product typically is
marketed and used as an add-on
component to a separately
manufactured, fully-functioning electric
storage water heater. The add-on device,
by itself, is not capable of heating water
and lacks much of the equipment
necessary to operate as a water heater.
DOE has concluded, therefore, that the
device does not meet EPCA’s definition
of a ‘‘water heater’’ and currently is not
a covered product. 74 FR 65852, 65865
(Dec. 11, 2009).
In response to DOE’s preliminary
conclusions set forth in the December
2009 NOPR regarding add-on heat pump
water heaters, the American Council for
an Energy Efficient Economy (ACEEE)
stated that add-on heat pump water
heaters should not have been excluded
from the rulemaking. (ACEEE, No. 79 at
p. 5) According to the commenter, the
December 2009 NOPR language used to
exclude them could as readily be used
to exclude split system air conditioners
as add-ins to furnace systems, since they
are not fully functional without the
furnace’s air handler. ACEEE argued
that add-on heat pump water heaters
could provide an important opportunity
for cost-effective resistive unit retrofits,
and standards are required to help
exclude low-performance units that will
not meet consumer needs. Otherwise,
ACEEE asserted that there is danger that
failures of low-performance add-on
units will damage the reputation of the
integral heat pump water heater product
class, as it is not clear that consumers
will easily differentiate the two product
subclasses.
In response, DOE does not agree with
ACEEE’s comparison of add-on heat
pump water heaters to central air
conditioning and heating systems.
Unlike components in a split airconditioning system, add-on heat pump
water heaters are paired to an electric
storage water heater which is fully
functional when it leaves the
manufacturing facility. Components in a
split air-conditioning system do not
work independently until paired
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together in the field. As DOE previously
stated, the add-on device, by itself, is
not capable of heating water and lacks
much of the equipment necessary to
operate as a water heater. DOE is not
swayed by the commenter’s speculative
assertions regarding the future
performance of add-on heat pump water
heaters. Accordingly, DOE has
concluded that an add-on heat pump
water heater does not meet EPCA’s
definition of a ‘‘water heater’’ and
currently is not a covered product.
jlentini on DSKJ8SOYB1PROD with RULES2
iii. Gas-Fired Instantaneous Water
Heaters With Inputs Above and Below
Certain Levels
During this rulemaking, DOE
considered whether to evaluate for
standards gas-fired instantaneous water
heaters with inputs greater than 200,000
Btu/h or less than 50,000 Btu/h. DOE
determined that the former do not meet
EPCA’s definition of a ‘‘water heater,’’
given the specific portions of the
definition pertaining to ‘‘instantaneous
type units.’’ (42 U.S.C. 6291(27)(B)) As
to the latter, DOE determined that
manufacturers are not currently
producing any gas-fired instantaneous
water heaters with an input capacity
less than 50,000 Btu/h. Therefore, DOE
did not propose standards for products
with an input capacity above 200,000
Btu/h or below 50,000 Btu/h. 74 FR
65852, 65865 (Dec. 11, 2009). DOE did
not receive any comments on this issue
at the NOPR stage, so the above
approach has been retained for this final
rule, and accordingly, no standards are
being adopted for gas-fired
instantaneous water heaters with inputs
greater than 200,000 Btu/h or less than
50,000 Btu/h.
iv. Residential Pool Heaters With Input
Capacities Above Certain Levels and
Coverage of Spa Heaters
At the framework stage of this
rulemaking, DOE considered excluding
pool heaters with an input capacity
greater than 1 million Btu/h, and
commenters suggested that DOE should
exclude products with an input capacity
greater than 400,000 Btu/h. The
rulemaking covers pool heaters that
meet EPCA’s definitions of ‘‘pool heater’’
(which provides no capacity limitation)
and of ‘‘consumer product.’’ (42 U.S.C.
6291(25); 42 U.S.C. 6291(1)). DOE
tentatively concluded that these
provisions, and standards adopted
under them, would apply to any pool
heater distributed to any significant
extent as a consumer product for
residential use, regardless of input
capacity. In addition, DOE tentatively
concluded that pool heaters marketed as
commercial equipment, which contain
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additional design modifications related
to safety requirements for commercial
installation, would not be covered by
such standards. Therefore, DOE did not
propose to limit application of the
standards developed in this rulemaking
to pool heaters with an input capacity
below a specified level. 74 FR 65852,
65865 (Dec. 11, 2009).
In response to this position in the
December 2009 NOPR, DOE received
three comments urging DOE to establish
an input capacity limit for residential
pool heaters.
Zodiac Pool Systems (Zodiac) asserted
that DOE should consider setting
different minimum efficiency levels for
pool heaters with input ratings of up to
400,000 British thermal units per hour
(Btu/h) and for those with input ratings
above 400,000 Btu/h. Zodiac stated its
belief that there may be some benefits to
be gained if what Zodiac referred to as
‘‘commercial’’ pool heaters (i.e., those
units rated above 400,000 Btu/h input)
required a higher minimum efficiency
level than that for ‘‘residential’’ pool
heaters (i.e., those units rated up to
400,000 Btu/h input). According to the
commenter, commercial-type units are
operated longer and in general,
continuously, thereby increasing the
potential payback in efficiency and
energy savings over the life of the
product. (Zodiac, No. 68 at p. 2)
Lochinvar asserted that DOE should
limit the input capacity for residential
pool heaters to 400,000 Btu/h and that
DOE should add an additional
classification for commercial pool
heaters above 400,000 Btu/h. According
to the commenter, practically all of the
residential pool heaters sold today have
pool heater inputs of 400,000 Btu/h and
below. Lochinvar stated that residential
pool heater sales by pool heater
manufacturers do not include pumps.
Residential pool heaters are designed to
accept a wide range of water flows to
meet the customers’ demands because
the residential market is mature with a
wide variety of pool distribution
accessories (e.g., pumps that mate with
water filtration systems, water
temperature controls, and valving
components). Therefore, pumps are not
supplied because this is a variable that
cannot be anticipated by the pool heater
manufacturer. Thus, for efficiency rating
purposes, pool heater thermal
efficiency, as calculated by DOE’s test
procedure, does not include the pump
energy. In contrast, Lochinvar pointed
out that commercial pool heater
applications require much higher
volumes of water to be circulated in a
primary pool loop that incorporates
large filtration systems and pool water
conditioning and monitoring
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equipment. Commercial pool heaters are
designed to tap off of the primary pool
loop and, via means of a separate pump,
circulate pool water through the
commercial pool heater to be heated and
then delivered back to the pool loop.
The ratio of water flow through
commercial pool loop systems to that
flowing through the pool heater is
anywhere from 5 to 15 times. In these
applications, commercial pool heater
sales always provide or specify
matching pumps to ensure sufficient
water flow through the heat exchanger.
Accordingly, the contribution of pump
energy is included in the industry
commercial pool heater test procedure
and combustion efficiency metric.
(Lochinvar, No. 56.6 at p. 2)
AHRI recommended that
consideration be given in the future to
creating separate subclasses to
distinguish between commercial and
residential pool heaters from a market
perspective. Comments have previously
been provided noting the major
differences between pool heaters for
commercial applications versus
residential applications, specifically in
terms of construction, control schemes,
and how they go to market. (AHRI, No.
91 at p. 10)
As DOE discussed in the December
2009 NOPR, EPCA places no capacity
limit on the pool heaters it covers in
terms of its definition of ‘‘pool heater.’’
(42 U.S.C. 6291(25)) Furthermore, EPCA
covers pool heaters as a ‘‘consumer
product,’’ (42 U.S.C. 6291(2),
6292(a)(11)) and defines ‘‘consumer
product,’’ in part, as an article that ‘‘to
any significant extent, is distributed in
commerce for personal use or
consumption by individuals.’’ (42 U.S.C.
6291(1)) These provisions establish that
EPCA, and standards adopted under it,
apply to any pool heater distributed to
any significant extent as a consumer
product for residential use, regardless of
input capacity. In light of the above and
based upon the distinct differences
articulated by commenters between the
residential and commercial pool heater
markets and products, DOE has
concluded that further delineation by
adding an input capacity limit is not
necessary. Specifically, pool heaters
marketed as commercial equipment,
which contain additional design
modifications related to safety
requirements for installation in
commercial buildings, are not covered
by this standard. This would include
pool heating systems that are designed
to meet a high volume flow and are
matched with a pump from the point of
manufacture to accommodate the needs
of commercial facilities. DOE believes
manufacturers can distinguish those
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units from pool heaters distributed to
any significant extent as a consumer
product for residential use, regardless of
input capacity.
As to spa heaters, the EPCA definition
for ‘‘pool heater’’ clearly encompasses
them. (42 U.S.C. 6291(25)) Therefore, in
the December 2009 NOPR, DOE
tentatively concluded that they are
covered by EPCA, and included them in
this rulemaking. Furthermore, DOE
tentatively concluded that because spa
heaters and pool heaters perform similar
functions, include similar features, and
lack performance or operating features
that would cause them to have
inherently different energy efficiencies,
a separate product class for such units
is not warranted. 74 FR 65852, 65865–
66 (Dec. 11, 2009). DOE did not receive
any comments in response to its
proposed treatment of spa heaters in the
December 2009 NOPR. Consequently,
DOE has concluded that spa heaters are
included within EPCA under the
definition of ‘‘pool heater’’ and do not
warrant a separate product class.
jlentini on DSKJ8SOYB1PROD with RULES2
v. Vented Hearth Products
The following two paragraphs
summarize DOE’s reasons, explained in
greater detail in the December 2009
NOPR for concluding that EPCA covers
vented hearth products and for
including them in this rulemaking. 74
FR 65852, 65866 (Dec. 11, 2009).
When EPCA was amended to include
energy conservation standards for
‘‘direct heating equipment,’’ that term
replaced the term ‘‘home heating
equipment’’ in the Act. However, EPCA
has never defined either of these terms.
Instead, DOE regulations define ‘‘home
heating equipment,’’ stating that the
term includes ‘‘vented home heating
equipment.’’ 10 CFR 430.2. These
definitions inform the meaning of
‘‘direct heating equipment,’’ but, to
provide clarity in the future, in today’s
rule DOE is incorporating into its
regulations a definition of this term that
is identical to the existing definition of
‘‘home heating equipment.’’
Vented hearth products include gasfired products such as fireplaces,
fireplace inserts, stoves, and log sets
that typically include aesthetic features
and that provide space heating. DOE has
concluded that such products meet its
definition of ‘‘vented home heating
equipment,’’ because they are designed
to furnish warmed air to the living space
of a residence. DOE has also concluded,
therefore, that they are covered products
under EPCA and are properly classified
as DHE. Accordingly, DOE proposed
and today is adopting standards for
vented hearth products.
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In the December 2009 NOPR, DOE
also pointed out that vented hearth
products would be subject to the same
product testing and certification
requirements that currently apply to
DHE. 74 FR 65852, 65866 (Dec. 11,
2009). In order to help manufacturers
determine more easily whether their
vented hearth direct heating equipment
is covered under DOE’s regulations,
DOE proposed to adopt the following
definition of ‘‘vented hearth heater’’:
Vented hearth heater means a vented,
freestanding, recessed, zero clearance
fireplace heater, a gas fireplace insert or a
gas-stove, which simulates a solid fuel
fireplace and is designed to furnish warm air,
without ducts to the space in which it is
installed.
74 FR 65852, 65867–68 (Dec. 11, 2009).
The Air-Conditioning, Heating, and
Refrigerating Institute (AHRI), the
Hearth, Patio, and Barbeque Association
(HPBA), and Empire Comfort Systems
(Empire) do not support DOE’s
proposed definition ‘‘vented hearth
heater’’ as presented above and in the
December 2009 NOPR. However, these
three interested parties do support
DOE’s decision to establish vented gas
fireplace heaters as a separate type of
direct heating equipment. AHRI, HPBA,
and Empire urged DOE to use the
definition of ‘‘vented gas fireplace
heater’’ as presented in the American
National Standards Institute (ANSI)
Standard Z21.88, Vented Gas Fireplace
Heaters, so as to directly connect it to
this safety standard. By law,
manufacturers are required to list and
label these types of appliances to
approved safety standards such as ANSI
Z21.88. By using this safety standard
reference, the interested parties argued
that DOE and others would be able to
distinguish vented gas fireplace heaters
from decorative gas appliances certified
to ANSI Z21.50, Vented Gas Fireplaces,
and ANSI Z21.60, Decorative Gas
Appliances for Installation in Solid-Fuel
Burning Fireplaces, thereby eliminating
a significant opportunity for confusion
in the marketplace after the new energy
conservation standards take effect. The
interested parties argued that when the
National Appliance Energy
Conservation Act was being developed,
it was recognized that there were
decorative gas appliances that were
marketed based on the aesthetic appeal
of a simulated solid fuel fireplace or
stove. The interested parties asserted
that those same products are available
in the marketplace today and need to be
excluded from inclusion in this
rulemaking in a proactive manner,
preferably by using the consensus safety
standard designation in the definition
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and adding an explanatory note to the
definition stating that ANSI Z21.50 and
ANSI Z21.60 appliances are not vented
gas fireplace heaters. The interested
parties suggested the following
definition of ‘‘vented gas fireplace
heater’’:
Vented Gas Fireplace Heater. A vented
appliance which simulates a solid fuel
fireplace and furnishes warm air, with or
without duct connections, to the space in
which it is installed. A vented gas fireplace
heater is such that it may be controlled by
an automatic thermostat. The circulation of
heated room air may be by gravity or
mechanical means. A vented gas fireplace
heater may be freestanding, recessed, zero
clearance, or a gas fireplace insert.
(AHRI, No. 91 at pp. 13–14; HPBA, No.
75 at p. 1; Empire, No. 100 at p. 3;
AHRI, Public Meeting Transcript, No.
57.4 at pp. 48–49; HPBA, Public
Meeting Transcript, No. 57.4 at pp. 42
and 51; and Empire, Public Meeting
Transcript, No. 57.4 at pp. 50)
ACEEE also suggested that it would be
reasonable for DOE to not set efficiency
regulations for purely decorative
products with an output capacity less
than or equal to 6,000 Btu/h. However,
ACEEE asserted that an upper limit is
necessary to prevent subterfuge and
confusion with actual heating
appliances. (ACEEE, No. 79 at p. 6)
DOE agrees with the interested parties
that further modification to the
definition of ‘‘vented hearth heater’’ is
necessary to provide clear guidance to
the industry regarding which products
are covered under DOE’s regulations.
DOE’s definition of ‘‘vented home
heating equipment’’ limits the coverage
of vented home heating equipment to
include only those units ‘‘designed to
furnish warmed air to the living space
of a residence.’’ 10 CFR 430.2. DOE
notes that it is often difficult to
determine the intended purpose of
fireplace product currently sold. Units
designed to furnish warmed air to the
living space and purely decorative units
often share very similar external
appearances, unit construction, and
input capacities. Some interested parties
suggested DOE use the ANSI safety
standards to distinguish coverage in the
marketplace. DOE does not believe that
using ANSI safety standards would be a
suitable solution to this problem since
many of those products classified as
‘‘decorative fireplaces’’ under the ANSI
safety standards are very similar in
construction to fireplace heaters and
provide warm air to the residence.
DOE notes that the primary difference
between the two types of hearth
products is that decorative units are
intended only to provide the ambiance
and aesthetic utility associated with a
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solid fuel (e.g., wood-burning) fireplace
with little or no heat output to the living
space, while heating hearth products are
intended to provide heat to the living
space along with the aesthetic utility.
Heating-type products are often shipped
with additional accessories that
decorative products do not have, such
as thermostats to control the heat output
and blowers that distribute hot air to the
room. DOE research suggests that this
additional equipment is typically
optional and hence not very useful to
distinguish between heaters and
decorative units.
After carefully considering the public
comments and conducting additional
research, DOE believes implementing a
maximum input capacity limit will
likely result in a clear distinguishable
way for DOE, manufacturers, and
consumers to identify which products
provide ‘‘warmed air to the residence,’’
as compared with those designed purely
for aesthetic purposes. Because of the
nature of hearth products (i.e., the
presence of a flame), all hearth products
create heat and nearly all of the hearth
products provide some amount of that
heat, however small that may be, to the
surrounding living space.
Unlike fireplace heaters, decorative
hearth products provide a unique
utility, specifically offering the
ambiance and aesthetic appeal provided
by the flame without adding significant
heat to the conditioned space. By way
of explanation, some consumers that
wish to purchase purely decorative
hearth products live in warmer climates
where any additional heat provided to
the residence would be undesirable.
However, these consumers still want the
aesthetic appeal provided by the flame.
As the efficiency of the vented hearth
product is increased, the more useful
heat is provided to the space. So in
response to comments, DOE is adopting
an approach that would maintain the
utility and availability of decorative
hearth products.
In order to determine whether a
maximum input capacity limit is a good
indicator of intended use, DOE
reviewed the market for vented hearth
products, including those products
marketed as heaters and decorative
appliances. DOE research identified
products marketed for heating and
decorative purposes offered across the
entire range of input capacities. Many of
the units produced solely for decorative
purposes come with the capability to
vary the input capacity in order to
change the magnitude of the flame.
Since manufacturers provide
consumers, installers, and contractor
with a means to change the input
capacity of the unit to better match
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consumers’ aesthetic desires and
heating needs, DOE believes input
capacity is indicative of the type of
intended use of the vented hearth
heater.
DOE believes that consumers desiring
a purely decorative unit will chose to
buy units which minimize the heat
furnished to their living space, thereby
reducing the impacts on the cooling
loads of their house for those living in
warmer climates. DOE contacted several
contractors in warmer climates, where
decorative appeal is presumably the
consumers’ top priority. From these
discussions and further review of the
product literature, DOE found that many
hearth products allow the input
capacity to be modulated via the gas
valve. In warmer climates, contractors
frequently suggest to their customer to
turn down the gas supply to minimize
the amount of heat radiated and
convected to the air within the
residence. Some installation companies
even offer optional venting products
and dampers, which attempt to direct
the heat to other parts of the residence
or outdoors. Even though decorative
hearth products are offered with a large
range of input capacities, DOE research
hence suggests that the input rating is
typically significantly reduced for
applications in conditions in which the
flames are purely ornamental to
minimize heat provided to the
residence. This is shown by the
variability in the input ratings offered
for a given model as described in
manufacturer catalog data, which can be
field-adjusted based on the amount of
heat desired within the residence.
DOE believes that hearth products
intended for decorative purposes
provide a specific aesthetic utility that
consumers value. In its analysis, DOE
considered the value of this aesthetic
quality and the additional heat load that
such systems produce. DOE believes
that a maximum input capacity of 9,000
Btu/h is an appropriate cut-off for
decorative appliances since existing
hearth-type DHE units featuring
adjustable input capacities operate at or
below this input capacity limit. DOE
chose 9,000 Btu/h because other gas
appliances found in a house, which may
have unintended heating loads, such as
a burner on a gas-cook top, are also
found at this input capacity. By
allowing manufacturers the option of
producing vented hearth heaters that are
excluded from the standards amended
in today’s final rule, DOE is preserving
the ability of manufacturers to continue
selling decorative units, consumers can
continue to enjoy them, and unintended
heat loads are limited to no more than
1⁄2 of a ton of heating capacity per
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decorative unit. DOE research suggests
that manufacturers can comply
relatively inexpensively with the
coverage established by the ‘‘vented
hearth heater’’ definition by reducing
the maximum input capacity of the gas
delivery system through the use of a
restrictor plate, modifying the gas valve,
or altering the flame orifice. All of these
options are currently available or
utilized within the industry today. DOE
believes the most likely solution that
will be used by hearth manufacturers to
meet DOE’s restriction on input capacity
would be to use a restrictor plate
because it is the most inexpensive. A
restrictor plate would ensure that
limitations were placed upon the gas
line such that the maximum input
capacity of the fireplace is less than
9,000 Btu/h. DOE notes that all vented
hearth heaters which manufacturers
produce to be purely decorative units
must be designed so that the consumer
cannot override this 9,000 Btu/h
maximum input capacity limit in the
field.
DOE chose to include a maximum
input capacity limitation, instead of an
output capacity limit as ACEEE
suggested, because a very inefficient
unit could have a very high input
capacity and use a lot of energy, while
meeting DOE’s limitation on output
capacity.
DOE realizes its amended definition
of ‘‘vented hearth heater’’ will include
all types of hearth units with maximum
input capacities above the specified
limit, including all products that are
currently referred to as fireplace heaters
and some products that are currently
deemed as decorative within the
marketplace. DOE also notes that this
maximum input capacity corresponds to
the output capacity suggested by
ACEEE, assuming the unit is about twothirds efficient, which is an efficiency
that is comparable to the standard level
being adopted today for vented gas
hearth heaters. Therefore, DOE is
modifying the ‘‘vented hearth heater’’
definition to include a maximum input
capacity limit of 9,000 Btu/h for purely
decorative units.
AHRI, HBPA, and Empire asserted
that DOE should amend its definition of
‘‘vented hearth heater’’ to include duct
connections. While duct connections
were excluded from the original ‘‘direct
heating equipment’’ definition, the
interested parties stated that this
exclusion is unnecessary for vented gas
fireplace heaters because they are
allowed to have duct connections by
design. The interested parties argued
that there is no reason for DOE to
exclude these currently-available
appliances merely based upon the
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presence of ducting, particularly given
that the limiting definition of ‘‘vented
home heating equipment’’ was written
before the products were introduced.
(AHRI, No. 91 at pp. 13–14; HPBA, No.
75 at pp. 1–2; Empire, No. 100 at p. 3)
DOE agrees with these interested
parties and is extending coverage to
both ducted and ductless vented hearth
heater products. DOE believes this
modification will provide equal
treatment to similar products offered on
the market today. DOE’s research
confirmed that some vented hearth
heater models have the ability to
connect to ducts and distribute the heat
furnished to the space throughout the
house. In order to include both ducted
and ductless vented hearth products,
DOE is amending the definitions of
‘‘vented hearth heater’’ and ‘‘vented
home heating equipment’’ for inclusion
at 10 CFR 430.2. Lastly, DOE is making
a number of editorial changes to the
definition of ‘‘vented hearth heater’’
proposed in the December 2009 NOPR,
in order to make the definition easier to
read. As adopted, these definitions read
as follows:
Vented hearth heater means a vented
appliance which simulates a solid fuel
fireplace and is designed to furnish
warm air, with or without duct
connections, to the space in which it is
installed. The circulation of heated
room air may be by gravity or
mechanical means. A vented hearth
heater may be freestanding, recessed,
zero clearance, or a gas fireplace insert
or stove. Those heaters with a maximum
input capacity less than or equal to
9,000 British thermal units per hour
(Btu/h), as measured using DOE’s test
procedure for vented home heating
equipment (10 CFR part 430, subpart B,
appendix O), are considered purely
decorative and are excluded from DOE’s
regulations.
DOE is also amending its definition of
‘‘vented home heating equipment or
vented heater’’ in 10 CFR 430.2 to
include vented hearth heaters with duct
connections. This modification is
necessary in order for the definition of
‘‘vented home heating equipment or
vented heater’’ to be consistent with the
definition of ‘‘vented hearth heater.’’
DOE is also amending this definition to
add ‘‘vented hearth heater’’ to the list of
products—‘‘vented wall furnace, vented
floor furnace, and vented room
heater’’—that the definition currently
states are included as vented home
heating equipment. As stated in the
December 2009 NOPR and above,
vented hearth products already meet
DOE’s definition for ‘‘vented home
heating equipment.’’ This is true
regardless of whether the term ‘‘vented
hearth heater’’ is added to that
definition. Thus, the addition of that
term merely clarifies the existing
definition, and is a technical correction
that does not alter the substance of the
definition. As amended, the definition
reads as follows:
Vented home heating equipment or
vented heater means a class of home
heating equipment, not including
furnaces, designed to furnish warmed
air to the living space of a residence,
directly from the device, without duct
connections (except that boots not to
exceed 10 inches beyond the casing may
be permitted and except for vented
hearth heaters, which may be with or
without duct connections) and includes:
vented wall furnace, vented floor
furnace, vented room heater, and vented
hearth heater.
b. Covered Products Not Included in
This Rulemaking
As the December 2009 NOPR explains
in detail, unvented direct heating
equipment, electric pool heaters, and
combination water heating/space
heating products all are covered
products under EPCA, but no Federal
energy conservation standards exist for
them. 74 FR 65852, 65866–76 (Dec. 11,
2009). DOE did not propose standards
for them in this rulemaking, because, in
the case of unvented DHE, a standard
could produce little energy savings
(largely due to the fact that any heat
losses are dissipated directly into the
conditioned space) and because of
limitations in the applicable DOE test
procedure, and in the case of the other
two products, because of the lack of an
appropriate DOE test procedure. Id.
By contrast, standards currently apply
to tabletop and electric instantaneous
water heaters. (10 CFR 430.32(d)) But, as
explained in the December 2009 NOPR,
an increase in the current standard
levels for tabletop products is not
feasible, and would force them off the
market, and an increase in the levels for
electric instantaneous products would,
at best, save little energy. 74 FR 65852,
65867 (Dec. 11, 2009). Therefore, DOE
also did not propose amended standards
for these products.
With regard to these five covered
products, DOE sees no reason to change
the conclusions expressed in the
December 2009 NOPR, and takes no
further action in today’s final rule. DOE
did not receive any comments in
response to its proposed treatment of
these five covered products in the
December 2009 NOPR. Consequently,
DOE is not adopting standards for these
products in today’s final rule.
2. Product Classes
In evaluating and establishing energy
conservation standards, DOE generally
divides covered products into classes by
the type of energy used or by capacity
or other performance-related feature that
justifies a different standard for
products having such feature. (See 42
U.S.C. 6295(q)) In deciding whether a
feature justifies a different standard,
DOE must consider factors such as the
utility of the feature to users. Id. DOE
normally establishes different energy
conservation standards for different
product classes based on these criteria.
Table IV.1 presents the product
classes for the three types of heating
products under consideration in this
rulemaking. The subsections below
provide additional details and a
discussion of comments relating to the
product classes for the three heating
products in response to the December
2009 NOPR proposals.
TABLE IV.1—PRODUCT CLASSES FOR THE THREE HEATING PRODUCTS
Characteristics
Gas-Fired Storage Type ....................................................
Oil-Fired Storage Type .......................................................
Electric Storage Type .........................................................
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Residential water heater type
Nominal input of 75,000 Btu/h or less; rated storage volume from 20 to 100 gallons.
Nominal input of 105,000 Btu/h or less; rated storage volume of 50 gallons or less.
Nominal input of 12 kW (40,956 Btu/h) or less; rated storage volume from 20 to 120
gallons.
Nominal input of over 50,000 Btu/h up to 200,000 Btu/h; rated storage volume of 2
gallons or less.
Gas-Fired Instantaneous ....................................................
Direct heating equipment type
Heating capacity (Btu/h)
Gas Wall Fan Type ............................................................
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Over 42,000.
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TABLE IV.1—PRODUCT CLASSES FOR THE THREE HEATING PRODUCTS—Continued
Gas Wall Gravity Type .......................................................
Gas Floor ...........................................................................
Gas Room ..........................................................................
Gas Hearth .........................................................................
Up to 27,000.
Over 27,000 and
Over 46,000.
Up to 37,000.
Over 37,000.
Up to 20,000.
Over 20,000 and
Over 27,000 and
Over 46,000.
Up to 20,000.
Over 20,000 and
Over 27,000 and
Over 46,000.
up to 46,000.
up to 27,000.
up to 46,000.
up to 27,000.
up to 46,000.
Pool heater type
Characteristics
Residential Pool Heaters ...................................................
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a. Water Heaters
As presented in the December 2009
NOPR, residential water heaters can be
divided into various product classes
categorized by physical characteristics
that affect product efficiency. Key
characteristics affecting the energy
efficiency of the residential water heater
are the type of energy used and the
volume of the storage tank. 74 FR 65852,
65868–71 (Dec. 11, 2009). These
product classes are differentiated by the
type of energy used (i.e., electric, gas, or
oil) and the type of storage for the water
heater (i.e., storage, tabletop, or
instantaneous). In this rulemaking, DOE
has excluded tabletop water heaters and
electric instantaneous water heaters
from consideration for the reasons
discussed above. 74 FR 65852, 65868
(Dec. 11, 2009).
In response to the December 2009
NOPR analysis and the issues for which
DOE specifically sought comment, DOE
received several comments from
interested parties about DOE’s proposed
product classes and their organization
for residential water heaters. These
comments are summarized and
addressed immediately below.
i. Low-Boy Water Heaters
General Electric (GE), A.O. Smith
Corporation (A.O. Smith), Bradford
White Corporation (BWC), and AHRI
supported the need for a separate
product class for low-boy water heaters,
which are electric storage water heaters
that are shorter in height and wider in
diameter than traditional water heaters.
(GE, No. 84 at p. 1; A.O. Smith, No. 76
at p. 2; BWC, No. 61 at p. 3; AHRI, No.
91 at p. 3; Rheem, No. 89 at p. 11; and
A. O. Smith, Public Meeting Transcript,
No. 57.4 at pp. 55–56) ACEEE,
EarthJustice, and ASAP disagreed and
supported DOE’s position in the
December 2009 NOPR, which did not
establish a separate product class for
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Gas-fired.
low-boy electric storage water heaters.
(ACEEE, No. 79 at p. 8; EarthJustice, No.
83 at p. 1; and ASAP, Public Meeting
Transcript, No. 57.4 at p. 60) The
individual commenters’ rationales and
further justification are presented
below.
GE asserted the low-boy water heaters
should be separated into their own
product class, because in some
categories, the benefits of unique size,
configuration, and functionality are very
important to consumers. In this product
category, the unique functionality of a
low-boy water heater happens to focus
on the physical dimensions of the
product. GE asserted that some
consumers prefer or require the lower
overall product height, as they do not
have the space available for a standardsized water heater. (GE, No. 84 at p. 1)
A.O. Smith strongly asserted that a
separate class for low-boy water heaters
is justified, for many of the same
reasons that a separate class is already
established for table-top water heaters.
According to the commenter, low-boy
water heaters are predominately used in
installations where height is a
constraint, such as where a furnace or
air-handler is mounted on a rack above
the low-boy water heater in an
equipment closet. Because low-boy
water heaters are already a larger
diameter unit than the baseline design,
increasing the diameter even more by
requiring additional insulation
thickness would make the heater too
large to fit into the space available in
most replacement situations (again,
such as the closet/rack example above).
A.O. Smith stated its belief that there
will be a loss of utility for low-boy
heaters if they are not put into a
separate class with an EF less than
proposed for the ‘‘standard’’ heater.
(A.O. Smith, No. 76 at p. 2)
BWC supports a separate product
class for low-boy water heaters because
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they have very specific applications.
Low-boy water heaters are frequently
used in condominiums where
additional space is unavailable and a
gas water heater cannot be used due to
venting limitations. When used in these
applications, BWC claimed that lowboys use less water than typical
standard electric water heaters.
Therefore, BWC asserted low-boy water
heaters have a different utility than
standard electric water heaters. (BWC,
No. 61 at p. 3)
AHRI asserted that low-boy water
heaters use electricity, but are not
offered in the same range of volumes as
standard electric storage water heaters.
Most low-boys are offered in 30-gallon
and 40-gallon sizes. AHRI asserted that
the December 2009 NOPR
mischaracterizes the functionality or
utility of these products. Low-boy
models have the unique feature of being
able to be installed in short, confined
spaces in a dwelling. But, as is the case
with countertop electric water heaters,
the constraints dictated by the spaces in
which these products are installed affect
the options for increasing the efficiency
of low-boy electric models. Many lowboy models today may have efficiencies
comparable to standard size electric
water heaters, but they do not have the
same potential for further increasing
their efficiency. Accordingly, AHRI
argued that this separate product class
should have a minimum EF standard
that is 0.01 less than that proposed for
electric storage water heaters. (AHRI,
No. 91 at p. 3)
Rheem asserted that low-boy electric
water heaters (i.e., electric storage water
heaters ranging from 20 to 50 gallons)
are typically installed under a counter
or stacked (air handler) in high-density
housing, such as apartment and
condominium communities. According
to Rheem, any size increase driven by a
significant change in the EF
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requirements would affect the product
geometry (diameter and height) and
drive the potential use of multiple,
smaller, point-of-use electric or
instantaneous electric water heaters.
(Rheem, No. 89 at p. 11)
ACEEE asserted that low-boy water
heaters designed to fit beneath
conventional cabinets are similar to
‘‘table-top’’ units, with similar trade-offs
in terms of capacity and improved
efficiency (through thicker insulation).
ACEEE agrees with DOE’s reasoning in
the December 2009 NOPR that low-boys
can be designed to meet the proposed
standards by using thicker insulation,
higher set-point settings, and a
tempering valve, and, therefore, ACEEE
opined that, in general, no special
product class is needed. However, as a
compromise, ACEEE stated that it could
support a special class for low-boys
designed for small living units, but with
an upper capacity limit of 30 gallons, in
order to prevent ‘‘leakage’’ of lowerefficiency units into the general water
heater applications. If larger units are
also included, ACEEE expressed
concern that significant growth in lowboy sales would be expected, leading to
a significant loss in energy savings
relative to use of higher-efficiency
conventional units. (ACEEE, No. 79 at
pp. 8–9)
EarthJustice stated that a separate
product class for low-boy water heaters
is not justified. According to the
commenter, DOE’s analyses demonstrate
that water heaters in these
configurations can meet the efficiency
standards under consideration for
electric-storage and gas-storage water
heaters, respectively (see 74 FR 65852,
65869 (Dec. 11, 2009)). (EarthJustice,
No. 83 at p. 1)
NRDC also stated that ‘‘low-boy’’ water
heaters do not warrant a separate
product class, because these products
could become a low-cost loophole to the
standard if allowed to be less efficient
than traditional tank-type water heaters.
(NRDC, No. 85 at p. 6)
ASAP agreed with DOE’s position not
to establish a separate product class for
low-boy water heaters, as presented in
the December 2009 NOPR. ASAP
warned DOE to keep a close eye on
lower standards for particular product
classes, which can result in market
shares for those products increasing and
reduction of the overall energy savings
associated with the energy conservation
standards. (ASAP, Public Meeting
Transcript, No. 57.4 at p. 60)
After careful consideration, DOE does
not agree with certain commenters that
a separate product class needs to be
established for low-boy water heaters.
As noted above, in evaluating and
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establishing energy conservation
standards, DOE generally divides
covered products into classes by the
type of energy used, or by capacity or
another performance-related feature that
justifies a different standard. (See 42
U.S.C. 6295(q)) DOE notes that low-boy
water heaters use the same type of
energy as other water heaters (i.e., gas or
electricity) and are offered in a range of
storage volumes. Thus, the type of
energy used and the functionality of
low-boy units are similar to other types
of water heaters. DOE acknowledges
that low-boy water heaters are only
offered in certain volume sizes, which
tend to be at the lower end of the range
(i.e., below 50 gallons). While many of
the commenters pointed to specific sizeconstrained applications where low-boy
water heaters are installed, DOE
reviewed the market and found that
low-boy water heaters are generally
classified as water heaters that have a
shorter height and wider diameter.
However, unlike tabletop water heaters,
low-boy water heaters did not seem to
have a uniform or common platform
size. Instead, the physical dimensions of
low-boy water heaters varied by
manufacturer, model, and efficiency,
but this is also true of the entire electric
storage water heating market. Water
heater manufacturers offer a range of
options to consumers, including various
physical dimensions that are not unique
to low-boy units. (See chapter 3 of the
TSD.) Furthermore, DOE does not
believe each different combination of
physical dimensions currently available
on the market warrants a separate
product class. DOE reaffirmed its
position in the December 2009 NOPR
that the size constraints of these units
do not appear to impact energy
efficiency, since many ‘‘low-boy’’
models have efficiencies that are
comparable to standard-size water
heaters currently available on the
market. DOE’s research suggests that
there are currently multiple low-boy
units offered that will meet the
standards being adopted in today’s final
rule for electric storage water heater less
than 55 gallons. Specifically, DOE found
multiple low-boy models at 0.95 EF
with a rated storage volume of 50
gallons. Consequently, for the reasons
above, DOE is not establishing a
separate product class for low-boy water
heaters.
ii. Ultra-Low NOX Water Heaters
In the December 2009 NOPR analysis,
DOE did not propose to establish a
separate product class for ultra-low NOX
gas-fired storage water heaters. 74 FR
65852, 65869–70 (Dec. 11, 2009).
However, DOE did specifically analyze
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these water heaters as compared to
traditional gas-fired storage water
heaters with standard burners. 74 FR
65852, 65882–83 (Dec. 11, 2009). In
response to the treatment of ultra-low
NOX gas-fired storage water heaters in
the December 2009 NOPR, DOE
received a number of different
comments. A.O. Smith, BWC, AHRI,
and Rheem urged DOE to establish a
separate product class for ultra-low NOX
gas-fired water heaters. (A.O. Smith, No.
76 at p. 2; BWC, 61 at p. 3; AHRI, No.
91 at p. 3; A.O. Smith, Public Meeting
Transcript, No. 57.4 at pp. 56–57; and
AHRI, Public Meeting Transcript, No.
57.4 at pp. 57–58) On the other hand,
ACEEE, EarthJustice, and NRDC agreed
with DOE’s position in the December
2009 NOPR that ultra-low NOX gas-fired
water heaters should not have their own
product class. Further details provided
by each commenter are presented
below.
A.O. Smith asserted that the burner
technology needed to comply with the
South Coast Air Quality Management
District’s (SCAQMD) ultra-low NOX
requirements and the changes to the
water heater technology that are needed
to meet increased efficiency
requirement are ‘‘operationally
contradictory’’ with each other. The
types of burners currently used to
comply with the ultra-low NOX
requirement in atmospheric heaters are
much more restrictive (higher pressure
drop) than conventional burners. Since
these ultra-low NOX heaters also must
comply with the flammable vapor
ignition resistance requirements, they
also have flame arrestors on the air inlet,
which add more restriction (pressure
drop) to the system. In order to boost the
efficiency, the flue baffle must be made
more effective, which means making it
more restrictive. The increased pressure
drops due to all three components taken
together is enough to offset the thermal
buoyancy of the atmospheric venting
design, and cause the heater to no
longer work. The only way to overcome
the additional restriction would be to
add a blower and/or power-burner to
the heater, which would greatly increase
the manufacturing and installation costs
of the heater. (A.O. Smith, No. 76 at
p. 2)
BWC asserted that ultra-low NOX gasfired water heaters should be a separate
product class because they have distinct
design differences compared to standard
atmospheric gas water heaters. The
unique design requirements for ultralow NOX gas-fired water heaters greatly
limit their capacity to increase the
efficiency while maintaining a lower
level of emissions. (BWC, 61 at p. 3)
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AHRI challenged the December 2009
NOPR’s tentative conclusions that ultralow NOX gas-fired models provide the
same utility as standard gas-fired storage
water heaters, while simply using a
distinct burner to achieve the ultra-low
NOX emissions. AHRI argued that
standard gas-fired water heaters do not
offer the same utility as the ultra-low
NOX models because the standard gasfired water heater cannot heat water
efficiently while also emitting NOX at a
very low rate. Regardless of its
efficiency, a standard residential gasfired water heater cannot be sold or
installed in many areas in California.
According to AHRI, the feature of ultralow NOX emissions is a unique
performance characteristic that imposes
different conditions on how, and at
what expense, the efficiency of these
models can be increased. As is the case
with low-boy electric models, AHRI
asserted that ultra-low NOX water
heaters should have a separate product
class with a minimum EF standard that
is 0.01 less than that proposed for gasfired storage water heaters. (AHRI, No.
91 at p. 4)
ACEEE stated that there is no reason
for a separate product class with
separate standards for ultra-low NOX
water heaters. According to ACEEE,
these units can meet the same standards
as conventional equipment, if they
incorporate induced draft (power vent)
to compensate for the combined
pressure drop of the better baffle, FVIR,
and ultra-low NOX burner. If
stakeholders want an exception, the
commenter suggested that this should
be dealt with by the waiver process
rather than by establishing another
dead-end class of atmospherically
vented equipment. (ACEEE, No. 79 at
p. 9)
EarthJustice stated that a separate
product class for ultra-low NOX gasfired water heaters is not justified. The
commenter pointed to DOE’s own
analysis, which arguably demonstrates
that water heaters in these
configurations can meet the efficiency
standards under consideration for
electric storage and gas storage water
heaters, respectively (see 74 FR 65852,
65869, 65881 (Dec. 11, 2009)).
(EarthJustice, No. 83 at p. 1)
NRDC likewise argued that there
should not be a separate product class
for ultra-low NOX gas-fired water
heaters. NRDC stated that the efficiency
requirements considered in the
rulemaking can be met in ultra-low NOX
gas-fired units by moving to power vent
technology and probably with other
routes. Therefore, the commenter
concluded that there is no need to allow
a less-stringent standard for these
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products when the proposed
requirements can be met. (NRDC, No. 85
at p. 6)
After considering public comments on
this issue, DOE has decided not to
change its position from the December
2009 NOPR and continues to believe
that a separate product class does not
need to be established for ultra-low NOX
gas-fired storage water heaters. As noted
above, in evaluating and establishing
energy conservation standards, DOE
generally divides covered products into
classes by the type of energy used, or by
capacity or other performance-related
feature that justifies a different standard
for products having such feature. (See
42 U.S.C. 6295(q)) Ultra-low NOX gasfired storage water heaters use the same
type of energy (i.e., gas) and are offered
in comparable storage volumes to
traditional gas-fired storage water
heaters using standard burners. In
deciding whether the product
incorporates a performance feature that
justifies a different standard, DOE must
consider factors such as the utility of the
feature to users. Id. In terms of water
heating, DOE believes ultra-low NOX
water heaters provide the same utility to
the consumer. However, DOE also notes
that ultra-low NOX water heaters do
incorporate a specific burner technology
allowing these units to meet the strict
emissions requirements of local air
quality management districts. Some of
the commenters pointed out that the
increased pressure drops could
adversely impact the efficiency levels.
DOE agreed with this assertion and
maintained its methodology for
handling ultra-low NOX gas-fired
storage water heaters, which included
development of a separate analysis for
these products, as detailed in the
December 2009 NOPR. 74 FR 65852,
65881–82 (Dec. 11, 2009). See section
IV.C.2.a for additional details. This
analysis showed that implementing
power venting and the same insulation
increases as those for standard gas-fired
water heaters would result in slightly
lower efficiencies due to the additional
pressure restrictions resulting from the
addition of the ultra-low NOX burner.
Therefore, DOE implemented
technologies at lower efficiency levels
for ultra-low NOX gas-fired storage
water heaters in order to achieve the
same efficiencies as those identified for
standard gas-fired storage water heaters.
Based on the teardown analysis of ultralow NOX water heaters, DOE believes
that ultra-low NOX gas-fired storage
water heaters will be able to meet the
standards that are being adopted in
today’s final rule using available
technologies currently on the market.
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Therefore, for the above reasons, DOE
has decided not to establish a separate
product class for ultra-low NOX gasfired storage water heaters in this final
rule.
iii. Heat Pump Water Heaters
Throughout the rulemaking, DOE has
treated heat pump water heaters as a
design option for electric storage water
heaters rather than a separate product
class, as further explained and detailed
in the preliminary analysis. (See
Chapter 2 of the preliminary analysis
TSD and the discussion in the December
2009 NOPR (74 FR 65852, 65870–81
(Dec. 11, 2009).) A heat pump water
heater represents a merging of two
technologies: (1) An electric resistance
storage water heater with tank and
controls; and (2) a refrigeration circuit
similar to that found in a residential airconditioner. Heat pump water heaters
use existing heat pump technology to
extract heat from the surrounding air
(typically at room temperature) for
heating stored water. For electric water
heaters, this is an alternative to resistive
heating, which transfers heat from the
electric resistance element to the water.
DOE received several comments from
interested parties in response to its
treatment of heat pump water heaters
and its request for comment on some of
the issues identified surrounding heat
pump water heaters. Some commenters
urged DOE to establish separate product
classes for traditional electric resistance
storage water heaters and heat pump
water heaters, while others agreed with
DOE’s classification of heat pump water
heaters. Their specific comments and
DOE’s response are presented below.
General Electric stated support for
DOE’s proposal to not create a separate
product class for heat pump water
heaters, as they are designed to replace
traditional electric water heaters in most
residences, and have similar consumer
functionalities. (GE, No. 84 at p. 1)
Daikin asserted that electric resistance
water heaters should be placed in the
same product class as heat pump water
heaters. Anecdotally, Daikin stated that
in the European Union, the European
Parliament has classified both of these
products in the same category for energy
efficiency regulatory purposes, and the
commenter further stated that in Japan,
electric resistance water heaters have
practically disappeared from the market
as of 2010. In addition, Daikin stated
that heat pump water heaters usually
have a back-up electric heater. If heat
pump water heaters are classified
separately, there will be a difficult
question about whether the back-up
electric heater requires heat pump water
heating systems to remain in the other
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category for some purposes. However,
Daikin suggested that if DOE decides to
establish a heat pump water heater
product class, then it should be
subdivided based on the following three
criteria: (1) Refrigerant type; (2) heat
source (i.e., air to water heat pump); and
(3) add-on or integrated type system
(i.e., heat pump system and a tank).
(Daikin, No. 82 at pp. 1–2)
Northwest Energy Efficiency Alliance
(NEEA) stated there is not a need for a
separate class of water heaters based on
heat pump versus resistance elements.
According to NEEA, all of the current
product offerings have a first-hour rating
that is equivalent to an electric
resistance heated product of the same
size. From a consumer utility
standpoint, the products are equivalent
in terms of delivery of hot water for an
equivalent tank size. These products are
all designed as integrated, ‘‘drop-in’’
replacement units according to product
literature that NEAA has reviewed from
A.O. Smith, Rheem, and General
Electric. (NEEA, No. 88 at p. 2)
In its comments, EarthJustice opposed
establishing a separate product class for
heat pump water heaters, based on the
following rationale. EarthJustice
asserted that EPCA provides both
mandatory and permissive authority for
DOE to establish new product classes
for covered products. (See 42 U.S.C.
6295(o)(4) and (q)(1)) However, aside
from the unique situation of a covered
product capable of consuming different
kinds of energy (42 U.S.C.
6295(q)(1)(A)), EarthJustice argued that
EPCA only mandates the creation of
multiple product classes when the
failure to do so would eliminate certain
truly unique product attributes from the
market. (42 U.S.C. 6295(o)(4)) In
contrast, while DOE does have
discretion to create separate classes for
products based on the presence of ‘‘a
capacity or other performance-related
feature,’’ the Department may exercise
this authority only if ‘‘such feature
justifies a [different] standard.’’ 42
U.S.C. 6295(q)(1)(B)) For the reasons
explained below, EarthJustice argued
that the plain language of EPCA
forecloses an interpretation that the
establishment of separate product
classes for electric resistance and heat
pump water heaters is warranted or
required. First, EarthJustice stated that
as DOE notes in the December 2009
NOPR, there is no distinction between
heat pump and electric resistance water
heaters with regard to operational
utility. Accordingly, EarthJustice argued
that because heat pump and electric
resistance water heaters provide
identical service, there is no basis for
DOE to conclude that separate product
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classes for these technologies are
necessary to preserve the availability in
the market of a distinct ‘‘feature’’ with
utility to the user of the product (see 42
U.S.C. 6295(o)(4)).
At the public hearing on the
December 2009 NOPR, representatives
from some manufacturers asserted that a
separate product class for heat pump
water heaters was needed to address the
fraction of households that would
otherwise experience higher-thannormal installation costs to replace a
water heater using electric resistance
heating with one using a heat pump.
However, EarthJustice stated that even if
DOE’s analysis confirms that there is a
cost penalty to install a heat pump
water heater in some applications, this
fact, standing alone, would not support
the creation of separate product classes
for heat pump and electric resistance
water heaters. In all standards
rulemakings, EarthJustice reasoned that
some households will face higher
incremental costs to install products
meeting revised standards, but the
proper approach under EPCA is to
consider these impacts in calculating
consumers’ average lifecycle cost and
payback period for the standard levels
under consideration (see 42 U.S.C.
6295(o)(2)(B)(i)(II)). According to
EarthJustice, to use an increase in the
installed cost for a portion of shipments
as the basis for a separate product class
would be an end-run around the other
factors Congress required DOE to
consider in assessing the economic
justification for a standard (see 42
U.S.C. 6295(o)(2)(B)(i)). The commenter
suggested that DOE’s recent statements
in the commercial clothes washers
rulemaking reinforce this point. There,
an industry commenter argued that a
particular product design merited a
separate product class on the basis of its
low installed cost. 75 FR 1122, 1130
(Jan. 8, 2010). In response, DOE
explained that it ‘‘does not consider first
cost a ‘feature’ that provides consumer
utility for purposes of EPCA. DOE
acknowledges that price is an important
consideration to consumers, but DOE
accounts for such consumer impacts in
the [lifecycle cost] and [payback period]
analyses conducted in support of this
rulemaking.’’ Id. at 1134. EarthJustice
stated that DOE’s refusal to use installed
costs as the basis for a separate product
class for commercial clothes washers is
faithful to EPCA’s text, and there is no
justification for adopting a contrary
approach for water heaters.
(EarthJustice, No. 73 at pp. 1–3)
NRDC also stated that heat pump
water heaters do not warrant a separate
product class since heat pump water
heater and an electric tank type water
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heater provide the same consumer
utility. (NRDC, No. 85 at p. 5)
On the other hand, Southern
Company (Southern) stated its belief
that there is more of a functional
difference between heat pump water
heaters and electric resistance water
heaters than with other products for
which DOE has established separate
product classes, including refrigerators
(top freezer versus side-by-side),
window air conditioners (for location of
louvers), and transformers (a multitude
of different phases and sizes). Southern
Company argued that heat pump water
heaters should be treated as a separate
product class because the heat pump
water heater transfers cold air from the
heat pump to the surrounding space and
are noisier than electric resistance water
heaters. (Southern, No. 90 at p. 5)
BWC recommended a separate
product class be established for heat
pump water heaters because the primary
fuel source is air instead of electricity.
Heat pump water heaters can attain
greater efficiencies, because while
electricity is being converted to heat the
water like a typical electric resistance
water heaters, heat is also being moved
from the surrounding environment to
the stored water via the heat pump. In
order for heat pump water heaters to
maximize efficiency, they must recover
slowly, which changes the utility of the
water heater. According to BWC, the
same size heat pump water heater is not
providing the same performance as the
equivalent size electric resistance
heater. (BWC, No. 61 at p. 4)
AHRI reaffirmed its position that heat
pump water heaters should be a
separate product class. AHRI argued
that DOE’s tentative conclusion that
heat pump water heaters do not require
a separate product class because they
provide hot water just like a traditional
electric storage water heater is invalid
because it fails to recognize how the
heat pump water heater produces that
hot water and how the heat pump water
heater’s performance is effected by the
environment in which it is installed.
AHRI asserted that the following
characteristics make heat pump water
heaters unique: (1) Water is heated by
energy extracted from the air; (2) the
heating capacity is variable depending
on the temperature of the air provided
to the heat pump; (3) the unit cannot
heat water above approximately 135
degrees Fahrenheit; (4) the unit must be
installed in a space large enough to
provide the necessary volume of air for
the unit to adequately heat water; (5) the
unit cools the air in the household; (6)
the unit requires a condensate drain as
part of the installation; (7) the unit
cannot be adjusted to meet increases in
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demand without relying on the electric
resistance elements; (8) the unit can
heat water as long as there is adequate
airflow through the heat pump, and
thus, a heat pump with electrical power
but with a clogged air filter will not heat
water; and (9) the unit needs a back up
water heating means that can operate
when the heat pump cannot meet the
load. (AHRI, No. 91 at pp. 4–6)
In response to these NOPR comments,
DOE does not agree that heat pump
water heaters meet the requirements for
establishing a separate product class.
Specifically, DOE does not believe heat
pump water heaters provide a different
utility from traditional electric
resistance water heaters. Heat pump
water heaters provide hot water to a
residence just as a traditional electric
storage water heater does. While AHRI
noted that heat pump water heaters
utilize heat extracted from the air to
heat the water, both heat pump water
heaters and traditional electric
resistance storage water heaters use
electricity as the primary fuel source.
AHRI’s recitation of operational
differences associated with water
heaters that utilize heat pump
technology does not establish that the
mode of heating water is performancerelated feature or provides a unique
utility. As pointed out by GE, current
manufacturers of heat pump water
heaters are marketing these products as
direct replacements for traditional
electric resistance water heaters. The
rated storage volumes and first hour
ratings of the heat pump water heaters
currently on the market are comparable
to the traditional electric resistance
water heaters. Some of the commenters
pointed out that heat pump water
heaters require special installation
considerations, but to account for this,
DOE applied in its analysis specific
installation costs, where applicable, to
heat pump water heaters. (See section
IV.F.2 of today’s notice for more details
on treatment of the installation costs.)
Consequently, DOE has concluded that
heat pump water heaters can replace
traditional electric resistance storage
water heaters in most residences,
although the installation requirements
may be quite costly. For these reasons,
DOE has decided not to establish a
separate product class for heat pump
water heaters.
iv. Unpowered Gas-Fired Water Heaters
The American Gas Association (AGA)
asserted that unpowered gas-fired
storage water heaters should be an
independent product class. An
unpowered gas-fired storage water
heater is one that does not utilize line
electricity in order to provide hot water
to the residence. For many customers
during a power outage, unpowered gasfired water heaters are the only utility
system that provides a source of heat.
AGA believes that this occurrence is
sufficiently frequent to justify the
treatment of unpowered gas-fired
storage water heaters as an independent
product class, consistent with DOE’s
charge to establish product classes
based on type of energy used, capacity,
and in this case, ‘‘other performancerelated feature’’ such as those that
provide utility to consumers. (AGA, No.
78 at pp. 6–7)
DOE does not agree with AGA’s
assertion that unpowered gas-fired
storage water heaters meet the criteria
for the establishment of a separate
product class. Both powered and
unpowered gas-fired storage water
heaters use gas as the primary fuel
source, and both provide the same basic
utility to consumers, which is to supply
hot water to the residence. DOE does
not believe that having the ability to
maintain hot water during power
outages when the electricity is not
working provides enough additional
utility to consumers to warrant a
separate product class. DOE believes
that power outages are infrequent events
that can be handled by a number of
different market solutions such as backup power systems.
b. Direct Heating Equipment
DHE can be divided into various
product classes categorized by physical
characteristics and rated input capacity,
both of which affect product efficiency
and function. Key characteristics
affecting the energy efficiency of DHE
are the physical construction (e.g., fan
wall units contain circulation blowers),
intended installation (e.g., floor furnaces
are installed with the majority of the
unit outside of the conditioned space),
and input capacity.
In the December 2009 NOPR, DOE
proposed consolidating the product
classes for four types of DHE and adding
product classes for one type of DHE.
DOE discusses the full details of its
proposals in the December 2009 NOPR.
74 FR 65852, 65871–72 (Dec. 11, 2009).
In response to the proposed product
class consolidation, AHRI took the
position that the Federal energy
conservation standards should not
change for direct heating equipment,
which would include not consolidating
any of the existing BTU range categories
or range levels. (AHRI, Public Meeting
Transcript, No. 57.4 at p. 85)
Empire Comfort Products (Empire)
stated that if DOE condenses the
product classes for direct heating
equipment, it will reduce the
manufacturers’ flexibility to increase
efficiency. (Empire, Public Meeting
Transcript, No. 57.4 at p. 86)
Neither AHRI nor Empire provided
any additional insight to explain why
the proposed reduction in product
classes would limit a manufacturer’s
ability to increase the efficiency of
direct heating equipment. DOE believes
the consolidation of product classes
reflects the current models offered by
manufacturers. As discussed in the
December 2009 NOPR, DOE carefully
reviewed product catalogs and
performance directories to determine
the relationship between AFUE and
input rating found among products
listed in the AHRI Directory. For each
of the five types of DHE, DOE found that
manufacturers do not produce products
in some of the input capacity ranges or
that some of the efficiency
characteristics of these products are
similar. DOE explained each of these
changes in the NOPR along with its
proposal to further consolidate the
product classes, where applicable. 74
FR 65852, 65871–72 (Dec. 11, 2009). For
each product class, DOE characterized
this relationship, and the commenters
have provided no data or rationale as to
why DOE’s characterization was
incorrect. Consequently, DOE is
adopting the consolidated product
classes as proposed in the December
2009 NOPR. Table IV.2 presents the
product classes for DHE being adopted
by this rulemaking.
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TABLE IV.2—PRODUCT CLASSES FOR DIRECT HEATING EQUIPMENT
Input heating capacity
Btu/h
Direct heating equipment type
Gas Wall Fan Type ..............................................................................................................................
Gas Wall Gravity Type ........................................................................................................................
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20135
Up to 42,000.
Over 42,000.
Up to 27,000.
Over 27,000 and up to 46,000.
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TABLE IV.2—PRODUCT CLASSES FOR DIRECT HEATING EQUIPMENT—Continued
Input heating capacity
Btu/h
Direct heating equipment type
Gas Floor .............................................................................................................................................
Gas Room ............................................................................................................................................
Gas Hearth ..........................................................................................................................................
c. Pool Heaters
As discussed in the December 2009
NOPR, the existing Federal energy
conservation standards for pool heaters
correspond to the efficiency levels
specified by EPCA, as amended (42
U.S.C. 6295(e)(2)), and codified in 10
CFR 430.32(k), classifying residential
pool heaters with one product class.
This product class is distinguished by
fuel input type (i.e., gas-fired). 74 FR
65852, 65872 (Dec. 11, 2009).
B. Screening Analysis
The purpose of the screening analysis
is to evaluate the technology options
identified in the market and technology
assessment as having the potential to
improve the efficiency of products and
to determine which technologies to
consider further and which to screen
out based on the four screening criteria.
DOE consulted with industry, technical
experts, and other interested parties to
develop a list of technologies for
consideration. DOE then applied the
following four screening criteria to
determine which design options are
suitable for further consideration in the
standards rulemaking:
1. Technological feasibility. DOE
considers technologies incorporated in
commercial products or in working
prototypes to be technologically
feasible.
2. Practicability to manufacture,
install, and service. If mass production
and reliable installation and servicing of
a technology in commercial products
could be achieved on the scale
necessary to serve the relevant market at
the time the standard comes into effect,
then DOE considers that technology
practicable to manufacture, install, and
service.
3. Adverse impacts on product utility
or product availability. If DOE
determines a technology would have a
significant adverse impact on the utility
of the product to significant subgroups
of consumers, or would result in the
unavailability of any covered product
type with performance characteristics
(including reliability), features, sizes,
capacities, and volumes that are
substantially the same as products
Over 46,000.
Up to 37,000.
Over 37,000.
Up to 20,000.
Over 20,000 and
Over 27,000 and
Over 46,000.
Up to 20,000.
Over 20,000 and
Over 27,000 and
Over 46,000.
up to 27,000.
up to 46,000.
up to 27,000.
up to 46,000.
generally available in the United States
at the time, it will not consider this
technology further.
4. Adverse impacts on health or
safety. If DOE determines that a
technology will have significant adverse
impacts on health or safety, it will not
consider this technology further.
See 10 CFR part 430, subpart C,
appendix A, (4)(a)(4) and (5)(b).
As presented in the December 2009
NOPR, DOE identified a number of
technology options that might be used
to improve the efficiency of residential
heating products during the market and
technology assessment. 74 FR 65852,
65872–79 (Dec. 11, 2009). See chapter 3
of the December 2009 NOPR and final
rule TSDs for more information and the
complete list of technologies identified
by DOE. DOE then applied the screening
criteria listed above to determine which
technologies would be carried through
the analysis. Table IV.3 through Table
IV.5 show the technology options that
were screened-in during the December
2009 NOPR screening analysis.
TABLE IV.3—TECHNOLOGIES DOE CONSIDERED FOR THE WATER HEATER ENGINEERING ANALYSIS
Water heater type by fuel source
Technology
Storage
Instantaneous
Gas-fired
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Increased Jacket Insulation .............................................................
Foam Insulation ...............................................................................
Improve/Increased Heat Exchanger Surface Area ..........................
Enhanced Flue Baffle ......................................................................
Direct-Vent (Concentric Venting) .....................................................
Power Vent ......................................................................................
Electronic (or Interrupted) Ignition ...................................................
Heat Pump Water Heater ................................................................
Condensing ......................................................................................
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Electric
Oil-fired
Gas-fired
X
............................
X
X
............................
X
X
............................
X
X
............................
X
............................
............................
............................
............................
X
............................
X
X
X
X
............................
X
X
............................
X
............................
............................
X
............................
X
X
X
............................
X
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TABLE IV.4—TECHNOLOGIES DOE
CONSIDERED FOR THE DIRECT
HEATING EQUIPMENT ENGINEERING
ANALYSIS
Technology
Increased Heat Exchanger Surface Area.
Direct-Vent (Concentric Venting).
Electronic Ignition.
Induced Draft.
Two Stage and Modulating Operation.
Condensing.
TABLE IV.5—TECHNOLOGIES DOE
CONSIDERED FOR THE POOL HEATER ENGINEERING ANALYSIS
Technology
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Increased Heat Exchanger Surface Area.
More Effective Insulation (Combustion Chamber).
Power Venting.
Sealed Combustion.
Condensing.
1. Comments on the Screening Analysis
In response to the screening analysis
presented in the December 2009 NOPR,
DOE received several comments from
interested parties.
In the December 2009 NOPR, CO2
heat pump water heaters were a
technology option screened out by DOE
for electric storage water heaters,
because DOE research suggests U.S.
manufacturers do not have the
necessary infrastructure to support
manufacturing, installation, and service
of CO2 heat pump water heaters on the
scale necessary to serve the relevant
market by the compliance date of an
amended energy conservation standard.
74 FR 65852, 65873 (Dec. 11, 2009). In
general, ACEEE stated that it strongly
objected to the screening analysis
because DOE considered only
technologies available in U.S.manufactured water heaters and
screened out technologies used in other
domestic products, as well as ones used
in the global market. (ACEEE, No. 79 at
p. 2) ACEEE stated that DOE’s screening
out of CO2 as a heat pump water heater
refrigerant is absurd, given the fact that
1.7 million of them had been sold
worldwide through the end of 2008, and
that there is a 5-year lead time before
the standards compliance date in which
manufacturers could design a CO2 heat
pump water heater. (ACEEE, No. 79 at
p. 2)
Conversely, Rheem commented that
CO2 refrigerants were appropriately
screened out. (Rheem, No. 89 at p. 8)
AHRI noted that there is a huge heat
pump business in the U.S. for air
conditioning and space heating, and no
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significant percentage of those products
use CO2 as the refrigerant. DOE believes
AHRI is using the air conditioning and
space heating industry as an example of
an industry with significant expertise in
working refrigerants, but that still does
not use CO2 refrigerants in its heating
and cooling products. Even though DOE
is investigating the use of CO2 as a
refrigerant in water heating
applications, AHRI’s example
demonstrates that U.S. manufacturers
and service industries do not have the
expertise in using or handling CO2 as a
typical refrigerant in cooling
applications. Therefore, AHRI stated its
belief that CO2 heat pumps have been
properly screened out because it is not
the prevailing technology in North
America. Further, AHRI stated that for
standards that will apply to U.S.
industry, DOE should not unnecessarily
expand this rulemaking by looking at
what might be happening in other parts
of the world. (AHRI, Public Meeting
Transcript, No. 57.4 at pp. 133–134)
A.O. Smith stated that CO2 heat pump
water heaters sold and installed in Japan
are certified to different levels of
standards requirements than those that
exist in the U.S., and those heat pump
water heaters would not be certifiable in
the U.S. (A.O. Smith, Public Meeting
Transcript, No. 57.4 at pp. 134–135)
In response, DOE believes that CO2
heat pump water heaters were properly
screened out during the December 2009
NOPR analysis. DOE notes that
technologies are not screened out solely
because they are not yet available in the
U.S. market. Technologies, such as CO2
heat pump water heaters, which are
available overseas, are screened out if
the U.S. does not have the necessary
infrastructure to support such a
technology on the scale necessary by the
compliance date of the standard. As
described in chapter 4 of the final rule
TSD (Screening Analysis), CO2 heat
pump water heaters were screened out
because the necessary infrastructure to
support manufacturing, installation, and
service of CO2 heat pump water heaters
is not available in the United States, and
will not be available on the scale
necessary to serve the relevant market at
the time of the compliance date of the
standard. ACEEE did not provide any
new evidence that would cause DOE to
change its position on this issue, and,
therefore, DOE continued to screen out
CO2 heat pump water heaters for the
final rule analysis. DOE notes that
pursuant to Section 612 of the Clean Air
Act, the U.S. EPA has found CO2 an
acceptable refrigerant for use in the U.S.
in certain applications (e.g., retail food
refrigeration), but has not made such a
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ruling on the use of CO2 in water
heating heat pumps. EPA indicates that
to date it has not received any
submission under the SNAP program for
the use of CO2 in such devices. For
additional information on EPA’s
Significant New Alternative Policy
(SNAP) program (see https://
www.epa.gov/ozone/snap/.)
ACEEE asserted that DOE fails to
differentiate between low-voltage (i.e.,
24 volt) and line-voltage (i.e., 120 volt)
power requirements for gas-fired
equipment auxiliaries such as igniters,
controls, and fans. The commenter
stated that line voltage requires a power
outlet reachable by a 6 foot power cord
on the water heater, which would
require a new outlet in some retrofits,
while a remote low-voltage plug-in
power supply can use much longer
supply lines that could support
electronic ignition and electromechanical flue dampers. ACEEE stated
that a recent study of standby losses of
atmospheric water heaters shows losses
large enough that ACEEE infers that
these features would be quite costeffective, and that such products have
been demonstrated in the past (for the
SCAQMD) and in gas stoves. (ACEEE,
No. 79 at p. 3) ACEEE stated that
requiring gas-fired appliances to have an
electrical connection does not diminish
utility because it is not an issue in the
minds of the public, and if the
capability of gas-fired products to
operate during power outages was
important, then local building codes
would require backup non-electric
heating capabilities for houses with
electric water heaters. (ACEEE, Public
Meeting Transcript, No. 57.4 at pp. 38–
39)
In response, DOE agrees with ACEEE
that requiring gas-fired appliances to
have an electrical connection does not
diminish utility, and DOE notes that
this rationale was not provided for
screening out any of the technologies
that DOE did not consider in the
analysis. Further, DOE notes that many
of the design options for gas-fired
appliances included electronic
components, such as electronic
ignitions and power venting.
Louisville Tin & Stove (LTS)
commented that the proposed standards
for DHE would reduce consumer utility
because they would lose the ability to
heat without electricity and/or lose the
ability to retrofit. (LTS, No. 56.7 at p. 2)
Empire stated adding components that
require electricity would cause the
elimination of the gas wall gravity, gas
room, gas floor, and gas hearth
categories because their main purpose is
to provide efficient heating and be able
to provide heat during a power outage
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or for consumers who do not have
electricity. (Empire, No. 100 at p. 2)
Although DOE recognizes the
consumer utility of direct heating
equipment that can be operated in the
event of a power outage, DOE also notes
that there are direct heating equipment
available on the market equipped with
an electronic ignition that utilize battery
backup systems to allow for operation
during power outages. As a result, DOE
does not believe the use of an electronic
ignition would reduce the consumer
utility of direct heating equipment. DOE
also does not believe that adding
electrical components would reduce the
ability to retrofit these products, thereby
causing the elimination of product
classes. The addition of certain
electrical components (e.g., an
electronic ignition) does not require
products to be any larger than products
currently available that have no electric
components, and thus, DOE does not
believe this will prevent products from
being retrofitted. DOE also does not
believe adding larger electrical
components (e.g., blower fans) would
cause the elimination of any products,
because DOE only considers the
addition of blower fans for certain
product classes which have products
that have demonstrated that the
technology is possible (i.e., gas wall fan
DHE, gas room DHE, and gas hearth
DHE). For gas wall gravity DHE, where
the inclusion of a fan would shift
products into the gas wall fan DHE
product class, DOE does not consider a
fan as a design option.
However, DOE does recognize that in
certain instances, consumers will have
to install electrical power outlets near
the heating equipment, thereby
increasing the cost of retrofitting the
product. These costs are addressed
during DOE’s analysis of installation
costs and are described in section IV.F.2
of this document. Accordingly, DOE
continued to screen-in electronic
ignition and other electronic
components for the final rule analysis of
direct heating equipment.
2. Heat Pump Water Heater and
Condensing Gas-Fired Storage Water
Heater Discussion
In the December 2009 NOPR, DOE
specifically requested comment
regarding the screening process for the
advanced technologies used as the basis
for the max-tech levels for gas-fired
storage and electric storage water heater
(i.e., heat pump water heaters and
condensing gas-fired storage water
heaters). 74 FR 65852, 65878 (Dec. 11,
2009). DOE received a multitude of
comments on this topic, which are
summarized below.
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a. Condensing Gas-Fired Water Heaters
DOE received several comments
specifically related to condensing gasfired water heater technology. ACEEE
noted that all three of the full-line water
heater manufacturers in the U.S.
currently manufacture commercial
condensing products. (ACEEE, Public
Meeting Transcript, No. 57.4 at p. 127)
Further, ACEEE stated that at least one
condensing gas-fired storage water
heater is actively marketed for
residential applications and is shipped
with a residential thermostat. ACEEE
recognized that this product is easy to
install, with height, diameter, and
installation requirements similar to
standard power-vent units. ACEEE
asserted that the only skills required for
installing condensing gas-fired water
heaters, beyond those already required
for installing conventional gas-fired
water heaters, are those common to the
installation of condensing furnaces and
air conditioners—cutting and gluing
PVC pipe, and hooking up a condensate
pump, if required. (ACEEE, No. 79 at p.
11)
ASAP stated that the manufacturing
capacity required for condensing gasfired storage water heaters at TSL 5 (i.e.,
approximately 4 percent, as estimated in
the December 2009 NOPR) would be
well within the capacity of
manufacturers to serve the market.
(ASAP, Public Meeting Transcript, No.
57.4 at p. 126) AHRI stated that
manufacturers could probably convert
their production of 75-gallon gas-fired
water heaters to make only condensing
75-gallon gas-fired storage water heaters
within five years. (AHRI, Public Meeting
Transcript, No. 57.4 at p. 119)
In addition, A.O. Smith stated that
they manufacture commercial
condensing gas-fired water heaters that
are ultra-low NOX, and, therefore, it is
technologically feasible to have an ultralow NOX condensing water heater. (A.O.
Smith, Public Meeting Transcript, No.
57.4 at p. 123)
In light of the comments above from
interested parties supporting the
technologically feasibility and the
practicability of manufacturing,
installing, and servicing condensing gasfired water heaters, DOE has concluded
that this technology option was
appropriately screened-in and
considered during the December 2009
NOPR analysis, and DOE continued to
consider condensing gas-fired water
heaters in the final rule analysis.
b. Heat Pump Water Heaters
DOE received several comments
specifically related to the screening
analysis for heat pump water heater
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technology. These comments related to
adverse impacts on product utility, as
well as the practicability to
manufacture, install, and service heat
pump water heaters.
Regarding adverse impacts on product
utility, the American Public Power
Association (APPA) commented that for
electric storage water heaters at TSL 5
and TSL 6 (i.e., levels requiring heat
pump water heater technology), the
utility of the product would be lessened,
although no further explanation was
provided. (APPA, No. 92 at p. 3) Rheem
stated that the utility of heat pump
water heaters is not equivalent to
electric storage water heaters because of
the reduced delivery performance of
heat pump water heaters. As evidence of
the reduced delivery performance,
Rheem cited ENERGY STAR’s
requirement of a minimum first hour
rating of 50 gallons for heat pump water
heaters, which is below the 67 gallons
that Rheem claimed is typical for
conventional technologies at that
capacity. (Rheem, No. 89 at p. 8) The
first hour rating is the amount of hot
water in gallons the heater can supply
per hour (starting with a tank full of hot
water). If the first hour rating were
reduced for heat pump water heaters,
this would impact consumer utility
because the water heater would not
provide the consumer with the same
amount of hot water as with a
traditional electric resistance water
heater.
In response, DOE does not believe
that any lessening of utility will occur
for electric storage water heaters that
use heat pump water heater technology,
as asserted by APPA and Rheem. In
response to APPA’s comment (as
explained in the December 2009 NOPR),
DOE does not believe the use of heat
pump technology will diminish the
utility of electric storage water heaters,
and DOE believes that these products
will provide the same utility to the
consumer as electric storage water
heaters using traditional electric
resistance technology. 72 FR 65852,
65876–77 (Dec. 11, 2009). In response to
Rheem’s assertion that heat pump water
heaters provide a reduced first hour
rating, and thereby reduce consumer
utility, DOE examined the first hour
ratings of heat pump water heaters
available on the market. DOE identified
heat pump water heaters currently
available on the market that have first
hour ratings of up to 67 gallons, which
Rheem states is typical for an electric
resistance water heater. DOE also notes
that electric storage water heater models
in the AHRI Directory of certified
equipment at the representative 50gallon storage volume have first hour
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ratings ranging from 48 to 68 gallons,
and for 50-gallon heat pump water
heaters currently available on the
market, the first hour ratings range from
63 to 67 gallons. Thus, DOE has
concluded that the integrated heat
pump water heater technology does not
cause any lessening of utility since it
provides similar first hour ratings as
water heaters that utilize electric
resistance technology.
Regarding practicability to
manufacture, install, and service heat
pump water heaters, DOE received
numerous comments from interested
parties. The views of interested parties
are summarized below, along with
DOE’s conclusions based on the results
of the comments received.
AHRI stated that to convert the U.S.
water heater industry from producing
four million electric resistance units per
year to all heat pump water heaters is
an unreasonable expectation. (AHRI,
Public Meeting Transcript, No. 57.4 at p.
90) AHRI pointed out that converting
existing product lines to manufacturing
of heat pump water heaters would be
difficult, because manufacturers would
continue to manufacture electric
resistance water heaters in order to meet
consumer demand before the
compliance date of the standard. (AHRI,
Public Meeting Transcript, No. 57.4 at
pp. 101–103)
Bock asserted that with heat pump
water heaters, there is no infrastructure
to teach and train technicians to
properly install and maintain those
units. Bock asserted that training
technicians of electric resistance, gasfired, and oil-fired water heaters to
install and maintain heat pump water
heaters could not be done quickly.
(Bock, Public Meeting Transcript, No.
57.4 at p. 96) Similarly, Bradford White
stated that there is no infrastructure to
repair and maintain heat pump water
heaters. Bradford White stated that
water heater service contractors would
need to be extensively retrained, and
that it would be impossible for them to
train plumbers to install and maintain
heat pump water heaters in sufficient
time. (Bradford White, No. 61 at p. 3)
In support of heat pump water
heaters, GE stated that it does believe
that heat pump water heaters are
manufacturable in a reasonable
timeframe. (GE, No. 84 at p. 1) Further,
GE commented that it currently has a
nationwide network for heat pump
water heater product service, and is
developing a nationwide installation
base to ensure that its consumers can
readily purchase, install, and repair
their heat pump water heaters. (GE, No.
84 at p. 1) The commenter noted that it
is currently working with two national
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partners and numerous regional
distributors to have its heat pump water
heater available in most markets and to
develop its water heater installation
network. GE forecasted that the
availability, service, installation, and
manufacturability of heat pump water
heaters will not present a significant
obstacle to the market acceptance of
such units. (GE, No. 84 at p. 2) The
commenter stated that installation of a
heat pump water heater is only slightly
more complex than installing an electric
resistance water heater, and is easily
within the capabilities of any residential
plumber. GE did acknowledge that
service of the sealed refrigeration system
can be more complex, but stated that it
believes that this can be adequately
handled by the national network of
appliance technicians and plumbers.
(GE, No. 84 at p. 2)
NPCC commented that several
manufacturers already have heat pump
water heater products and business
plans to sell heat pump water heaters
over the next five years, a schedule well
before the compliance date of the
relevant amended energy conservation
standards. Therefore, NPCC believes
that it is within the ability of
manufacturers to produce heat pump
water heater units on the scale
necessary to serve the market for largevolume products. (NPCC, Public
Meeting Transcript, No. 57.4 at p. 107)
NPCC also stated that it believes there
is adequate lead time for those
manufacturers who still must develop
new products, since standards will not
take effect for five years. (NPCC, No. 87
at p. 5) Further, NPCC stated that DOE’s
concern about the manufacturability of
heat pump water heaters and the
capacity of manufacturers to ramp up
production are overstated, because two
major manufacturers already appear
committed to manufacturing significant
quantities of heat pump water heaters
and a third manufacturer also appears
likely to do the same. NPCC asserted
that because new energy conservation
standards for water heaters will not go
into effect for five years, manufacturers
will have ample time to ‘‘ramp up’’ the
production of these high-efficiency
models to meet the limited market
expected at TSL 5. (NPCC, No. 87 at pp.
5–6) Regarding practicability to install
heat pump water heaters, the
commenter stated that heat pump water
heaters currently on the market are
drop-in replacements for electric
resistance water heaters, and are
advertised as such by manufacturer
literature. NPCC commented that this
fact, along with the fact that a national
home improvement chain has agreed to
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sell Rheem’s heat pump water heater
unit, are evidence that both
manufacturers and retailers believe that
the installation of ‘‘advanced’’ water
heater technology is not a significant
barrier to its adoption. (NPCC, No. 87 at
pp.3–4) NPCC stated that DOE’s concern
regarding whether the service
infrastructure’s lack of familiarity with
advanced technologies would act as a
deterrent to their adoption also appears
unwarranted, due to the fact that: (1)
Manufacturers are already offering these
products; (2) manufacturers will have 5
years to train and deploy a service force;
(3) major manufacturers with product
on the market offer a 10-year warranty;
(4) GE has a set up a nationwide
network of authorized service
technicians who are being trained to
both install and service its ‘‘advanced
technology’’ water heaters; and (5)
Rheem has stated that its heat pump
water heater uses a sealed heat pump
and that no HVAC experience is needed,
so no additional service technician
training is required. (NPCC, No. 87 at p.
4)
NEEP stated that based on the
documented ENERGY STAR-qualified
water heating units on the market, heat
pump water heaters and condensing gas
water heaters are commercially viable,
manufacturable, and have a growing
infrastructure of service and
maintenance professionals. (NEEP, No.
86 at p.1) NEEP stated that according to
a recent advertisement by Rheem and
the Home Depot, their ENERGY STARqualified heat pump water heater
‘‘installs as easily as a standard electric
storage water heater,’’ and thus, NEEP
commented that installation issues are
clearly not as serious as many
manufacturers claim. (NEEP, No. 86 at
p. 2)
NEEA commented that regarding a
potential scale-up in response to a large
utility program opportunity that was
being considered for heat pump water
heaters, major manufacturers assured
them that scale-up to large
manufacturing numbers is not a limiting
factor. (NEEA, No. 88 at pp. 2–3) The
commenter stated all of the heat pump
water heater units being offered for sale
are designed as drop-in integrated units
that require no more connections than a
conventional electric resistance tank.
NEEA asserted that there is nothing in
principle about heat pump water heater
technology that makes it substantively
more difficult than a current
replacement with a standard electric
tank. NEEA also stated that all heat
pump water heaters offered for sale in
2010 have sealed refrigeration
components (similar to a refrigerator or
a room air-conditioner that do not
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require service) and have 10-year
warranties, an indication of
manufacturers’ confidence in the longterm reliability of the systems. NEEA
commented that a duct to vent cold air
to the outdoors is required in some heat
pump water heater installations, and
that installing such a duct is no more
complicated than installing a flue for a
gas-fired water heater, which is well
within the skill set of existing water
heater installers. (NEEA, No. 88 at p. 3)
ACEEE commented that five years
from final rule publication to the
compliance date is sufficient time to
design, test, tool up, manufacture, and
certify a brand new product. (ACEEE,
No. 79 at pp. 13) ACEEE stated that
manufacturing capacity should not be a
concern for heat pump water heaters,
given the five-year lead time between
the standards’ effective date and
compliance date. The commenter also
stated that resistive tank water heaters
and refrigeration engines like the ones
used in heat pump water heaters are
mature technologies that can be
integrated to manufacture heat pump
water heaters. (ACEEE, No. 79 at p. 4)
ACEEE commented that TSL 5 would
require new production lines for about
9 percent of the product, which should
be manageable and in the scale of
expected investments in new
production lines. (ACEEE, No. 79 at p.
10) Regarding practicability to install
heat pump water heaters, ACEEE stated
that the arguments regarding training
time for installers and servicers are
vastly overblown. The commenter noted
further that the Web sites of the leading
providers of ENERGY STAR heat pump
water heaters do not contain language
that would void warrantees if such units
are home-owner installed, and such
units are now sold by major ‘‘big box’’
retailers and Internet sales outlets.
(ACEEE, No. 79 at p. 10) With regard to
servicing, ACEEE stated that although a
heat pump water heater operates more
hours per year than a room air
conditioner, it is basically the same kind
of technology, and will require no
routine service beyond that which can
be done by the homeowner (i.e., filter
cleaning). Thus, ACEEE argued that at
least for heat pump water heaters with
appropriate diagnostics, there are no
skills required beyond those one would
expect from a typical refrigerator repair
person. (ACEEE, No. 79 at p. 10) ACEEE
stated that in January 2010, the GE
Hybrid electric heat pump water heater
will be sold at Lowe’s, Sears, and other
locations, presumably to do-it-yourself
installers, and in examining the
warranties available on-line, ACEEE
found no restrictions as would limit
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product installation to certified or
qualified trades people. From this, the
commenter inferred that there are no
special skills expected for installation of
these heat pump water heater products.
(ACEEE, No. 79 at p. 12) ACEEE
asserted that the skill set required to
service heat pump water heaters is the
same as the skill set associated with
fixing the refrigeration engines of room
air conditioners, refrigerators, and
similar light equipment. Similarly, the
commenter argued that servicing of
condensing gas water heaters uses the
same skill sets as condensing boilers.
Thus, ACEEE stated that it believes that
over the next five years, the emergence
and market penetration of incentive
programs for both types of products will
lead to adequate supplies of servicers
with the requisite skills. (ACEEE, No. 79
at p. 12)
The Joint Advocacy comment 4
(submitted by ASAP) stated that the
limited scope of the December 2009
NOPR TSL 5 (i.e., the TSL requiring
electric storage water heaters larger than
55 gallons to use heat pump water
heater technology), combined with the
five-year lead time before the
compliance date, will make the new
standards more manageable for
manufacturers, equipment installers,
and servicers than standards which
effectively require heat pump water
heaters and condensing gas products in
all sizes. (The Joint Advocacy Comment,
No. 102 at p. 2)
ASE stated that for the December 2009
NOPR’s TSL 5, the advanced technology
requirements are limited to a modest
share of total water heater shipments,
which is a sensible means of addressing
the issue of manufacturers being able to
4 The joint advocacy comment was submitted by
ASAP on behalf of multiple organizations,
including: ACEEE, National Association of State
Energy Officers, California Energy Commission,
Consumer Federation of America, PG&E, ASE,
ASAP, National Consumer Law Foundation, NRDC,
National Grid, National Insulation Association,
North American Insulation Manufacturers
Association, NEEP, NPCC, Sierra Club, Iowa Office
of Energy, New Hampshire Office of Energy and
Planning, Office of the Ohio Consumers’ Council,
California Public Utilities Commission, New
Mexico Public Regulation Commission, Public
Utility Commission of Oregon, New Jersey Board of
Public Utilities, Community Environmental Center,
Conservation Law Foundation, Environmental
Defense Fund, Environment America,
Environmental Law and Policy Center,
Environmental and Energy Study Institute, Midwest
Energy Efficiency Alliance, Southern Alliance for
Clean Energy, Southwest Energy Efficiency Project,
Urban Green Council (U.S. Green Building Council
of New York), Arizona PIRG, Energy Coordinating
Agency of Philadelphia, Environment Illinois,
Environment Texas, Michigan Environmental
Council, NW Energy Coalition, Ohio Environmental
Council, Oklahoma Sustainability Network, Texas
Ratepayer’s Organization to Save Energy, National
Community Action Foundation, and Fresh Energy.
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scale up the production of these
products to meet the needs of the
market. (ASE, No. 77 at p. 2)
A.O. Smith stated that a facility to
produce 2 million heat pump water
heaters per year (i.e., A.O. Smith’s
approximate share of the entire electric
storage water heater market) would take
2–3 years to implement. (A.O. Smith,
No. 76 at p. 3)
Daikin stated that heat pump
technology can be easily introduced to
existing electric resistance water heater
manufacturers from the air conditioning
and refrigerator manufacturing sectors.
The commenter noted that European
and Japanese electric resistance heat
pump manufacturers have already
obtained the necessary heat pump
technology and have heat pump water
heater manufacturing lines up and
running. Daikin stated its belief that
taking into account the significance of
the introduction of heat pump
technology to unfamiliar manufacturers,
at least one to two years would be
required for this change to be
implemented after publication of the
final rule. (Daikin, No. 82 at p. 2)
After reviewing the comments from
interested parties above, DOE believes
that integrated heat pump water heaters
and condensing gas-fired storage water
heaters were properly screened in for
the December 2009 NOPR analysis, and
DOE continued to consider this
technology for the final rule analysis.
Based on the comments of interested
parties, including those from
manufacturers, DOE has concluded that
given the five-year lead time, the
practicability to manufacture, install,
and service heat pump water heaters
and condensing gas-fired storage water
heaters is not a concern that would
justify eliminating these technologies
from consideration in this analysis.
However, DOE further considered the
concerns of interested parties regarding
heat pump water heaters and
condensing gas-fired storage water
heaters for the selection of the final
standard level.
Because DOE did not change any of
its conclusions about the screening
analysis for technologies for the
December 2009 NOPR analysis, DOE
screened in the same technologies for
the final rule (shown in Table IV.3
through Table IV.5). For more
information about the technologies that
were screened out, and the reasoning for
those options being screened out, see
chapter 4 of the final rule TSD.
DOE believes that all of the efficiency
levels discussed in today’s notice are
technologically feasible. The
technologies that DOE examined have
been used (or are being used) in
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commercially-available products or
working prototypes. Furthermore, these
technologies all incorporate materials
and components that are commercially
available in today’s supply markets for
the residential heating products that are
the subject of this final rule.
C. Engineering Analysis
The engineering analysis develops
cost-efficiency relationships to show the
manufacturing costs of achieving
increased efficiency. As explained in
the December 2009 NOPR, DOE
conducted the engineering analysis for
heating products using both the
efficiency level approach to identify
incremental improvements in efficiency
for each product and the costassessment approach to develop the
manufacturer production cost (MPC) at
each efficiency level. 74 FR 65852,
65879–96 (Dec. 11, 2009). DOE first
identified the most common residential
heating products on the market and
determined their corresponding
efficiencies and the distinguishing
technology features associated with
those levels. After identifying the most
common products that represent a crosssection of the market, DOE gathered
information about these selected
products using reverse-engineering
methodologies, product information
from manufacturer catalogs, and
discussions with manufacturers and
other experts of water heaters, DHE, and
pool heaters. This approach provided
useful information, including
identification of potential technology
paths manufacturers use to increase
energy efficiency.
DOE used information gathered by
reverse-engineering multiple
manufacturers’ products spanning the
range of efficiency levels for each of the
three product categories to generate bills
of materials (BOMs), which describe
each product in detail, including all
manufacturing steps required to make
and/or assemble each part. DOE
developed a cost model that converted
the raw information BOMs into MPCs.
By applying derived manufacturer
markups to the MPCs, DOE calculated
the manufacturer selling prices (MSPs)
and constructed industry cost-efficiency
curves.
In response to the December 2009
NOPR, DOE received comments from
interested parties on various aspects of
the engineering analysis, including: (1)
Efficiency levels analyzed and
technology options; (2) manufacturer
production costs; (3) shipping costs; (4)
scaling of storage water heater MPCs to
other storage volumes; and (5) the
energy efficiency equations. A further
discussion of the engineering analysis
methodology, a discussion of the
comments DOE received, DOE’s
response to those comments, and any
changes DOE made to the engineering
analysis methodology or assumptions as
20141
a result of those comments is presented
in the sections below. See chapter 5 of
the final rule TSD for additional details
about the engineering analysis.
1. Representative Products for Analysis
As explained in the December 2009
NOPR, DOE reviewed all of the product
classes of residential water heaters,
DHE, and pool heaters for the
engineering analysis. Within each
product type, DOE chose units for
analysis that represent a cross-section of
the residential heating products market.
The December 2009 NOPR contains
specific details about DOE’s selection of
representative units for each type of
heating product. 74 FR 65852, 65879–81
(Dec. 11, 2009). The analysis of these
representative products allowed DOE to
identify specific characteristics that
could be applied to all of the products
across a range of storage and input
capacities, as appropriate. In response to
the December 2009 NOPR, DOE did not
receive any comments regarding the
representative units analyzed, and as a
result, DOE did not change the
representative units from the December
2009 NOPR analysis. The representative
units for each product class are shown
in Table IV.6 below. For more details
about the selection of the representative
units for each product class, see chapter
5 of the final rule TSD.
TABLE IV.6—REPRESENTATIVE PRODUCTS ANALYZED
Residential Water Heaters
Residential water heater class
Representative storage volume
(gallons)
Gas-Fired Storage Type .............................................................................................................
Electric Storage Type .................................................................................................................
Oil-fired Storage Type ................................................................................................................
Instantaneous Gas Fired ............................................................................................................
40.
50.
32.
0.
(199,000 Btu/h input capacity).
Direct Heating Equipment
Direct heating equipment design type
Gas
Gas
Gas
Gas
Gas
Representative input rating range (Btu/h)
Wall Fan ..............................................................................................................................
Wall Gravity .........................................................................................................................
Floor ....................................................................................................................................
Room ...................................................................................................................................
Hearth .................................................................................................................................
Over
Over
Over
Over
Over
42,000.
27,000 and up to 46,000.
37,000.
27,000 and up to 46,000.
27,000 and up to 46,000.
Residential Pool Heaters
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Pool heaters product class
Representative input rating (Btu/h)
Gas-fired Pool Heaters ...............................................................................................................
2. Efficiency Levels Analyzed
For each of the representative
products, DOE analyzed multiple
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efficiency levels and estimated
manufacturer production costs at each
efficiency level. These efficiency levels
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250,000.
were presented in detail in the
December 2009 NOPR. 74 FR 65852,
65881–89 (Dec. 11, 2009). DOE analyzed
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jlentini on DSKJ8SOYB1PROD with RULES2
from the baseline efficiency level to the
maximum technologically feasible (maxtech) efficiency level for each product
class. The baseline units in each
product class were used as reference
points against which DOE measured
changes resulting from potential
amended energy conservation
standards. These units generally
represent the basic characteristics of
equipment in that product class, just
meet current Federal energy
conservation standards, and provide
basic consumer utility. DOE established
intermediate energy efficiency levels for
each of the product classes that are
representative of efficiencies that are
typically available on the market
through a complete review of AHRI’s
product certification directory,
manufacturer catalogs, and other
publicly-available literature. DOE
determined the maximum improvement
in energy efficiency that is
technologically feasible (max-tech) for
water heaters, DHE, and pool heaters, as
required by section 325(o) of EPCA. (42
U.S.C. 6295(o)). For the representative
product within a given product class,
DOE could not identify any working
products or prototypes at higher
efficiency levels that were currently
available beyond the identified maxtech level at the time the analysis was
performed.
a. Water Heaters
Table IV.7 through Table IV.11 in this
section show the efficiency levels
analyzed at the representative rated
storage volume for each of the water
heater product classes for the final rule.
These tables also show the technology
pathways identified by DOE which
could be used to reach the identified
efficiency levels. DOE received several
comments (discussed below) in
response to the efficiency levels and
possible technology pathways presented
in the December 2009 NOPR for gasfired storage water heater.
Rheem stated that for 40-gallon gasfired storage water heaters at TSL 4 (i.e.,
0.63 EF), DOE underestimates the
insulation thickness that would be
required. Rheem asserted that 3 inches
of insulation would be required to reach
this efficiency level, instead of the 2
inches that DOE estimated in the
December 2009 NOPR. In addition,
Rheem stated that for 50-gallon electric
storage water heaters, DOE estimates 4
inches of foam insulation are needed to
achieve TSL 4 (i.e., 0.95 EF) but that
DOE should recognize there are
diminishing returns for added foam
insulation. Further, Rheem asserted that
the increased insulation requirements
will result in increased product cost,
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shipping cost, life-cycle cost, space
constraint frequency, and reduce
consumer payback. (Rheem, No. 89 at
p. 10) Similarly, Bradford White stated
that when increasing insulation
thickness to improve water heater
efficiency, there is a diminishing return
and a point at which increasing
insulation does not result in any further
efficiency gain. Bradford White asserted
that to attain the efficiencies in the
December 2009 NOPR, additional
changes would be required besides
increasing insulation thickness.
(Bradford White, No. 61 at p. 1)
As described in the December 2009
NOPR, DOE performed extensive
research regarding the technologies
required to reach each efficiency level
for the representative rated storage
volumes analyzed. 74 FR 65852, 65884
(December 11, 2009). DOE research
suggested that the insulation
thicknesses listed at various efficiency
levels identified are consistent with
products available on the market. DOE
reviewed manufacturer literature (which
typically includes information on
energy factor and insulation
thicknesses) and then reverseengineered several gas-fired water
heaters to verify the technologies used
to improve energy efficiency, including
insulation thicknesses. For the
December 2009 NOPR analysis, DOE
also hired an independent testing
facility to determine the EF of a
representative sample of water heaters
across multiple efficiency levels. (See
chapter 5 of the December 2009 NOPR
TSD for additional details.) These water
heaters were subsequently disassembled
to verify the technologies used to
increase energy efficiency. DOE was
able to measure the insulation
thicknesses on the sides, top, and
bottom of each water heater unit
disassembled. For these reasons, DOE
believes the results of its assessment of
insulation thicknesses at various
efficiency levels are accurate and
maintained the same insulation
thicknesses for the final rule analysis.
AGA stated that efficiency level 2 for
gas-fired storage water heaters should
include power venting, because
according to industry testing and
research, the prevailing technology at
that level will be a power-vented design,
not an atmospheric design. (AGA,
Public Meeting Transcript, No. 57.4 at
pp. 35–36) Further, AGA stated that the
majority of the models on the market
rated at this efficiency level are not
atmospherically vented, and contended
that atmospherically-vented models at
0.63 EF would have recovery
efficiencies high enough such that they
require venting modifications because of
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the possibility for corrosive condensate
to occur. (AGA, No. 78 at p. 8) If proper
venting is not installed, corrosion from
condensate can cause leaks in the
venting system, which in turn can allow
combustion by-products (e.g., carbon
monoxide) to infiltrate into areas where
such by-products are not desirable,
possibly leading to serious injury or
death. Thus, AGA recommended that
DOE should consider only powerventing technology as the design option
at efficiency level 2 for reasons of
installation safety and practicality, and
asserted that continuing to rely upon
atmospheric technology for the
efficiency level 2 design would violate
statutory requirements for DOE to avoid
implementing efficiency standards that
would pose an increased safety risk to
consumers. (AGA, No. 78 at p. 10)
In response, DOE notes that there are
products currently available on the
market at efficiency level 2 that do not
use a power-venting design. The
manufacturer literature for these
products does not indicate that there are
certain instances in which the
installation of these products would be
unsafe. Therefore, DOE did not change
its technology options at efficiency level
2. However, DOE does recognize the
venting concerns of gas-fired storage
water heaters at efficiency level 2 with
high recovery efficiencies. DOE
addresses this issue in section IV.F.2
(Installation Cost).
A.O. Smith strongly recommended
that DOE lower the max-tech level for
gas-fired storage water heaters from the
0.80 EF level identified in the December
2009 NOPR for the representative 40gallon storage volume. A.O. Smith
stated that the 0.80 EF level identified
as the max-tech for gas-fired storage
water heaters by the Super Efficient Gas
Water Heating Appliance Initiative
(SEGWHAI) program and in a
presentation by A.O. Smith at the 2009
ACEEE Hot Water Forum were based on
theoretical modeling, and not
operational prototypes. A.O. Smith also
commented that the ENERGY STAR
level of 0.80 EF is based on similar
modeling, and stated that discussions
are underway with DOE regarding the
need to lower the Energy Star level to
0.77 EF. A.O. Smith stated they have
recently built and tested a number of
condensing gas-fired water heater
prototypes that result in actual
performance that is somewhat lower
than predicted by the models.
Consequently, A.O. Smith expressed
support for 0.77 EF as the max-tech
level for 40 gallon gas-fired storage
water heaters. (A.O. Smith, No. 76 at pp.
1–2)
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In the preliminary analysis, DOE
proposed to use 0.77 EF as the max-tech
level for gas-fired storage water heaters
at the representative rated storage
volume (see chapter 5 of the preliminary
analysis TSD for more details). In
response to this proposal in the
preliminary analysis, DOE received
comments from interested parties
stating that the max-tech efficiency level
considered for gas-fired storage water
heaters in this rulemaking should be
harmonized with the ENERGY STAR
level for residential condensing gasfired storage water heaters, and DOE
subsequently revised the max-tech level
to 0.80 EF for the December 2009 NOPR
analysis. 74 FR 65852, 65883 (Dec. 11,
2009). DOE believes there is some
uncertainty regarding the efficiencies
that can be achieved by gas-fired storage
water heaters because there are no
products currently available on the
market and to date only prototypes have
been developed for residential
applications. For the final rule, DOE has
20143
reviewed confidential data
characterizing the performance of
residential gas-fired storage water heater
prototypes and has concluded that 0.77
EF is more representative of the
condensing water heaters likely to enter
the market. As such, DOE has revised its
max-tech efficiency level for the final
rule so that at the 40-gallon
representative capacity, the efficiency
level is 0.77 EF, as shown in Table IV.7.
TABLE IV.7—FORTY-GALLON GAS-FIRED STORAGE WATER HEATER (STANDARD BURNER) EFFICIENCY LEVELS
Efficiency level (EF)
Technology
Baseline (EF = 0.59) ................................................................................
Efficiency Level 1 (EF = 0.62) ..................................................................
Efficiency Level 2 (EF = 0.63) ..................................................................
Efficiency Level 3 (EF = 0.64) ..................................................................
Efficiency Level 4 (EF = 0.65) ..................................................................
Efficiency Level 5 (EF = 0.67) ..................................................................
Efficiency Level 6—Max-Tech (EF = 0.77) ..............................................
Regarding the technology options for
ultra-low NOX gas-fired storage water
heaters, ACEEE stated that once an
inducer fan is added to an ultra-low
NOX product, the ultra-low NOX design
factor is not a prohibitive feature.
(ACEEE, Public Meeting Transcript, No.
57.4 at pp. 127) A.O. Smith stated that
the only way for ultra-low NOX water
heaters to overcome the additional
restriction added by increased flue
baffling (needed to promote heat
exchange and increase efficiency) would
be to add a blower and/or power-burner
to the heater, which would greatly
increase the manufacturing and
installation costs of the heater. (A.O.
Smith, No. 76 at p. 2)
DOE tentatively concluded in the
December 2009 NOPR that ultra-low
NOX gas-fired water heaters require the
introduction of additional technologies
Standing Pilot and 1’’ Insulation.
Standing Pilot and 1.5’’ Insulation.
Standing Pilot and 2.0’’ Insulation.
Electronic Ignition, Power Vent and 1’’ Insulation.
Electronic Ignition, Power Vent and 1.5’’ Insulation.
Electronic Ignition, Power Vent and 2’’ Insulation.
Condensing, Power Vent, 2’’ Insulation.
to achieve the same efficiency as
standard gas-fired water heaters. For the
December 2009 NOPR, DOE performed
a teardown analysis of ultra-low NOX
gas-fired storage water heaters. 74 FR
65852, 65881 (Dec. 11, 2009). (Details
about DOE’s December 2009 NOPR
analysis of ultra-low NOX storage water
heaters are available in chapter 5 of the
December 2009 NOPR TSD.) DOE
research showed that implementing
power venting and the same insulation
increases as those for standard gas-fired
water heaters would result in slightly
lower efficiencies due to the additional
pressure restrictions resulting from the
addition of the ultra-low NOX burner.
Therefore, DOE implemented
technologies at lower efficiency levels
for ultra-low NOX gas-fired storage
water heaters in order to achieve the
same efficiencies as those identified for
standard gas-fired storage water heaters.
Based on the teardown analysis of ultralow NOX water heaters, DOE believes
that the levels identified for ultra-low
NOX gas-fired storage water heaters are
achievable using the technologies
identified in Table IV.8. In its
comments, ACEEE does not present any
new data or evidence to support its
assertion that once a power venting
design is implemented, ultra-low NOX
gas-fired storage water heaters can
achieve the same efficiencies as gasfired water heaters with standard
burners. As a result, DOE maintained
the technologies and efficiency levels
identified in the December 2009 NOPR
for the final rule, with the exception of
the max-tech level, which was reduced
to 0.77 EF for the reasons described
above.
TABLE IV.8—FORTY-GALLON GAS-FIRED STORAGE WATER HEATER (ULTRA-LOW NOX BURNER) EFFICIENCY LEVELS
Efficiency level (EF)
Technology
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Baseline (EF = 0.59) ................................................................................
Efficiency Level 1 (EF = 0.62) ..................................................................
Efficiency Level 2 (EF = 0.63) ..................................................................
Efficiency Level 3 (EF = 0.64) ..................................................................
Efficiency Level 4 (EF = 0.65) ..................................................................
Efficiency Level 5 (EF = 0.67) ..................................................................
Efficiency Level 6—Max-Tech (EF = 0.77) ..............................................
DOE also received several comments
relating to the max-tech efficiency levels
for electric storage water heaters, which
was identified as 2.2 EF at the 50-gallon
representative rated storage volume in
the December 2009 NOPR. 74 FR 65852,
65884 (Dec. 11, 2009). GE stated that the
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Standing Pilot and 1″ Insulation.
Standing Pilot and 2″ Insulation.
Electronic Ignition, Power Vent, and 1″ Insulation.
Electronic Ignition, Power Vent and 1.5″ Insulation.
Electronic Ignition, Power Vent and 2″ Insulation.
Not Attainable (would go to condensing).
Condensing, Power Vent, 2″ Insulation.
heat pump water heater it has in
production has an EF of 2.35 at standard
DOE test conditions, which is higher
than the max-tech level identified in the
December 2009 NOPR for electric
storage water heaters. (GE, No. 84 at p.
1) A.O. Smith also stated that the 2.2 EF
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max-tech in the December 2009 NOPR
is too low, citing the GE heat pump
water heater that is rated at 2.3 EF as
evidence. A.O. Smith stated that the
heat pump water heater max-tech level
should be increased to 2.3 EF or higher
if there is data available showing higher
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levels are feasible. (A.O. Smith, No. 76
at p. 2) Further, A.O. Smith stated that
because of heat pumps using CO2 as a
refrigerant and because other heat pump
technologies exist, the max-tech
possibly is higher than 2.2 EF. (A.O.
Smith, Public Meeting Transcript, No.
57.4 at p. 131) ACEEE stated that DOE
does not have an appropriate max-tech
for electric storage water heaters
because it inappropriately screened out
CO2 heat pump water heaters, which are
commercially available in other
countries. (ACEEE, Public Meeting
Transcript, No. 57.4 at p. 130)
Additionally, ACEEE stated that the GE
product with an EF of 2.35 exceeds
DOE’s December 2009 NOPR max-tech
level of 2.2 EF (ACEEE, No. 79 at p. 8)
Daikin stated that DOE’s proposed
max-tech for heat pump water heaters of
2.2 EF is reasonable and appropriate,
and is an achievable standard for heat
pump water heaters. (Daikin, No. 82 at
p. 1)
In response, DOE estimated the maxtech efficiency for electric storage water
heaters for the December 2009 NOPR
before any integrated heat pump water
heaters were commercially available on
the market. In the time since the
December 2009 NOPR’s publication,
several heat pump water heater models
have become available to consumers.
The highest EF of the heat pump water
heater models currently available on the
market is 2.35 EF at 50 gallons. While
DOE does acknowledge A.O. Smith’s
and ACEEE’s point that a CO2 heat
pump water heater could provide an
even higher EF, that technology was
screened out during the screening
process (see section IV.B.1), and DOE is
not considering that technology as a
viable way of reaching the max-tech
level. As a result, DOE has revised the
max-tech level for the final rule to be
2.35 EF at the representative 50-gallon
rated storage volume, as shown in Table
IV.9.
TABLE IV.9—FIFTY-GALLON ELECTRIC STORAGE WATER HEATER EFFICIENCY LEVELS
Efficiency level (EF)
Technology
Baseline (EF = 0.90) ................................................................................
Efficiency Level 1 (EF = 0.91) ..................................................................
Efficiency Level 2 (EF = 0.92) ..................................................................
Efficiency Level 3 (EF = 0.93) ..................................................................
Efficiency Level 4 (EF = 0.94) ..................................................................
Efficiency Level 5 (EF = 0.95) ..................................................................
Efficiency Level 6 (EF = 2.0) ....................................................................
Efficiency Level 7—Max-Tech (EF = 2.35) ..............................................
DOE received only one comment in
response to the efficiency levels and
technology pathways presented in the
December 2009 NOPR for oil-fired
storage water heaters. In the December
2009 NOPR, DOE determined that oilfired storage water heaters would have
to use a multi-flue design to achieve
efficiency levels 6 and 7 (i.e., 0.66 and
0.68 EF for the 32-gallon representative
rated storage volume). 74 FR 65852,
65885–86 (Dec. 11, 2009). Bradford
White stated that at the efficiency level
1.5″ Foam Insulation.
2″ Foam Insulation.
2.25″ Foam Insulation.
2.5″ Foam Insulation.
3″ Foam Insulation.
4″ Foam Insulation.
Heat Pump Water Heater.
Heat Pump Water Heater, More-Efficient Compressor.
proposed in the December 2009 NOPR
for oil-fired storage water heaters (i.e.,
efficiency level 5, or 0.62 EF for the 32gallon representative rated storage
volume), reaching the required
efficiency will likely require the use of
multi-flue designs, thereby adding
tremendous cost to residential designs.
(Bradford White, No. 61 at p. 2)
In response, DOE identified the
technologies at each efficiency level by
examining the designs of products
currently available on the market at
each efficiency level. Oil-fired storage
water heaters are currently available on
the market at 0.62 EF, which do not
utilize a multi-flue design or other
proprietary technology. As a result, DOE
believes that the technology options
identified in the December 2009 NOPR
at efficiency level 5 are appropriate, and
has retained the same efficiency levels
and technologies for the final rule.
Accordingly, DOE did not include a
multi-flue design at efficiency level 5 for
the final rule analysis.
TABLE IV.10—THIRTY-TWO-GALLON OIL-FIRED STORAGE WATER HEATER WITH BURNER ASSEMBLY
Efficiency level (EF)
Technology
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Baseline (EF = 0.53) ................................................................................
Efficiency Level 1 (EF = 0.54) ..................................................................
Efficiency Level 2 (EF = 0.56) ..................................................................
Efficiency Level 3 (EF = 0.58) ..................................................................
Efficiency Level 4 (EF = 0.60) ..................................................................
Efficiency Level 5 (EF = 0.62) ..................................................................
Efficiency Level 6 (EF = 0.66) ..................................................................
Efficiency Level 7—Max-Tech (EF = 0.68) ..............................................
DOE did not receive any comments in
response to the efficiency levels and
technology options presented in the
December 2009 NOPR analysis for gasfired instantaneous water heaters. 74 FR
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1″ Fiberglass Insulation.
1.5″ Fiberglass Insulation.
2″ Fiberglass Insulation.
2.5″ Fiberglass Insulation.
2″ Foam Insulation.
2.5″ Foam Insulation.
1″ Fiberglass Insulation, and Multi-Flue Design.
1″ Foam Insulation, and Multi-Flue Design.
65852, 65886–87 (Dec. 11, 2009). DOE
believes that the efficiencies and
technology options presented for gasfired instantaneous water heaters in the
December 2009 NOPR are still valid and
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continued to use the same technologies
and efficiency levels in the final rule
analysis.
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20145
TABLE IV.11—ZERO-GALLON GAS-FIRED INSTANTANEOUS WATER HEATER, 199,000 BTU/H INPUT CAPACITY
Efficiency level (EF)
Technology
Baseline (EF = 0.62) ................................................................................
Efficiency Level 1 (EF = 0.69) ..................................................................
Efficiency Level 2 (EF = 0.78) ..................................................................
Efficiency Level 3 (EF = 0.80) ..................................................................
Efficiency Level 4 (EF = 0.82) ..................................................................
Efficiency Level 5 (EF = 0.84) ..................................................................
Efficiency Level 6 (EF = 0.85) ..................................................................
Standing Pilot.
Standing Pilot and Improved Heat Exchanger Area.
Electronic Ignition And Improved Heat Exchanger.
Electronic Ignition and Power Vent.
Electronic Ignition, Power Vent, Improved Heat Exchanger Area.
Electronic Ignition, Power Vent, and Improved Heat Exchanger Area.
Electronic Ignition, Power Vent, Direct Vent, and Improved Heat Exchanger Area.
Electronic Ignition, Power Vent, Direct Vent, Condensing.
Electronic Ignition, Power Vent, Direct Vent, Condensing (Max-Tech).
Efficiency Level 7 (EF = 0.92) ..................................................................
Efficiency Level 8—Max Tech (EF = 0.95) ..............................................
b. Direct Heating Equipment
Table IV.12 through Table IV.16
present the efficiency levels DOE
examined for the final rule analysis for
DHE. In the December 2009 NOPR
analysis, DOE identified various
efficiency levels for gas wall fan DHE.
74 FR 65852, 65887 (Dec. 11, 2009).
DOE did not receive any comments
pertaining to its efficiency levels or
technologies identified for the gas wall
fan product in the December 2009
NOPR analysis. After reviewing the
efficiency levels and technologies, DOE
has determined that the same efficiency
levels and technologies are still
appropriate and continued to use them
in the final rule analysis.
TABLE IV.12—GAS WALL FAN-TYPE DHE (OVER 42,000 Btu/h) EFFICIENCY LEVELS
Efficiency level (AFUE)
Technology
Baseline (AFUE = 74) ..............................................................................
Efficiency Level 1 (AFUE = 75) ................................................................
Efficiency Level 2 (AFUE = 76) ................................................................
Efficiency Level 3 (AFUE = 77) ................................................................
Standing Pilot.
Intermittent Ignition and Two-Speed Blower.
Intermittent Ignition and Improved Heat Exchanger.
Intermittent Ignition, Two-Speed Blower, and Improved Heat Exchanger.
Induced Draft and Electronic Ignition.
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Efficiency Level 4—Max-Tech (AFUE = 80) ............................................
For gas wall gravity DHE, DOE
identified efficiency levels and
technology options in the December
2009 NOPR analysis, which included a
72-percent AFUE level as the max-tech
that could be achieved using electronic
ignition. 74 FR 65852, 65887–88 (Dec.
11, 2009). DOE received several
comments in response to the efficiency
levels and technologies for gas wall
gravity DHE presented in the December
2009 NOPR. These comments and
DOE’s response are discussed below.
Williams stated that due to factors
such as interior stud-wall installation,
the lack of an electricity requirement,
and limited height footprint, gravity
wall heaters do not lend themselves to
the addition of a fan, and the
commenter asserted that the TSD
recommendations centered almost
exclusively on the incorporation of a fan
for improving efficiency of DHE.
(Williams, No. 96 at p. 2) Further,
Williams stated that a three-percent
AFUE difference between a gravity wall
and fan wall heater is not plausible.
Williams also commented that DOE’s
assumption that increased efficiencies
of three percent to nine percent can be
attained by using an electronic ignition
is unproven. (Williams, No. 96 at p. 2)
Empire stated that to improve
efficiency of DHE, larger heat exchanger
surface areas would be needed and, as
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a result, the overall size of the unit may
increase. Furthermore, Empire stated
that many of the modifications
necessary to improve the efficiency of
gas wall gravity DHE would require
electricity. (Empire, Public Meeting
Transcript, No. 57.4 at p. 166) LTS
stated that it is not optimistic that it
could manufacture gravity wall furnaces
at the proposed level, because meeting
that level would require a larger heat
exchanger and cabinet and,
consequently, the product would lose
its retrofit ability. (LTS, No. 56.7 at
p. 1)
In consideration of the comments
above, DOE reevaluated its efficiency
levels and technologies for gas wall
gravity DHE for the final rule. After
reexamining the current market for gas
wall gravity DHE for the final rule, DOE
concluded that at the efficiency levels
analyzed by DOE in the December 2009
NOPR, some gas wall gravity DHE
models are available on the market, but
these models are not in the
representative rated capacity range.
Therefore, DOE revised the efficiency
levels analyzed for the final rule to more
accurately reflect the current market for
products within the representative rated
capacity. DOE notes that the revised
efficiency levels do not require the use
fans, and allow for heat exchangers to be
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sized so that the units can be easily
retrofitted. In addition, although no gas
wall gravity products that use an
electronic ignition system are available
on the market, DOE maintained the
assumption from the December 2009
NOPR that an electronic ignition could
be added to gas wall gravity products to
improve the AFUE by 1 percent. DOE
does not believe that a reduction of
consumer utility will occur by requiring
electrical power for an electronic
ignition because these products could
incorporate a battery backup to mitigate
any concerns about operation during
power outages.
Regarding Williams’ assertion that the
AFUE increases from an electronic
ignition have not been proven, DOE
agrees that the actual AFUE increase
resulting from the addition of an
electronic ignition will be highly
variable based on the characteristics of
each individual product, and the results
of this have not been demonstrated in
gas wall gravity DHE on the market.
Because no products are available on
the market in this product class that
utilize electronic ignition, it is difficult
to determine the exact impact of
utilizing an electronic ignition for gas
wall gravity DHE. However,
consideration under the DOE test
procedures for vented home heating
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equipment (10 CFR part 430, subpart B,
appendix O) led DOE to believe it is
reasonable to assume that a 1-percent
increase in AFUE would be achieved
with the addition of an electronic
ignition. Section 4.1.17 of DOE’s test
procedures for vented home heating
equipment lists the AFUE equation as:
AFUE = 0.968hss-wt ¥ 1.78DF ¥ 1.89DS
¥ 129PF ¥ 2.8LJ + 1.81
Of particular relevance in the AFUE
equation above is the PF term, which is
the pilot fraction and accounts for the
AFUE reduction caused by the standing
pilot. PF is defined as the ratio of the
pilot light input to the total input of the
product. If DOE assumes a typical pilot
light input of 400 Btu/h, the minimum
pilot fraction for the representative
input range for gas wall gravity DHE
would be 0.009. When multiplied by the
129 coefficient provided in the
equation, a pilot fraction of 0.009 would
yield slightly over a 1-percent AFUE
reduction according to the equation.
Therefore, DOE assumes that the
elimination of a standing pilot would
provide about a 1-percent AFUE
increase for the representative capacity
range. DOE used gas wall gravity DHE
with an electronic ignition to represent
the max-tech efficiency level because
the incorporation of electronic ignition
does not require significant
modifications to the installation space
that would limit consumers’ ability to
retrofit the product. Table IV.13 shows
the revised efficiency levels for gas wall
gravity DHE that were used in the final
rule analysis.
TABLE IV.13—GAS WALL GRAVITY DHE (OVER 27,000 Btu/h AND UP TO 46,000 Btu/h) EFFICIENCY LEVELS
Efficiency level (AFUE)
Technology
Baseline (AFUE = 64) ..............................................................................
Efficiency Level 1 (AFUE = 66) ................................................................
Efficiency Level 2 (AFUE = 68) ................................................................
Efficiency Level 3 (AFUE = 69) ................................................................
Efficiency Level 4—Max Tech (AFUE = 70) ............................................
For gas floor DHE, gas room DHE, and
gas hearth DHE, DOE surveyed the
market and identified a number of
efficiency levels for these products
based on the technologies available for
each product class in the December
2009 NOPR analysis. 74 FR 65852,
Standing Pilot.
Standing Pilot and Improved Heat Exchanger.
Standing Pilot and Improved Heat Exchanger.
Standing Pilot and Improved Heat Exchanger.
Electronic Ignition.
65888 (Dec. 11, 2009). DOE did not
receive any comments about the
efficiency levels and technologies
identified for these products. After
reviewing the efficiency levels and
technologies for each of these three
product classes, DOE determined that
the efficiency levels and technologies
examined in the December 2009 NOPR
are still appropriate and maintained
them for the final rule analysis. Table
IV.14 through Table IV.16 show the
efficiency levels analyzed for gas floor,
gas room, and gas hearth DHE.
TABLE IV.14—GAS FLOOR DHE (OVER 37,000 Btu/h) EFFICIENCY LEVELS
Efficiency level (AFUE)
Technology
Baseline (AFUE = 57) ..............................................................................
Efficiency Level 1—Max Tech (AFUE = 58) ............................................
Standing Pilot.
Standing Pilot and Improved Heat Exchanger.
TABLE IV.15—GAS ROOM DHE (OVER 27,000 Btu/h AND UP TO 46,000 Btu/h) EFFICIENCY LEVELS
Efficiency level (AFUE)
Technology
Baseline (AFUE = 64) ..............................................................................
Efficiency Level 1 (AFUE = 65) ................................................................
Efficiency Level 2 (AFUE = 66) ................................................................
Efficiency Level 3 (AFUE = 67) ................................................................
Efficiency Level 4 (AFUE = 68) ................................................................
Efficiency Level 5—Max Tech (AFUE = 83) ............................................
Standing Pilot.
Standing Pilot and Improved Heat Exchanger.
Standing Pilot and Improved Heat Exchanger.
Standing Pilot and Improved Heat Exchanger.
Standing Pilot and Improved Heat Exchanger.
Electronic Ignition and Multiple Heat Exchanger Design.
TABLE IV.16—GAS HEARTH DHE (OVER 27,000 Btu/h AND UP TO 46,000 Btu/h) EFFICIENCY LEVELS
Efficiency level (AFUE)
Technology
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Baseline (AFUE = 64) ..............................................................................
Efficiency Level 1 (AFUE = 67) ................................................................
Efficiency Level 2 (AFUE = 72) ................................................................
Efficiency Level 3—Max Tech (AFUE = 93) ............................................
c. Pool Heaters
Table IV.17 shows the efficiency
levels analyzed for the final rule
analysis for pool heaters. In response to
the December 2009 NOPR analysis, DOE
received several comments related to
the efficiency levels and technologies
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Standing Pilot.
Electronic Ignition.
Fan Assisted.
Condensing.
identified for pool heaters, particularly
for efficiency level 5 (i.e., 84-percent
thermal efficiency).
AHRI asserted that DOE has
incorrectly analyzed the measures
required to manufacture gas-fired pool
heaters capable of achieving a minimum
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thermal efficiency of 84 percent.
Further, AHRI stated that manufacturers
must design products to address the
entire range of installation situations
that the product could experience, and
if a particular replacement installation
presents concerns about possible
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excessive condensation for a heater with
83- or 84-percent thermal efficiency, the
option currently exists to install a
slightly less efficient pool heater and
minimize this concern. However, AHRI
asserted that because this option will no
longer exist if DOE adopts TSL 4,
manufacturers will have to use more
corrosion-resistant (and more
expensive) stainless steel in the heat
exchangers. (AHRI, No. 91 at p. 9)
Similarly, Raypak stated its belief,
based on their own testing conducted to
evaluate ways to achieve higher
efficiency from their products that
more-expensive stainless steel materials
will be required to properly deal with
the increased amount of condensate at
higher efficiency levels (i.e., anything
greater than TSL 2). Further, Raypak
stated that atmospheric products
currently on the market do condense
(although they are designed to minimize
condensation), so increasing the
efficiency level will both increase the
amount of condensation and reduce the
life of the product, unless moreexpensive stainless steel materials are
used to manage condensate more
effectively. (Raypak, No. 67 at p. 3)
Zodiac also stated that 84-percent
thermal efficiency for gas-fired pool
heaters approaches the point at which
condensing occurs, and that
condensation as a byproduct of
combustion is acidic and can cause
corrosion to important components of
the heater, including the venting
material if the proper type of venting is
not installed. Zodiac stated that
corrosion from condensate can lead to
leaks in the venting system, which in
turn can allow combustion by-products
to infiltrate into areas where such byproducts are not desirable. Zodiac
asserted this can subsequently
contribute to creating a carbon
monoxide hazard in the event that
abnormal combustion ever occurs,
which can lead to serious injury or
death. (Zodiac, No. 68 at pp. 1–2)
In response to these comments, DOE
notes that in the engineering analysis,
DOE examined pool heaters that are
currently available on the market at 84percent thermal efficiency. DOE
determined that these products did not
incorporate stainless steel heat
exchangers. In addition, manufacturer
literature does not specify instances
when these products could cause unsafe
installations, and where less-efficient
products should be used to minimize
corrosive condensate. Instead,
20147
manufacturer literature advertises safety
features that minimize condensate, such
as a manual bypass that will raise the
incoming water temperature to reduce
the formation of corrosive condensate.
Because these products currently exist
on the market and seem to be capable
of safe operation with condensate being
mitigated using less expensive methods
than incorporating stainless steel
materials, DOE did not consider
stainless steel heat exchangers at 84percent thermal efficiency for the final
rule. Additionally, DOE notes that
typically pool heaters are installed
outdoors or outside of the living space,
so these products are unlikely to cause
safety concerns in most installations.
DOE does not believe manufacturers
would largely deviate from the designs
currently on the market in the event of
a standard at this efficiency level, and,
thus, DOE based its technologies on
products currently available on the
market at 84-percent thermal efficiency.
As a result, DOE maintained the pool
heater efficiency levels analyzed for the
December 2009 NOPR in the final rule
analysis.
TABLE IV.17—GAS-FIRED POOL HEATER (250,000 Btu/h) EFFICIENCY LEVELS
Efficiency level (thermal efficiency)
Technology
Baseline (Thermal Efficiency = 78)*. .................................
Efficiency Level 1 (Thermal Efficiency = 79)* ....................
Efficiency Level 2 (Thermal Efficiency = 81)* ....................
Efficiency Level 3 (Thermal Efficiency = 82)* ....................
Efficiency Level 4 (Thermal Efficiency = 83) .....................
Efficiency Level 5 (Thermal Efficiency = 84) .....................
Efficiency Level 6 (Thermal Efficiency = 86) .....................
Efficiency Level 7 (Thermal Efficiency = 90) .....................
Efficiency Level 8—Max-Tech (Thermal Efficiency = 95)
Improved Heat Exchanger Design.
Improved Heat Exchanger Design.
Improved Heat Exchanger Design, More Effective Insulation (Combustion Chamber).
Power Venting.
Power Venting, Improved Heat Exchanger Design.
Sealed Combustion, Improved Heat Exchanger Design.
Sealed Combustion, Condensing.
Sealed Combustion, Condensing, Improved Heat Exchanger Design.
* Technologies incorporating either a standing pilot or electronic ignition. Efficiency Levels above 3 include electronic ignition.
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3. Cost Assessment Methodology
a. Manufacturer Production Cost
As explained in the December 2009
NOPR, DOE’s process for developing
manufacturer production costs (MPCs)
consisted of several steps. First, DOE
selected representative models that
corresponded to the representative rated
storage volumes and input capacities,
and that represented the most common
designs and characteristics available in
products on the market. DOE then
performed a teardown analysis of the
selected models, which included
disassembling the selected products into
their base components and
characterizing each component
according to its weight, dimensions,
material, quantity, and the
manufacturing processes used to
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fabricate and assemble it. The teardown
analysis for this rulemaking included a
total of over 60 physical and virtual
teardowns of water heaters, DHE, and
pool heaters during the preliminary and
NOPR analysis phases. 74 FR 65852,
65889–93 (Dec. 11, 2009).
DOE used the data gathered during
the teardown analysis to generate bills
of materials (BOMs) that incorporate all
materials, components, and fasteners
classified as either raw materials or
purchased parts and assemblies, and
characterize the materials and
components by weight, manufacturing
processes used, dimensions, material,
and quantity. DOE developed a cost
model using Microsoft Excel that
converts the materials and components
in the BOMs into dollar values based on
the price of materials, labor rates
PO 00000
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associated with manufacturing and
assembling, and the cost of overhead
and depreciation. To convert the
information in the BOMs to dollar
values, DOE collected information on
labor rates, tooling costs, raw material
prices, and other factors. For purchased
parts, the cost model estimates the
purchase price based on volumevariable price quotations and detailed
discussions with manufacturers and
component suppliers. For fabricated
parts, the prices of raw metal materials
(e.g., tube, sheet metal) are estimated on
the basis of 5-year averages. The cost of
transforming the intermediate materials
into finished parts is estimated based on
current industry pricing.
For the final rule analysis, DOE
updated all of the labor rates, tooling
costs, raw material prices, and the
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purchased parts costs. DOE calculated
new 5-year average materials prices
using the U.S. Department of Labor’s
Bureau of Labor Statistics (BLS)
Producer Price Indices (PPIs) for various
raw metal materials from 2005 to 2009,
which incorporate the changes within
each material industry and inflation.
DOE also used BLS PPI data to update
current market pricing for other input
materials such as plastic resins and
purchased parts. Finally, DOE adjusted
all averages to 2009$ using the gross
domestic product implicit price
deflator. Chapter 5 of the final rule TSD
describes DOE’s cost model and
definitions, assumptions, and estimates.
Additionally, because integrated heat
pump water heaters became available on
the market before the completion of the
final rule analysis, DOE was able to
perform teardown analyses and develop
detailed BOMs for multiple heat pump
water heaters. DOE used the BOMs to
develop the MPCs for heat pump water
heaters, which DOE found affirmed the
MPCs developed for the December 2009
NOPR analysis that were based on a
theoretical heat pump water heater
design (since no heat pump water
heaters were available on the market at
the time of the December 2009 NOPR
analysis). The teardown analysis of heat
pump water heaters allowed DOE to
refine its MPCs for these products for
the final rule analysis.
DOE received several comments in
response to the manufacturer
production costs and methodology
presented in the December 2009 NOPR.
ACEEE stated its disappointment that
DOE did not perform retrospective
analysis of the costs of products affected
by changes in efficiency standards.
ACEEE recommended that DOE balance
the current approach to developing the
cost-efficiency relationship by
considering the historical results of
rulemakings, arguing that manufacturer
production costs for product redesigns
almost inevitably result in lower
consumer prices for more-efficient
goods than DOE has typically estimated
in its rulemaking analyses for energy
conservation standards. Further, ACEEE
stated that DOE’s reasoning that it
cannot speculate about specific changes
manufacturers might adopt, is no reason
to reject analysis of the historical
pattern of manufacturer responses.
ACEEE cited published work by a DOE
contractor purportedly showing that
most standards yield consumer prices
lower than projected by the Department,
and ACEEE stated that empirical results
are simply more credible than those
relied upon in DOE’s rulemaking record,
particularly for the future costs of
products that include technology shifts
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and very low market shares today, such
as heat pump water heaters. (ACEEE,
No. 79 at p. 3)
In response, DOE reiterates its
tentative conclusion in the December
2009 NOPR that DOE’s manufacturing
cost estimates seek to gauge the most
likely industry response to meet the
requirements of proposed energy
conservation standards. DOE’s analysis
of manufacturing cost must be based on
currently-available technology that
would provide a nonproprietary
pathway for compliance with a standard
once it becomes effective, and, thus,
DOE cannot speculate on future product
and market innovation. In response to a
change in energy conservation
standards, manufacturers have made a
number of changes to reduce costs in
the past. DOE understands
manufacturers have re-engineered
products to reduce cost, made changes
to manufacturing process to reduce
labor costs, and moved production to
lower-cost areas to reduce labor costs.
However, these are individual company
decisions, and it is impossible for DOE
to forecast such decisions. DOE does not
know of any data that would allow it to
determine the precise course a
manufacturer may take. Furthermore,
while manufacturers have been able to
reduce the cost of products that meet
previous energy conservation standards,
there are no data to suggest that any
further reductions in cost are possible.
Therefore, it would not be appropriate
to speculate about cost reduction based
upon prior actions of manufacturers of
either the same or other products.
Setting energy conservation standards
based upon relevant data is particularly
important given EPCA’s anti-backsliding
provision at 42 U.S.C. 6295(o)(1).
At the December 2009 NOPR public
meeting, A.O. Smith stated that the cost
impact studies for ultra-low NOX in
combination with condensing
technology should be reworked
extensively because it is significantly
more complex to implement an ultralow NOX design with a condensing gasfired water heater than a noncondensing gas-fired water heater. (A.O.
Smith, Public Meeting Transcript, No.
57.4 at p. 124) A.O. Smith also
commented at the public meeting that
for ultra-low NOX gas-fired storage
water heaters, the MPC at efficiency
level 6 for an ultra-low NOX condensing
gas water heater is considerably too low
(A.O. Smith, Public Meeting Transcript,
No. 57.4 at p. 139) However, in its
written submission, A.O. Smith stated
that they believe DOE’s manufacturer
production costs in the December 2009
NOPR are all reasonably accurate. (A.O.
Smith, No. 76 at p. 3) DOE believes A.O.
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Smith’s written statement clarified A.O.
Smith’s opinion regarding the
manufacturer production costs, and
thus, DOE did not change its approach
to developing MPCs for ultra-low NOX
condensing water heaters.
Turning to pool heaters, AHRI stated
that the manufacturing cost for pool
heater models to comply with TSL 4
(i.e., 84-percent thermal efficiency) is
underestimated by DOE. (AHRI, No. 91
at p. 8) Similarly, Raypak asserted that
DOE does not account for the stainless
steel material improvements (a
significant cost increase) at any TSL
below fully condensing. (Raypak, No. 67
at p. 3)
In response, DOE did not include the
cost of a stainless steel heat exchanger
design in its analysis of pool heaters at
84-percent thermal efficiency, because
DOE’s MPC for this product is based on
models at 84-percent thermal efficiency
that are currently available on the
market, as explained in section IV.C.2.c,
DOE does not have sufficient reason to
believe that in the event of a minimum
energy conservation standard at this
efficiency level, manufacturers would
completely redesign their products at
this efficiency. Thus, DOE disagrees
with AHRI and Raypak, and does not
believe that the pool heater MPC at 84percent thermal efficiency was
underestimated for the December 2009
NOPR and has continued to use that
MPC for the final rule analysis.
b. Manufacturer Selling Price
The manufacturer selling price (MSP)
is the price at which the manufacturer
can recover all production and nonproduction costs and earn a profit. The
MSP should be high enough to recover
the full cost of the product (i.e., full
production and non-production costs),
and yield a profit. For heating products,
DOE calculates the MSP in one of two
ways, depending on the product type.
For gas-fired instantaneous water
heaters, DHE, and pool heaters, the MSP
is the MPC multiplied by a
manufacturer markup. For gas-fired,
electric, and oil-fired storage water
heaters, the size of the unit is largely
dependent on the final standard
requirement, and as a result, the
shipping costs are much different at
each efficiency level. Therefore, in the
December 2009 NOPR analysis, DOE
separated the shipping costs of storage
water heaters from the manufacturer
markup to more transparently show the
impacts of standards on the shipping
costs of storage water heaters. The MSP
for gas-fired, electric, and oil-fired
storage water heaters was calculated as
the MPC multiplied by the manufacturer
markup (less the percentage of markup
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usually attributed to shipping cost) plus
the shipping cost per unit. See chapter
5 of the final rule TSD for more
information regarding the manufacturer
markup.
i. Manufacturer Markup
The manufacturer markup is a nonproduction cost multiplier that DOE
applies to the full MPC to account for
corporate non-production costs and
profit. To calculate the manufacturer
markups for the preliminary analysis,
DOE used 10–K reports from publiclyowned residential heating products
companies. DOE presented the
calculated markups to manufacturers
during interviews conducted for the
December 2009 NOPR MIA analysis,
and considered the feedback from
manufacturers in order to supplement
the calculated markup. DOE then
refined the markups for each type of
residential heating product to better
reflect the residential heating products
market. DOE used a constant markup to
reflect the MSPs of the baseline
products as well as more-efficient
products. DOE used this approach
because amended standards may result
in high-efficiency products (which
currently are considered premium
products) becoming the baselines.
In regard to the manufacturer
markups and methodology for
determining manufacturer markups in
the December 2009 NOPR, DOE did not
receive any feedback from interested
parties. After reviewing the
manufacturer markups used for the
December 2009 NOPR, DOE continued
to use the same manufacturer markups
for the final rule.
ii. Shipping Cost for Storage Water
Heaters
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The final step in DOE’s costassessment methodology was to
calculate the shipping cost for storage
water heaters. Typically, the cost of
shipping is fully accounted for in the
manufacturer markup, and as noted
above, this was DOE’s approach for
direct heating equipment, pool heaters,
and gas-fired instantaneous water
heaters. For storage water heaters,
however, shipping costs are highly
variable because the size of the unit is
largely dependent upon the efficiency
level being considered. Thus, DOE
separated the shipping cost from
manufacturer markup for storage water
heaters.
For the final rule, DOE used many of
the same assumptions used in the
December 2009 NOPR to calculate
shipping costs. DOE calculated shipping
costs based on a typical 53-foot straightframe trailer with a storage volume of
4,240 cubic feet, and assumed an
average cost of $4,000 per trailer load.
DOE examined the average sizes of
water heaters at each efficiency level
and storage volume, and determined the
number of units that would fit in each
trailer based on assumptions about the
arrangement of water heaters in the
trailer.
In response to the shipping costs
presented in the December 2009 NOPR,
Bradford White stated that the increases
in shipping costs at higher efficiency
levels are far too low. (Bradford White,
Public Meeting Transcript, No. 57.4 at
pp. 40–41) However, DOE notes that
Bradford White did not provide any
new data regarding shipping costs in
response to the December 2009 NOPR.
Further, Bradford White expressed
strong disagreement with the shipping
costs used for the December 2009 NOPR
analysis, arguing that at the increased
insulation thicknesses presented in the
December 2009 NOPR, DOE’s shipping
costs are very much underestimated.
(Bradford White, No. 61 at p. 1)
In response to these comments, DOE
reexamined the shipping costs for the
final rule analysis. DOE made several
changes to its December 2009 NOPR
assumptions for the final rule, including
changes to the packaging dimensions of
heat pump water heaters and changes to
assumptions about the arrangement
power vented gas-fired units on the
trailer. For example, for the final rule
analysis, DOE was able to examine
actual heat pump water heaters
available on the market, which allowed
DOE to refine its estimated shipping
dimensions of these units by increasing
the dimensions to more accurately
reflect the packaging of products that
have recently become available to
consumers. The increased shipping
dimensions led to an increase the
shipping cost (as manufacturers would
be able to fit fewer units per shipping
load). As a result, DOE was able to
revise its shipping costs to more
accurately reflect the cost to ship
products currently available on the
20149
market. However, DOE notes that the
shipping costs developed for the final
rule represent estimates of the cost per
unit shipped if the trailer were fully
loaded with the same product (i.e., same
type of water heater at the same
efficiency level and same storage
volume). DOE recognizes that in reality,
manufacturers will likely mix different
products of various storage volumes and
efficiencies to try to optimize the use of
space within the trailer, which will
cause some variation in the actual
shipping costs per unit. For a full
description of shipping costs for storage
water heaters, see chapter 5 of the final
rule TSD.
4. Engineering Analysis Results
The results of the engineering analysis
are reported as cost-efficiency data in
the form of MSP (in dollars) versus
efficiency (EF for water heaters, AFUE
for DHE, and thermal efficiency for pool
heaters). The results from the
engineering analysis are the basis for the
subsequent analyses in the final rule
and were used in the LCC analysis to
determine consumer prices for
residential heating products at the
various potential standard levels.
Chapter 5 of the final rule TSD provides
the full list of MPCs and MSPs at each
efficiency level for each analyzed
representative product.
5. Scaling to Additional Rated Storage
Capacities
As discussed in the December 2009
NOPR, to account for the large variation
in the rated storage volumes of
residential storage water heaters and
differences in both usage patterns and
first cost to consumers of water heaters
larger or smaller than the representative
capacity, DOE scaled its MPCs and
efficiency levels for the representative
rated storage volumes to several discrete
rated storage volumes higher and lower
than the representative storage volume
for each storage water heater product
class. 74 FR 65852, 65893–94 (Dec. 11,
2009) DOE developed the MPCs for
water heaters at each of the rated storage
volumes shown in Table IV.18. The
MPCs developed for this analysis were
used in the downstream LCC analysis,
where a distribution of MPCs was used
based on the estimated market share of
each rated storage volume (see section
IV.F).
TABLE IV.18—ADDITIONAL WATER HEATER STORAGE VOLUMES ANALYZED
Storage volumes
analyzed (gallons, U.S.)
Water heater product class
Gas-fired Storage ...........................................................................................................................................................
Electric Storage ..............................................................................................................................................................
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30, 50, 65, 75.
30, 40, 66, 80, 119.
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TABLE IV.18—ADDITIONAL WATER HEATER STORAGE VOLUMES ANALYZED—Continued
Storage volumes
analyzed (gallons, U.S.)
Water heater product class
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Oil-fired Storage ..............................................................................................................................................................
As described in the December 2009
NOPR, DOE developed the MPCs for the
analysis of additional storage volumes
by creating a cost model based on
teardowns of products at nominal
storage volumes outside the
representative volume across a range of
efficiencies and manufacturers. The cost
model accounts for changes in the size
of water heater components that would
scale with tank volume, while assuming
other components (e.g., gas valves,
thermostats, controls) remain largely the
same across the different storage volume
sizes. DOE estimated the changes in
material and labor costs that occur at
volume sizes higher and lower than the
representative volume based on
observations made during teardowns,
which allowed DOE to accurately model
certain characteristics that are not
identifiable in manufacturer literature.
Additional details and the results of
DOE’s analysis for the additional storage
volumes are presented in chapter 5 of
the final rule TSD (engineering
analysis).
In response to the scaled MPCs
developed for the December 2009 NOPR
analysis, DOE received feedback from
several interested parties. Southern
Company and AHRI commented that
DOE’s assumption that for heat pump
water heaters, the heat pump output
capacity would not change as a function
of tank size is likely incorrect. Southern
Company stated that a heat pump with
a higher capacity would be used on a
119-gallon tank than on a 30-gallon
tank. As a result, the commenters stated
their belief that DOE’s scaling of costs
for the heat pump water heater
efficiency levels may be incorrect.
(Public Meeting Transcript, No. 57.4 at
pp. 152–155) Further, Southern
Company stated that the reason the
heating elements in electric resistance
heaters have the same output capacity
across the full range of gallon sizes is
because they max-out the standard
circuit. (Southern Company, Public
Meeting Transcript, No. 57.4 at p. 155)
A.O. Smith also commented that a 119gallon heat pump water heater would
likely have a higher-capacity refrigerant
circuit than a 30-gallon heat pump
water heater. (A.O. Smith, Public
Meeting Transcript, No. 57.4 at p. 157)
DOE’s analysis of electric storage
water heaters currently available on the
market revealed that electric storage
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water heaters use the same capacity
heating elements across the range of
storage volumes to provide the same
amount of heat input to the water. DOE
notes that for heat pump water heaters,
the heat pump unit serves essentially
the same function as the electric
resistance element in electric storage
water heaters (i.e., heating the water).
Because heat pump modules paired
with electric water heaters currently
available on the market demonstrate
that the same amount of heating
capability as compared to the electric
elements found in conventional water
heaters and both of these types of
heaters can be used to satisfy the
heating requirements of the full range of
water heater storage volumes, DOE
believes the same amount of heat input
from a heat pump can also be used to
satisfy the heating requirements for the
full range of storage volumes. Therefore,
DOE does not believe an increase in the
heat pump capacity would be required
at larger tank storage volumes. DOE
believes that the same amount of heat
pump heating capacity will be adequate
to serve the water heating needs across
the entire range of storage volumes, and
as a result manufacturers would be
unlikely to increase the size and
capacity of the heat pump unit as the
storage volume increases. Therefore,
DOE maintained the assumption that
the heat pump unit will not scale with
storage volume for the final rule
analysis.
EEI stated that for large water heaters
(66 to 119 gallons), DOE’s costs to go
from TSL 4 (electric resistance) to TSL
5 (heat pump water heaters) are between
$20 and $26, which are vastly
understated. (EEI, No. 95 at p. 5)
In response, DOE believes that EEI
misinterpreted the scaled MPCs
presented in the December 2009 NOPR
analysis. EEI appears to have been
considering the MPC differences
between TSLs, whereas the December
2009 NOPR only lists the cost
differences between efficiency levels.
Heat pump water heater technology is
implemented for larger-storage-volume
products at the December 2009 NOPR
TSL 5; however, DOE does not consider
heat pump water heater technology in
the engineering analysis for efficiency
level 5, but instead considers it at
efficiency level 6 for all product classes.
The December 2009 NOPR TSL 5 was a
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50.
combination of efficiency level 5 for the
smaller storage volume sizes (55 gallons
or less), and efficiency level 6 for the
larger storage volume sizes (greater than
55 gallons). Thus, DOE believes the
scaled MPCs at the higher gallon sizes
and higher efficiency levels presented in
the December 2009 NOPR were correct.
6. Water Heater Energy Efficiency
Equations
For this rulemaking, DOE reviewed
the energy efficiency equations that
define the existing Federal energy
conservation standards for residential
water heaters. The energy efficiency
equations characterize the relationship
between rated storage volume and
energy factor and allow DOE to expand
the analysis on the representative rated
storage volume to the full range of
storage volumes covered under the
existing Federal energy conservation
standards. The energy efficiency
equations allow DOE to account for the
increases in standby losses as tank
volume increases. The current energy
efficiency equations show that for each
water heater class, the minimum energy
factor decreases as the rated storage
volume increases.
As described in the December 2009
NOPR, DOE reviewed market data and
product literature for gas-fired and
electric storage water heaters and
developed two approaches for amending
the existing energy efficiency equations
for gas-fired and electric storage water
heaters in the preliminary analysis. 74
FR 65852, 65894–96 (Dec. 11, 2009).
One approach was to maintain the same
slope used in the existing equations
(found at 10 CFR 430.32(d)), but to
incrementally increase the intercepts.
The second approach was to adjust the
slope of the energy efficiency equations
based on the review of the storage water
heater models currently on the market.
The advantage of the second approach
was to acknowledge the changes in the
product efficiencies that have occurred
since the previous standards were set,
and to account for these changes. DOE
examined the efficiencies of models
with varying storage volumes, but with
the same or similar design features and
varied the slope of the line to maximize
the number of models in the series that
meet the efficiency levels that DOE is
considering in the full range of rated
storage volumes.
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The standard levels proposed in the
December 2009 NOPR were based on
the results of the second approach for
gas-fired and electric storage water
heaters. For oil-fired storage water
heaters and gas-fired instantaneous
water heaters, DOE only used the first
approach to develop energy efficiency
equations due to the limited number of
models available on the market and
limited data to justify modifying the
equations. In response to the energy
efficiency equations presented in the
December 2009 NOPR, DOE received
feedback from several interested parties.
A.O. Smith stated it supports the
energy-efficiency equations as generally
being appropriate for the various
efficiency levels. A.O. Smith endorsed
the equations applicable to TSL 4, and
strongly recommended that they not be
revised from those proposed in the
December 2009 NOPR. (A.O. Smith, No.
76 at p. 2)
Bradford White expressed its
disagreement with the energy efficiency
equations proposed for electric storage
water heaters. In particular, Bradford
White commented that the efficiency
level 4 equation (EF = ¥0.00060(VR) +
0.965) should be used for VR ≤ 65
gallons and that the efficiency level 3
equation (EF = ¥0.00155(VR) + 1.026)
should be used for VR > 65 gallons.
Bradford White asserted that these
changes are necessary to prevent the
disproportionate EF increase that was
proposed on larger volumes that have to
combat higher standby losses. (Bradford
White, No. 61 at p. 4)
Similarly, AHRI recommended that
DOE revise the energy efficiency
equation for TSL 4 for electric storage
water heaters above 65 gallons, because
AHRI believes it represents a
disproportionately large increase in the
EF requirement for these units. AHRI
asserts that because larger electric
storage water heaters have a smaller
surface-area-to-volume ratio, increased
insulation is less effective in achieving
energy efficiency gains, and as a result,
the projected efficiencies are overstated.
AHRI recommended that for electric
storage water heaters above 65 gallons,
DOE should select the equation for TSL
3 (EF = 1.051 ¥ (0.00168 * Rated
Storage Volume)) as the standard.
(AHRI, No. 91 at p. 2)
Rheem also stated that the energyefficiency equation for gas-fired storage
water heaters at TSL 4
disproportionately imposes higher
minimum EF values for large-capacity
gas-fired storage water heaters. Rheem
expressed concern that the uneven
treatment of large-capacity units would
encourage work-around solutions and
product shifts. In addition, Rheem
stated that the energy efficiency
equation for electric storage water
heaters at TSL 4 disproportionately
impacts large-capacity electric storage
water heaters. Rheem recommends that
the equation read EF = 1.026 ¥ (0.00155
× Rated Storage Volume in gallons) for
capacities above 55 gallons, in order to
yield balance for high-capacity units.
(Rheem, No. 89 at p. 12)
In light of the comments above, DOE
reexamined the energy efficiency
equations proposed in the December
2009 NOPR for gas-fired and electric
storage water heaters. The energy
efficiency equations are intended to
represent the relationship between
efficiency and storage volume so that
the same technology could be used to
meet the EF requirement for the entire
range of gallon capacities. After
examining the characteristics of
products on the market at each
efficiency level and gallon size, and
based on the results of the testing and
teardown analysis done prior to the
December 2009 NOPR, DOE believes
that the energy efficiency equations, as
presented in the December 2009 NOPR,
accurately represent the relationship
between efficiency and storage volume.
The equations developed by DOE have
two slopes and decline faster for the
larger storage volumes than the smaller
storage volumes. The slopes developed
for the December 2009 NOPR
incorporated the results of testing and a
physical examination (through
teardowns) of the features incorporated
into units across various gallon sizes
and efficiency levels. Through this
process, DOE was able to determine the
efficiencies that can be achieved using
the same technologies across the range
of rated storage volumes. DOE then
developed equations based on the
results of this analysis to create
efficiency levels that allow products to
utilize the same technology across the
range of storage volumes.
DOE believes that the equations have
a proportionate impact on both largerstorage-volume units and smaller-
20151
storage-volume units. While DOE
acknowledges that the efficiency levels
in the proposed TSLs (which are
determined based on a variety of factors,
see section VI.A for more details) may
be paired in a way which requires
different efficiency levels utilizing
different technologies for water heaters
at various storage volumes, DOE does
not believe this applies for the energy
efficiency equations in the engineering
analysis, which are based on constant
technologies across the full range of
storage volumes. The commenters did
not provide any new data or evidence to
lead DOE to conclude that the outcome
of its analysis for the December 2009
NOPR is not valid.
As a result, DOE is maintaining the
energy efficiency equations presented in
the December 2009 NOPR, with only
minor changes to account for the new
max-tech levels described in section
IV.C.2. For the max-tech energy
efficiency equation (i.e., EL 6) for gasfired storage water heaters, DOE
maintained the slope used in the
December 2009 NOPR, but shifted the
efficiency requirements down so that
the EF requirement at the 40-gallon
representative rated storage volume is
0.77 EF instead of 0.80 EF. Similarly, for
the max-tech equation (i.e., EL 7) for
electric storage water heaters, DOE
maintained the same slope, but shifted
the equation upwards so that the
efficiency requirement at the 50-gallon
representative rated storage volume is
2.35 EF instead of 2.2 EF. See section
IV.C.2.a for discussion of the max-tech
efficiency levels.
DOE did not receive any comments
regarding the proposed approach for oilfired storage water heater energy
efficiency equations presented in the
December 2009 NOPR and has used the
same approach in the final rule.
Similarly, DOE did not receive any
comments objecting to the proposed
approach for gas-fired instantaneous
water heater energy efficiency equations
presented in the December 2009 NOPR
and has used the same approach in the
final rule. Table IV.19 through Table
IV.22 show the energy efficiency
equations for residential water heaters.
For more information on the energy
efficiency equations, see chapter 5 of the
final rule TSD.
TABLE IV.19—ENERGY EFFICIENCY EQUATIONS FOR GAS-FIRED STORAGE WATER HEATERS
Efficiency level
Minimum energy factor (20 to 60 gallons)
Baseline Energy Efficiency Equation ........................
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Minimum energy factor
(Over 60 and up to 100 gallons)
EF = ¥0.00190(VR) + 0.670
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TABLE IV.19—ENERGY EFFICIENCY EQUATIONS FOR GAS-FIRED STORAGE WATER HEATERS—Continued
Efficiency level
Minimum energy factor
(Over 60 and up to 100 gallons)
Minimum energy factor (20 to 60 gallons)
EL 1
Energy Efficiency Equation ............................
EF = ¥0.00150(VR) + 0.675 ....................................
EF = ¥0.00190(VR) + 0.699.
EL 2
Energy Efficiency Equation ............................
EF = ¥0.00120(VR) + 0.675 ....................................
EF = ¥0.00190(VR) + 0.717.
EL 3
Energy Efficiency Equation ............................
EF = ¥0.00100(VR) + 0.680 ....................................
EF = ¥0.00190(VR) + 0.734.
EL 4
Energy Efficiency Equation ............................
EF = ¥0.00090(VR) + 0.690 ....................................
EF = ¥0.00190(VR) + 0.750.
EL 5
Energy Efficiency Equation ............................
EF = ¥0.00078(VR) + 0.700 ....................................
EF = ¥0.00190(VR) + 0.767.
EL 6
Energy Efficiency Equation ............................
EF = ¥0.00078(VR) + 0.8012
TABLE IV.20—ENERGY EFFICIENCY EQUATIONS FOR ELECTRIC STORAGE WATER HEATERS
Efficiency level
Minimum energy factor
(Over 80 and up to 120 gallons)
Minimum energy factor (20 to 80 gallons)
Baseline Energy Efficiency Equation .............
EF = 0.00132(VR) + 0.97.
EL 1
Energy Efficiency Equation .................
EF = ¥0.00113(VR) + 0.97 ...............................................................
EF = ¥0.00149(VR) +
0.999.
EL 2
Energy Efficiency Equation .................
EF = ¥0.00095(VR) + 0.967 .............................................................
EF = ¥0.00153(VR) +
1.013.
EL 3
Energy Efficiency Equation .................
EF = ¥0.00080(VR) + 0.966 .............................................................
EF = ¥0.00155(VR) +
1.026.
EL 4
Energy Efficiency Equation .................
EF = ¥0.00060(VR) + 0.965 .............................................................
EF = ¥0.00168(VR) +
1.051.
EL 5
Energy Efficiency Equation .................
EF = ¥0.00030(VR) + 0.960 .............................................................
EF = ¥0.00190(VR) +
1.088.
EL 6
Energy Efficiency Equation .................
EF = -0.00113(VR) + 2.057
EL 7
Energy Efficiency Equation .................
EF = -0.00113(VR) + 2.406
TABLE IV.21—ENERGY EFFICIENCY EQUATIONS FOR OIL-FIRED STORAGE WATER HEATERS
Efficiency level
Minimum energy factor
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.60.
EL 2
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.62.
EL 3
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.64.
EL 4
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.66.
EL 5
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.68.
EL 6
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.72.
EL 7
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EL 1
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.74.
TABLE IV.22—ENERGY EFFICIENCY EQUATIONS FOR GAS-FIRED INSTANTANEOUS WATER HEATERS
Efficiency Level
Minimum energy factor
EL 1
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.69.
EL 2
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.78.
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20153
TABLE IV.22—ENERGY EFFICIENCY EQUATIONS FOR GAS-FIRED INSTANTANEOUS WATER HEATERS—Continued
Efficiency Level
Minimum energy factor
EL 3
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.80.
EL 4
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.82.
EL 5
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.84.
EL 6
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.85.
EL 7
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.92.
EL 8
Energy Efficiency Equation ....................................................................................................................
EF = ¥0.0019(VR) + 0.95.
D. Markups To Determine Product Price
DOE used manufacturer-to-consumer
markups to convert the manufacturer
selling prices estimated in the
engineering analysis to customer prices,
which then were used in the life-cycle
cost (LCC), payback period (PBP), and
manufacturer impact analyses. DOE
calculates markups for baseline
products (baseline markups) and for
more-efficient products (incremental
markups) based on the markups at each
step in the distribution channel. The
overall incremental markup relates the
change in the manufacturer sales price
of higher-efficiency models (the
incremental cost increase) to the change
in the retailer or distributor sales price.
In order to develop markups, DOE
identifies how the products are
distributed from the manufacturer to the
customer (the distribution channels).
DOE estimated manufacturer-tocustomer markups for residential
heating products based on separate
distribution channels for water heaters,
direct heating equipment, and pool
heaters. After establishing appropriate
distribution channels for each of the
product classes, DOE relied on
economic data from the U.S. Census
Bureau and other sources to define how
prices are marked up as the products
pass from the manufacturer to the
customer. A detailed description of the
distribution channels and the markup
applied at each step in the distribution
process can be found in chapter 6 of the
December 2009 NOPR TSD. DOE did
not receive any comments on
development of markups, and it used
the same approach for the final rule as
it used for the December 2009 NOPR.
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E. Energy Use Characterization
The energy use characterization,
which assesses the energy savings
potential from adopting higher
efficiency standards, provides the basis
for the energy savings values used in the
LCC and subsequent analyses. For each
considered efficiency level within each
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heating product class, DOE calculated
the potential energy savings compared
to baseline models. As part of the
characterization, DOE made certain
engineering assumptions regarding
product application, including how the
products are operated and under what
conditions. Those assumptions are
documented in chapter 7 of the TSD,
which also provides more detail about
DOE’s approach.
DOE determined the annual energy
use in the field by using a nationallyrepresentative set of housing units for
each type of product. The housing units
were selected from EIA’s Residential
Energy Consumption Survey (RECS).
The December 2009 NOPR analysis and
today’s final rule used the 2005 RECS,
which was the latest data set available.
(See https://www.eia.doe.gov/emeu/
recs/.)
1. Water Heaters
For residential storage-type water
heaters, DOE relied on an energy use
analysis tool, the water heater analysis
model (WHAM), and a hot water draw
model. For this rulemaking, DOE
modified earlier versions of the tools,
which were used to conduct the
previous rulemaking that concluded in
2001. Combined with data from the
2005 RECS, these analytical tools enable
DOE to establish the variation in water
heater energy consumption in the
United States.
DOE determined the annual energy
consumption of water heaters in actual
housing units by considering the
primary factors that determine energy
use: (1) Hot water use per household; (2)
the energy efficiency characteristics of
the water heater; and (3) water heater
operating conditions other than hot
water draws. DOE used a hot water
draw model to determine hot water use
for each household in the sample. The
characteristics of each water heater’s
energy efficiency were taken from the
engineering analysis. DOE developed
water heater operating conditions (other
than hot water draws) from weather data
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and other relevant sources. DOE
calculated the energy use of water
heaters using WHAM, which accounts
for a range of operating conditions and
energy efficiency characteristics of
water heaters.
For heat pump water heaters that
would be located indoors, overcooling
of the indoor space as a result of the
unit’s operation is a potential problem.
DOE assumed that the majority of
households that would be affected by
indoor operation of a heat pump water
heater would not want to incur the cost
of a venting system, and would instead
operate their heating and cooling
systems to compensate for the effects of
the heat pump water heater. To account
for this indirect increase in home
heating (and the decrease in cooling
during summer months), DOE estimated
the associated energy consumption by
space heating and air conditioning
equipment for the appropriate homes in
the RECS subsample for electric water
heaters, and included this energy use in
its analysis.
A.O. Smith stated that to replace an
electric resistance water heater with a
heat pump water heater, the heat pump
water heater will either require a larger
tank to effectively utilize the heat pump
cycle, or if a larger tank is not provided,
the unit will run in the electric
resistance mode and diminish the
benefits of having a heat pump water
heater. (A.O. Smith, No. 76 at pp. 2–3)
In the December 2009 NOPR analysis
and the final rule analysis, DOE
estimated the fraction of heat pump
water heater operation that would be in
electric resistance mode for each unit in
the subsample. The fraction estimated to
be in electric resistance mode varies
from 10 to 50 percent in the subsample.
Southern stated that heat pump water
heaters do not perform well in
temperatures outside the 45°–120 °F
range, and it pointed out that there are
locations where ambient temperatures
are outside this range. (Southern, No. 90
at p. 3) DOE accounted for the ambient
temperatures likely to be faced in heat
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pump water heater locations by
assuming electric resistance heating
operation under extreme temperatures.
For gas-fired instantaneous water
heaters, DOE modified the approach
used for storage water heaters to account
for the absence of a storage tank. DOE
applied a performance adjustment factor
to account for evidence that the rated
energy efficiency of instantaneous water
heaters does not accurately portray
actual performance.
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2. Direct Heating Equipment
The household sample developed for
DHE is comprised of 2005 RECS
housing units that used a floor/wall
furnace, fireplace, or heater as the
primary or secondary source of heat.
DOE relied on the assumptions in the
DOE test procedure (10 CFR part 430,
subpart B, appendix O) to establish the
typical annual energy consumption of
direct heating equipment. However, to
better reflect actual operating
conditions, DOE used home heating
loads derived from RECS instead of the
average assumptions in the test
procedure.
Williams stated that DHE is used in
many applications as a secondary heat
source, where the primary heat source is
turned down and the DHE provides heat
to the occupied zone only. (Williams,
No. 96 at p. 1) For the December 2009
NOPR and today’s final rule, for those
RECS households that used a gas
furnace as the primary heating
equipment and direct heating
equipment as a secondary heat source,
DOE adjusted the house heating load to
estimate the portion of the load met by
only the direct heating equipment.
DOE did not receive any other
comments on its approach for
estimating energy consumption of direct
heating equipment, and it has used
essentially the same approach and data
for the final rule.
3. Pool Heaters
DOE estimated energy consumption of
pool heaters in a representative sample
of housing units from the 2005 RECS.
DOE relied on the assumptions in the
DOE test procedure (10 CFR part 430,
subpart B, appendix P) to establish the
typical annual energy consumption of
pool heaters. However, to better reflect
actual operating conditions, DOE used
pool heater heating loads derived from
RECS instead of the average test
procedure assumptions.
The calculation of pool heater energy
consumption at each considered
efficiency level depends on the assumed
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fraction of products that use a pilot
light. In the December 2009 NOPR
analysis, DOE used data based on the
number of models in the market to
estimate that 26.5 percent of units use
a pilot light. Raypak stated that 8
percent of pool heaters are millivolt
pool heaters (i.e., use a pilot light).
(Raypak, No. 67 at p. 2) Given that
Raypak’s estimate is based upon actual
shipments data, DOE believes that the
value it cited likely better reflects the
actual market than the NOPR estimate
based on the number of models.
Therefore, for the final rule analysis,
DOE adopted the value cited by Raypak.
F. Life-Cycle Cost and Payback Period
Analyses
DOE conducted LCC and PBP
analyses to evaluate the economic
impacts on individual consumers of
potential amended energy conservation
standards for the three types of
residential heating products. The LCC
represents total consumer expenses
during the life of an appliance,
including purchase and installation
costs plus operating costs (expenses for
energy use, maintenance, and repair).
To compute LCCs for the three heating
products, DOE discounted future
operating costs to the time of purchase,
and then summed those costs over the
life of the appliances. The PBP is
calculated using the change in purchase
cost (normally higher) that results from
an amended efficiency standard,
divided by the change in annual
operating cost (normally lower) that
results from the standard.
DOE measures the changes in LCC
and PBP associated with a given
efficiency level relative to an estimate of
base-case appliance efficiencies. The
base-case estimate reflects the market in
the absence of amended mandatory
energy conservation standards,
including the market for products that
exceed the current standards.
For each set of heating products, DOE
calculated the LCC and PBP for a
nationally representative set of housing
units, which were selected from the
2005 RECS. The housing units include
five types: Single-family (attached),
single-family (detached), multi-family
(2–5 units), multi-family (more than 4
units), and manufactured homes. For
each sample household, DOE
determined the energy consumption for
the heating product and the energy price
faced by the household. By developing
a representative sample of households,
the analysis captured the variability in
energy consumption and energy prices
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associated with the use of residential
heating products. DOE determined the
LCCs and PBPs for each sampled
household using a heating product’s
unique energy consumption and the
household’s energy price, as well as
other variables. DOE calculated the LCC
associated with the baseline heating
product in each household. To calculate
the LCC savings and PBP associated
with equipment that meets higher
efficiency standards, DOE’s analysis
replaced the baseline unit with a range
of more-efficient designs.
Inputs to the calculation of total
installed cost include the cost of the
product—which includes manufacturer
costs, manufacturer markups, retailer or
distributor markups, and sales taxes—
and installation costs. Inputs to the
calculation of operating expenses
include annual energy consumption,
energy prices and price projections,
repair and maintenance costs, product
lifetimes, discount rates, and the year
that proposed standards take effect. For
many of the above inputs, DOE created
distributions of values to account for
uncertainty and variability. Within each
distribution, probabilities are attached
to each value. As described above, DOE
used samples of households to
characterize the variability in energy
consumption and energy prices for
heating products. For the inputs to
installed cost, DOE used probability
distributions to characterize sales taxes.
DOE also used distributions to
characterize the discount rate and
product lifetime that are inputs to
operating cost.
The computer model DOE uses to
calculate LCC and PBP, which
incorporates Crystal Ball (a
commercially-available software
program), relies on a Monte Carlo
simulation to incorporate uncertainty
and variability into the analysis. The
Monte Carlo simulations randomly
sampled input values from the
probability distributions and household
samples. The model calculated the LCC
and PBP for products at each efficiency
level for 10,000 housing units per
simulation run.
Table IV.23 summarizes the approach
and data DOE used to derive inputs to
the LCC and PBP calculations. The table
provides the data and approach DOE
used for the December 2009 NOPR TSD,
as well as the changes made for today’s
final rule. The following subsections
discuss the main inputs and the changes
DOE made to them.
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TABLE IV.23—SUMMARY OF INPUTS AND KEY ASSUMPTIONS IN THE LCC AND PBP ANALYSES *
Inputs
NOPR
Changes for the final rule
Installed Costs
Product Price .......................
Derived by multiplying manufacturer cost by manufacturer, retailer, and distributor markups and sales tax,
as appropriate.
Updated manufacturer product costs (see section
IV.C.3.a).
Installation Cost ...................
Water Heaters: Based on data from RS Means and
other sources.
Applied additional cost for space constraints and other
installation situations.
DHE: Based on data from RS Means and DOE’s furnace installation model.
No change.
Pool Heaters: Based on data from RS Means ...............
Modified fraction of installations with pilot light.
Operating Costs
Annual Energy Use ..............
Water Heaters: Used hot water draw model to calculate
hot water use for each household in the sample from
RECS 2005. Calculated energy use using the water
heater analysis model (WHAM).
No change.
DHE: Based on sample and data from RECS 2005 ......
No change.
Pool Heaters: Based on sample and data from RECS
1993 to 2005.
Based on sample and data from RECS 2001 and 2005.
Included spa heaters.
Energy Prices .......................
Electricity: Based on EIA’s 2007 Form 861 data ............
Natural Gas: Based on EIA’s 2007 Natural Gas Navigator.
Variability: Regional energy prices determined for 13
geographic areas **.
Electricity: Updated using data from EIA’s 2008 Form
861 data and EIA’s Form 826.
Natural Gas: Updated using EIA’s 2008 Natural Gas
Navigator.
Variability: No change.
Energy Price Trends ............
Forecasted using EIA’s AEO2009 ..................................
Forecasts updated using EIA’s AEO2010 (Early Release).
Repair and Maintenance
Costs.
Water Heaters: Based on RS Means and other sources
No change.
DHE: Based on RS Means and other sources ...............
No change.
Pool Heaters: Based on RS Means and other sources
No change.
Present Value of Operating Cost Savings
Product Lifetime ...................
Water Heaters: Based on data from RECS, AHS, and
shipments. Variability and uncertainty: Characterized
using Weibull probability distributions.
No change.
Set lifetime of oil-fired storage water heater equal to
that of gas-fired storage water heater.
No change.
DHE: Based on range of lifetimes from various sources
No change.
Variability and uncertainty: Characterized using Weibull
probability distributions.
Average lifetime increased from 8 years to 10 years.
Discount Rates .....................
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Pool Heaters: Based on range of lifetimes from various
sources. Variability and uncertainty: characterized
using Weibull probability distributions..
Approach based on the cost to finance an appliance
purchase. Primary data source was the Federal Reserve Board’s SCF *** for 1989, 1992, 1995, 1998,
2001, 2004, and 2007.
No change in approach; added data for asset classes.
Standard Compliance Date ..
Water heaters: 2015 .......................................................
DHE and Pool Heaters: 2013.
No change.
* References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the December 2009
NOPR TSD.
** Consisting of the nine U.S. Census Divisions, with four large States (New York, Florida, Texas, and California) treated separately.
*** Survey of Consumer Finances.
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1. Product Price
To calculate consumer product prices,
DOE multiplied the manufacturer
selling prices developed in the
engineering analysis by the supplychain markups described above (along
with sales taxes where appropriate).
DOE used different markups for baseline
products and higher-efficiency
products, because the markups
estimated for incremental costs differ
from those estimated for baseline
models. The estimated product prices at
the considered efficiency levels are
included in Chapter 8 in the TSD.
2. Installation Cost
Installation costs include labor,
overhead, and any miscellaneous
materials and parts. The following
sections discuss DOE’s treatment of
installation costs for each of the three
heating products for the December 2009
NOPR, describe and address significant
comments received, and discuss
changes that DOE made for today’s final
rule.
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a. Water Heaters
In its preliminary analysis, DOE
included several installation costs to
address the space constraints that water
heaters having thicker insulation may
face. DOE assumed that major
modifications for replacement
installations of electric storage water
heaters would occur 40 percent of the
time for water heater designs with 3
inches or greater insulation. To estimate
the fraction of households that would
require various modifications, DOE used
the water heater location determined for
each sample household. DOE
determined the location using
information from the 2005 RECS, which
reports whether the house has a
basement, whether the basement is
heated or unheated, and the presence or
absence of a garage, crawlspace, or attic.
Generally, DOE maintained the above
approach for the December 2009 NOPR.
However, in response to comments on
the space constraints for water heaters
with increased insulation thickness, for
the NOPR analysis, DOE investigated
the issue of space constraints for electric
and gas-fired storage water heaters with
an insulation thickness of 2 inches or
more. Based upon the results of this
inquiry, DOE expanded the percentage
of installations that may have space
constraints to also include water heaters
with 2–3 inches of insulation. DOE
assumed that major modifications for
replacement installations of electric and
gas storage water heaters would occur
20 percent of the time for water heater
designs with 2–3 inches of insulation.
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DOE also added for all water heaters a
cost for extra labor needed to install
water heaters in attics, and for installing
larger water heaters.
Commenting on the December 2009
NOPR analysis, Rheem and Southern
stated that DOE has not adequately
considered the space constraints faced
by manufactured housing, although no
data were provided relevant to this
issue. (Rheem, No. 89 at pp. 11–12;
Southern, No. 90 at pp. 3–4) In
response, DOE reviewed its assumptions
regarding space constraints faced by
manufactured housing, and based on its
assessment of likely water heater
locations from 2005 RECS, it
approximately doubled the fraction of
installations deemed to have space
constraints. These installations would
incur costs as described above to
address the space constraints faced by
water heater designs with more
insulation.
Regarding installation of gas-fired
storage water heaters, A.O. Smith stated
that the need (and cost) to add electrical
power and condensate disposal to
existing installations appears to be
understated in the December 2009
NOPR. (A.O. Smith, No. 76 at p. 4) DOE
notes that the commenter did not
provide any data to support its position.
DOE reviewed the available sources,
which are based on RS Means and
consultant reports, concluded that they
provide a reasonable basis for its
estimates, and therefore it has
maintained the NOPR estimates for the
final rule.
AHRI stated that replacing larger gasfired storage water heaters with
condensing water heaters would require
the added cost of new venting system,
electrical connection, and a condensate
disposal system, and sometimes an
electric supply circuit. (AHRI, No. 91 at
p. 7) Rheem stated that external power
would be required to operate max-tech
gas-fired storage water heaters, that
venting would typically change to a
positive pressure system with plastic
venting, and that condensate lines,
pumps, and proper disposal methods
would be required. (Rheem, No. 89 at
pp. 3–4) For the final rule analysis, DOE
included a range of installation costs for
the condensing water heater design that
include all of the items cited by AHRI
and Rheem.
In its preliminary analysis, DOE
applied a distribution of costs for heat
pump water heater installations in
indoor locations, including situations
where modifications would be required.
In response to comments on the
assumed costs, for the December 2009
NOPR analysis, DOE made a number of
changes, which are discussed below.
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Additional comments on these issues at
the NOPR stage and DOE’s response are
likewise presented below.
In 20 percent of replacement
installations, DOE assumed that a
household facing space constraints
would install a smaller water heater and
use tempering valves. BWC stated that
adjusting the thermostat higher on a
smaller-volume heat pump water heater
and using a tempering valve cannot be
done. It noted that the viable
refrigerants available limit the water
heater to lower temperatures (typically
∼130 °F maximum), and to achieve
temperatures above this level, an
electric resistance element must be
used, which decreases the efficiency of
the water heater. (BWC, No. 61 at p. 2)
Rheem raised similar concerns. (Rheem,
No. 89 at p. 8) DOE finds some merit in
the above comments. Therefore, it
reduced the fraction of installations that
would use a tempering valve to include
only those cases where the water heater
setpoint would not need to exceed 140
°F, as recommended in manufacturer
product literature. DOE assumed that
those households for which the
tempering valve strategy is not viable
would incur significant costs to modify
the space to accommodate the heat
pump water heater.
For the December 2009 NOPR, DOE
assumed that some households that
would experience significant indoor
cooling due to operation of the heat
pump water heater in the heating
months would have a venting system
installed to exhaust and supply air. DOE
estimated that 40 percent of households
facing a significant cooling effect would
incur this cost, which averages $460.
A.O. Smith stated that heat pump water
heaters will not be vented due to the
exorbitant costs of such a venting
system and the fact that the venting will
not fit within the existing studs and will
need to be installed outside the current
wall structure, where it will either be
exposed, or have to be covered with
additional material. (A.O. Smith, No. 76
at p. 3) DOE agrees that the costs of a
venting system could be high in some
cases, but its analysis assumes that
venting will occur in some cases, and
the associated costs are included in its
LCC analysis. DOE also agrees that in
some cases it would be necessary to
install the venting system outside the
wall structure, where the exposed vents
would likely be covered. Therefore, for
the final rule analysis, DOE has
assumed that one-fourth of the venting
system installations would incur an
additional cost (on average $581) for
covering the exposed vents.
For half of indoor replacement
installations, DOE added a cost for
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installing a fully-louvered closet door to
permit adequate air flow for the
operation of the unit. A.O. Smith stated
that putting a louvered door on a closet
will not provide adequate air volume for
a heat pump water heater to function
correctly. (A.O. Smith, No. 76 at p. 3)
Southern raised similar concerns about
closet installations. (Southern, No. 90 at
pp. 3–4) AHRI also commented that heat
pump water heaters installed in
replacement situations may require
costly alterations so that the heat pump
water heater can perform efficiently.
(AHRI, No. 91 at p. 6) DOE agrees that
there are legitimate concerns about the
extent to which installing a louvered
door will provide adequate air flow for
closet installations of heat pump water
heaters. For the final rule analysis, DOE
decreased the fraction of indoor
replacement installations that add a
louvered door. DOE now assumes that
all indoor replacement installations
where the household would face a
significant cooling effect would use a
venting system (costing on average
$469), which would provide adequate
air flow and also alleviate excessive
cooling of the indoor space near the
water heater.
GE stated that DOE overstated the
installation costs for heat pump water
heaters, and claimed that their heat
pump water heater has not required
more labor, larger drain pans, tempering
valves, or closet door redesigns. (GE,
No. 84 at p. 1) DOE’s estimates of
installation costs for heat pump water
heaters seek to account for the full range
of installation situations that might be
faced in all replacements of
conventional electric storage water
heaters. DOE agrees that in many
installations, particularly those not
located indoors, the additional costs
associated with heat pump water heater
installation may be small, and DOE’s
analysis accounts for those installations
as well as those where higher costs may
be incurred. Chapter 8 of the final rule
TSD provides further details about
DOE’s analysis of installation costs for
heat pump water heaters.
For the December 2009 NOPR, DOE’s
design for gas-fired storage water heaters
at efficiency level 2 (0.63 EF for the
representative 40-gallon unit) assumed
natural draft (atmospheric venting)
operation. DOE’s analysis assumed that
installations with water heaters with
recovery efficiency (RE) of 80 percent or
higher (which accounted for a small
fraction of models at 0.63 EF) would use
stainless steel vent connectors. Without
such vent connectors, there is a
potential for corrosion of the vent due
to condensation of flue gases, which can
lead to safety concerns.
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AGA expressed concerns about the
safety of atmospheric venting at
efficiency level 2. AGA referred to
analysis by the Gas Technology Institute
of vent temperatures from water heaters
with high recovery efficiency, and
voiced concern for recovery efficiencies
of 78 percent and higher regarding
condensation and the resulting
corrosive environment in vent
connectors during water heater cycling.
AGA insisted that, for venting integrity
and occupant safety, 100 percent of
installations of units with recovery
efficiency of 78 percent and higher
should include the cost of a stainless
steel vent connector. It added that the
combined concerns of vent connector
corrosion and venting system buoyancy
suggest that the proper vent connector
should be stainless steel Type B. (AGA,
No. 78 at p. 9) A.O. Smith also
expressed concerns that efficiency level
2 could potentially lead to increased
vent corrosion and raise issues that may
require revisiting the venting table in
the National Fuel Gas Code.5 (A.O.
Smith, No. 76 at p. 1)
In response, DOE appreciates the
information provided by AGA regarding
the safety of atmospheric venting at
efficiency level 2. Although there are
several 40-gallon gas-fired water heater
models currently available to consumers
at 0.63 EF that utilize atmospheric
venting and do not have any
instructions directing installers to use
special venting for these products, DOE
believes that the prudent course is to
assume that a stainless steel vent
connector would be required for all
models with RE of 78 percent and
higher. Applying this assumption
resulted in DOE using a cost for a
stainless steel vent connector for 57
percent of installations at efficiency
level 2, for 53 percent of installations at
efficiency level 1, and for 24 percent of
installations at the baseline level. DOE
agrees that there remain issues that may
require revisiting the venting table in
the National Fuel Gas Code, and
discusses these issues in section VI.D.2
below.
b. Direct Heating Equipment
DOE used the approach in the 1993
TSD 6 to calculate installation costs for
5 National Fire Protection Association, National
Fuel Gas Code—2009 Edition. Available at: https://
www.nfpa.org/AboutTheCodes/AboutTheCodes
.asp?DocNum=54.
6 U.S. Department of Energy—Office of Codes and
Standards, Technical Support Document: Energy
Efficiency Standards for Consumer Products: Room
Air Conditioners, Water Heaters, Direct Heating
Equipment, Mobile Home Furnaces, Kitchen Ranges
and Ovens, Pool Heaters, Fluorescent Lamp Ballasts
& Television Sets, 1993. Washington, DC. Vol. 1 of
3. Report No. DOE/EE–0009.
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baseline direct heating equipment for its
December 2009 NOPR analysis, as it
believed that the factors affecting DHE
installation are largely unchanged, and
more recent data are not available. For
gas wall gravity, floor, and room direct
heating equipment, DOE included
installation costs for designs that require
electricity (the average cost is $181).
DOE made this adjustment for the
replacement market only, because
wiring is considered part of the general
electrical work in new construction.
LTS commented that the proposed
standards for the gravity wall furnace
category (71-percent AFUE for furnaces
in the input capacity range over 27,000
and up to 46,000 Btu/h) would not
allow the product to keep the same
characteristics, particularly cabinet size
and combustion chamber sizes. The
commenter claims that with a bigger
cabinet and heat exchanger dimensions,
installation would require more
carpenter work, possible drywall work,
and, in some cases, changing or
replacing the vent. According to LTS,
these changes would be in addition to
providing an electrical port. (LTS, No.
56.7 at pp. 1–2)
In response, DOE found that gravity
wall furnaces that have dimensions to
fit in replacement applications are
currently available on the market with
efficiencies ranging from 64-percent to
69-percent AFUE in the representative
capacity range. There are currently no
71-percent or 72-percent AFUE models
within the representative capacity range
offered by any of the manufacturers.
DOE agrees that models at 71-percent or
72-percent AFUE are likely to have
larger dimensions and/or include
electronic ignition, either of which
would require an additional installation
cost. As discussed in section IV.C.2.b,
for the final rule, DOE decided to
remove the 71-percent and 72-percent
AFUE levels from its analysis. DOE
introduced the 70-percent AFUE level,
which it believes has the necessary
dimensions to fit in replacement
applications. This level includes
electronic ignition, and DOE included a
cost for installation of electrical wiring.
Regarding gas wall fan type DHE,
AHRI commented that adding to the
heat exchanger to increase efficiency
would make the upright models bigger,
such that they may not be able to fit in
the same space as the unit they are
replacing. The result could be added
installation costs. For the max-tech level
for gas wall fan type DHE (80-percent
AFUE), DOE added carpentry cost for
cutting and repairing the wall to
increase the dimensions of the wall
opening for a fraction of installations.
That fraction also takes into account
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that some installations are ‘‘console
units’’ and do not have this issue, and
that some upright installations are not
installed inside the wall and, therefore,
do not have this issue.
c. Pool Heaters
DOE developed installation cost data
for the baseline pool heater in its
December 2009 NOPR analysis using RS
Means and information in a consultant’s
report. DOE incorporated additional
installation costs for designs involving
electronic ignition and/or condensing
technology.
In the December 2009 NOPR analysis,
DOE included a cost for adding
electricity at efficiencies above 82
percent (which use electronic ignition
only) for installations where the unit
currently uses a pilot light. For the
December 2009 NOPR, DOE estimated
that 26.5 percent of installations would
incur this cost. Raypak stated that 8
percent of pool heaters are millivolt
pool heaters (i.e., use a pilot light), and
the cost of adding electricity is not
insignificant. (Raypak, No. 67 at p. 2)
For the final rule, DOE has adopted the
8-percent value provided by Raypak to
estimate the fraction of installations that
would require addition of electricity at
efficiencies above 82 percent. For
further details on DOE’s derivation of
installation costs for pool heaters, see
chapter 8 of the TSD.
jlentini on DSKJ8SOYB1PROD with RULES2
3. Annual Energy Use
DOE determined the annual energy
use in the field for the three types of
heating products as described above in
section IV.E.
4. Energy Prices
For the December 2009 NOPR
analysis, DOE derived average energy
prices for 13 geographic areas consisting
of the nine U.S. Census Divisions, with
four large States (New York, Florida,
Texas, and California) treated
separately. For Census Divisions
containing one of these large States,
DOE calculated the regional average
excluding the data for the large State.
DOE estimated residential electricity
prices for each of the geographic areas
based on data from EIA Form 861,
‘‘Annual Electric Power Industry
Database,’’ and EIA Form 826, ‘‘Monthly
Electric Utility Sales and Revenue Data.’’
DOE calculated average annual regional
residential electricity prices as well as
average monthly regional electricity
prices. For the December 2009 NOPR,
DOE used data from 2007. For the final
rule analysis, DOE used more recent
2008 data from the same sources.
DOE estimated average annual
residential natural gas prices in each of
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the 13 geographic areas based on data
from EIA’s Natural Gas Navigator.7 For
the December 2009 NOPR, DOE used
EIA data from 2007. For today’s final
rule, DOE used more recent 2008 data
from the same source.
DOE estimated average residential
prices for liquefied petroleum gas (LPG)
in each of the 13 geographic areas based
on data from EIA’s State Energy
Consumption, Price, and Expenditures
Estimates.8 For the December 2009
NOPR, DOE used data from 2006. For
today’s final rule, DOE used the more
recent 2007 data from the same source.
DOE estimated average residential
prices for oil in each of the 13
geographic areas based on data from
EIA’s Petroleum Navigator.9 For the
December 2009 NOPR, DOE used data
from 2007. For today’s final rule, DOE
used more recent 2008 data from the
same source.
5. Energy Price Trend
To estimate the trends in electricity
prices for the December 2009 NOPR,
DOE used the regional price forecasts in
the 2009 Annual Energy Outlook (AEO
2009) April Release.10 To arrive at
prices in future years, DOE multiplied
the average prices described above by
the forecast of annual average price
changes in each region. Because the
AEO 2009 forecasts prices only to 2030,
DOE followed past guidelines provided
to the Federal Energy Management
Program by EIA and used the average
rate of change during 2020–2030 to
estimate the price trends beyond 2030.
For today’s final rule, DOE updated its
analysis to use the price forecasts in the
AEO 2010 Early Release, which
includes price forecasts until 2035. DOE
used the average rate of change from
2025 to 2035 to estimate price trends
beyond 2035.
The spreadsheet tools used to conduct
the LCC and PBP analysis allow users to
select either the AEO’s high-price case
or low-price case price forecasts to
estimate the sensitivity of the LCC and
PBP to different energy price forecasts.
The AEO 2009 April Release and AEO
2010 Early Release only provide
forecasts for the Reference Case.
Therefore, for the December 2009
7 See Energy Information Administration, Natural
Gas Navigator (2009). Available at: https://tonto.eia.
doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm.
8 See Energy Information Administration, 2007
State Energy Consumption, Price, and Expenditure
Estimates (SEDS). Available at: https://
www.eia.doe.gov/emeu/states/_seds.html.
9 See Energy Information Administration,
Petroleum Navigator, December (2009). Available
at: https://tonto.eia.doe.gov/dnav/pet/pet_cons_
821dsta_a_EPD0_VAR_Mgal_a.htm.
10 All AEO publications are available online at:
https://www.eia.doe.gov/oiaf/aeo/.
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NOPR, DOE used the AEO 2009 March
Release high-price or low-price forecasts
directly to estimate high-price and lowprice trends. For today’s final rule, DOE
updated the low-price and high-price
forecasts to be based on the ratio
between the AEO 2009 March Release
low- or high-price forecasts and the AEO
2009 March Release reference case. DOE
then applied these ratios to the AEO
2010 Early Release reference case to
construct its high-price and low-price
forecasts. DOE did not receive any
substantive comments on its forecast of
energy price trends. Thus, DOE retained
the same approach for the final rule.
6. Repair and Maintenance Costs
Repair costs are associated with
repairing or replacing components that
have failed in the appliance, whereas
maintenance costs are associated with
maintaining the operation of the
equipment. Determining the repair cost
involves determining the cost and the
service life of the components that are
likely to fail. Addressing water heaters,
A.O. Smith commented that the repair
and maintenance costs presented in the
December 2009 NOPR are reasonably
accurate. (A.O. Smith, No. 76 at p. 4)
For more information on DOE’s
development of repair and maintenance
cost estimates, see chapter 8 of the TSD.
For the December 2009 NOPR
analysis, DOE assumed that there would
be some instances where professional
maintenance would be needed for heat
pump water heaters. For some locations
where the heat pump water heater might
be more exposed to the outdoor
environment, such as garages and
crawlspaces, DOE applied a 5-year
preventative maintenance cost based on
experience with heat pump water heater
outdoor installations in Australia,
which has roughly comparable
conditions to much of the United States.
Commenting on the December 2009
NOPR, BWC stated that heat pump
water heaters are installed with an
optional component and that the repair
and maintenance costs of the optional
components were not taken into
account, although the commenter
provided no specific information
regarding the nature or prevalence of
such optional components. (BWC, No.
61 at p. 3) Daikin stated that heat pump
water heaters generally do not require
maintenance for the first 10 years of
operation. (Daikin, No. 82 at p. 2) GE
stated that the maintenance cost for heat
pump water heaters is overstated. (GE,
No. 84 at p. 1) In response, DOE
acknowledges that many heat pump
water heaters may require little or no
maintenance. However, DOE believes
that because the field experience with
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heat pump water heaters is limited, it is
reasonable to apply a maintenance cost
for some installations. DOE assumed
that optional components, which are an
addition to the water heater, are not
uniformly applicable, and thus, it did
not include them in its analysis.
Therefore, for the reasons above, DOE
has retained the approach to repair and
maintenance costs used for the
December 2009 NOPR for the final rule.
The approach also accounts for repair or
replacement of common components
such as heating elements, fans, and
compressors.
jlentini on DSKJ8SOYB1PROD with RULES2
7. Product Lifetime
DOE used a variety of sources to
establish minimum, average, and
maximum values for the lifetime of each
of the three types of heating products.
For each water heater product class and
for DHE and pool heaters, DOE
characterized the product lifetime using
a Weibull probability distribution that
ranged from minimum to maximum
lifetime estimates. See chapter 8 of the
December 2009 NOPR TSD for further
details on the sources DOE used to
develop product lifetimes.
a. Water Heaters
For the December 2009 NOPR
analysis, DOE used an average lifetime
of 13 years for gas-fired, electric, and
oil-fired storage water heaters. DOE did
not receive any comments on this value,
and it continued to use it for the final
rule.
For the December 2009 NOPR
analysis, DOE used an average lifetime
of 20 years for gas-fired instantaneous
water heaters. A.O. Smith stated that a
20 year lifetime for gas-fired
instantaneous water heaters is too long,
and is largely based on manufacturers’
literature or advertising claims. It
referred to its experience with
commercial water heating equipment
that uses a similar copper-tube type heat
exchanger as gas-fired instantaneous
water heaters and similar input
combustion systems of around 200,000
Btu/h, and the commenter concluded
that the same service life (i.e., 13 years)
as a tank-type heater should be used for
gas-fired instantaneous water heaters.
(A.O. Smith, No. 76 at pp. 4–5)
DOE acknowledges that, given that
long-term field experience with gasfired instantaneous water heaters is
relatively limited, there is uncertainty
regarding the lifetime of these products.
Furthermore, the lifetime is influenced
by maintenance practices. The 20-year
mean lifetime used by DOE is primarily
based on the value reported in the
National Association of Home Builders/
Bank of America Home Equity Study of
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Life Expectancy of Home Components,
which is 20+ years.11 Regarding the
analogy between gas-fired instantaneous
water heaters and commercial water
heating equipment mentioned by A.O.
Smith, DOE notes that the usage
patterns in residential applications are
different (e.g., less hot water use), and
these patterns have a significant impact
on the lifetime. Given the available data,
DOE decided to retain the mean lifetime
of 20 years for the final rule analysis.
b. Direct Heating Equipment
For the December 2009 NOPR
analysis, DOE used an average lifetime
of 15 years for DHE. DOE did not
receive any comments on this value,
and it continued to use it for the final
rule.
c. Pool Heaters
For the December 2009 NOPR
analysis, DOE used an average lifetime
of 8 years for pool heaters. In the public
meeting, Lochinvar stated that pool
heaters live longer than 6–8 years.
(Lochinvar, Public Meeting Transcript,
No. 57.4 at p. 224) For the final rule,
DOE subsequently reviewed information
provided by an expert consultant and
based upon this information, decided to
use a mean lifetime of 10 years for pool
heaters, with the same distribution as in
the December 2009 NOPR analysis (3 to
20 years).
8. Discount Rates
For the December 2009 NOPR, DOE
developed separate distributions of
discount rates for new construction and
replacement applications. Because the
cost of heating products installed in
new homes is part of the home selling
price, DOE estimated discount rates for
appliance purchases in new housing
using the effective real mortgage rate for
homebuyers, which accounts for
deducting mortgage interest for income
tax purposes. DOE developed a
distribution of mortgage interest rates
using data from the Federal Reserve
Board’s ‘‘Survey of Consumer Finances’’
(SCF) for 1989, 1992, 1995, 1998, 2001,
2004, and 2007.12 Because the mortgage
rates carried by households in these
years were established over a range of
time, DOE believes they are
representative of rates that may apply
when amended standards take effect.
The effective real interest rates on
11 National Association of Home Builders
(NAHB), ‘‘Study of Life Expectancy of Home
Components’’ (Feb. 2007). Available at: https://
www.nahb.org/fileUpload_
details.aspx?contentID=99359.
12 The Federal Reserve Board, Survey of
Consumer Finances 1989, 1992, 1995, 1998, 2001,
2004, 2007. Available at: https://www.federalreserve
.gov/pubs/oss/oss2/scfindex.html.
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20159
mortgages across the seven surveys
averaged 3.0 percent.
DOE’s approach for deriving discount
rates for replacement purchases
involved identifying all possible debt or
asset classes that might be used to
purchase replacement products,
including household assets that might
be affected indirectly. DOE used data
from the surveys mentioned above to
estimate the average percentages of the
various debt and equity classes in the
average U.S. household portfolios. DOE
used SCF data and other sources to
develop distributions of interest or
return rates associated with each type of
equity and debt. For the final rule, it
added 2009 values for interest or return
rates to the distributions for some of the
asset classes. The resulting average rate
across all types of household debt and
equity, weighted by the shares of each
class, is 5.1 percent.
DOE did not receive any comments on
the discount rates it used in the LCC
analysis, and it continued to apply the
approach used in the December 2009
NOPR, with the updates discussed
above, for the final rule.
9. Compliance Date
In the context of EPCA, the
compliance date is the future date when
parties subject to the requirements of a
new standard must begin to comply. As
described in DOE’s semi-annual
Implementation Report for Energy
Conservation Standards Activities
submitted to Congress pursuant to
section 141 of the Energy Policy Act of
2005 and section 305 of the Energy
Independence and Security Act of
2007,13 a final rule for the three types
of heating products that are the subject
of this rulemaking is scheduled to be
completed by March 2010. Compliance
with amended energy efficiency
standards for direct heating equipment
and pool heaters is required three years
after the final rule is published in the
Federal Register (in 2013); compliance
with amended standards for water
heaters is required five years after the
final rule is published (in 2015).
Comments on the compliance date for
the three types of heating products are
presented and responded to in section
V.B of this final rule. DOE calculated
the LCC for the three types of heating
products as if consumers would
purchase new products in the year
compliance with the standard is
required.
13 Available at: https://www1.eere.energy.gov/
buildings/appliance_standards/pdfs/2010_feb_
report_to_congress.pdf.
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10. Product Energy Efficiency in the
Base Case
To accurately estimate the percentage
of consumers who would be affected by
a particular standard level, DOE’s
analysis considered the projected
distribution of product efficiencies that
consumers purchase under the base case
(i.e., the case without new energy
efficiency standards). DOE refers to this
distribution as a base-case efficiency
distribution. Using the projected
distribution of product efficiencies for
each heating product, DOE randomly
assigned a specific product efficiency to
each sample household. If a household
was assigned a product efficiency
greater than or equal to the efficiency of
the standard level under consideration,
the LCC calculation shows that this
household is not affected by that
standard level.
To estimate the base-case market
shares of various energy efficiency
levels for water heaters in the
compliance year, DOE began with data
on shipments for 2002–2006 from AHRI,
supplemented with data on the number
of water heater models at different
energy efficiency levels reported in
AHRI Directories. (See chapter 8 of the
TSD for citations for these data sources.)
For the final rule, DOE updated its
estimates using the February 2010 AHRI
Directory. To estimate the base-case
market shares of gas-fired and electric
storage water heaters, DOE considered
the market penetration goals set by the
ENERGY STAR program, in
combination with its assessment of
constraints on such penetration. The
projected base-case energy efficiency
market shares for water heaters that
DOE used for the final rule, shown in
Table IV.24, are half of the ENERGY
STAR goal for heat pump water heaters
(EF of 2.0 and 2.2), and one-fifth of the
ENERGY STAR goal for gas-fired
condensing water heaters (EF of 0.77).
These market shares represent the
products that households would
purchase in 2015 in the absence of
revised energy conservation standards.
TABLE IV.24—WATER HEATERS: BASE-CASE ENERGY EFFICIENCY MARKET SHARES*
Gas storage
Electric storage
Market
share (%)
EF
0.59
0.62
0.63
0.64
0.65
0.67
0.77
..................................................................................
..................................................................................
..................................................................................
..................................................................................
..................................................................................
..................................................................................
..................................................................................
63.9
23.4
1.6
4.8
0.0
5.3
1.0
EF
0.90
0.91
0.92
0.93
0.94
0.95
2.0
2.2
100%
Market
share (%)
29.8
16.8
11.2
26.1
7.5
3.7
4.0
1.0
Oil storage
Gas-fired
instantaneous
Market
share (%)
EF
0.53
0.54
0.56
0.58
0.60
0.62
0.66
0.68
100%
0.0
20.0
0.0
0.0
10.0
20.0
25.0
25.0
100%
EF
0.62
0.69
0.78
0.80
0.82
0.84
0.85
0.92
0.95
Market
share (%)
1.0
2.9
1.0
4.9
52.4
1.9
3.9
20.4
11.7
100%
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* The base-case market shares of each product class are estimated in the shipment analysis, as described in chapter 9 of the final rule TSD.
For DHE, DOE estimated the market
shares of different energy efficiency
levels within each product class in the
base case using data in the AHRI
Directory. For the final rule, DOE
updated its estimates using the February
2010 AHRI Directory, and for hearth
products, DOE also consulted
manufacturers’ Web sites in addition to
the 2010 AHRI Directory (see chapter 8
of the TSD for the citation and detailed
information). For pool heaters, DOE
estimated the market shares of different
energy efficiency levels in the base-case
by using 2008 data from the Federal
Trade Commission (FTC) on the number
of gas-fired pool heater models at
different energy efficiency levels as a
proxy for shipments. For the final rule,
DOE updated its estimates using 2009
FTC data.
DOE did not receive any comments on
its estimation of base-case energy
efficiency market shares for the three
types of heating products. For further
information on DOE’s estimation of
base-case market shares, see chapter 8 of
the TSD.
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11. Inputs to Payback Period Analysis
The payback period is the amount of
time it takes the consumer to recover the
additional installed cost of moreefficient products, compared to baseline
products, through energy cost savings.
For these calculations, DOE uses a
simple payback period, which does not
account for changes in operating
expense over time or the time value of
money. Payback periods are expressed
in years. Payback periods that exceed
the life of the product mean that the
increased total installed cost is not
recovered in reduced operating
expenses.
The inputs to the PBP calculation are
the total installed cost of the equipment
to the customer for each efficiency level
and the annual (first-year) operating
expenditures for each efficiency level.
The PBP calculation uses the same
inputs as the LCC analysis, except that
energy price trends and discount rates
are not needed. DOE did not receive any
comments on its methodology for the
payback period analysis.
As noted above, EPCA, as amended,
establishes a rebuttable presumption
that a standard is economically justified
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if the Secretary finds that the additional
cost to the consumer of purchasing a
product complying with an energy
conservation standard level will be less
than three times the value of the energy
(and, as applicable, water) savings
during the first year that the consumer
will receive as a result of the standard,
as calculated under the test procedure
in place for that standard. (42 U.S.C.
6295(o)(2)(B)(iii)) For each TSL, DOE
determined the value of the first year’s
energy savings by calculating the
quantity of those savings in accordance
with the applicable DOE test procedure,
and multiplying that amount by the
average energy price forecast for the
year in which compliance with the
amended standard would be required.
Results of DOE’s payback period
analysis, including both the rebuttable
presumption analysis and the payback
period analysis considering all of the
relevant statutory factors, are discussed
in section VI.
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G. National Impact Analysis—National
Energy Savings and Net Present Value
Analysis
1. General
DOE’s National Impact Analysis (NIA)
assesses the national energy savings
(NES) and the national net present value
(NPV) of total consumer costs and
savings expected to result from
standards at specific efficiency levels.
DOE applied the NIA spreadsheet to
calculate NES and NPV, using the
annual energy consumption and total
installed cost data from the LCC
analysis. DOE forecasted the energy
savings, energy cost savings, equipment
costs, and NPV for each product class
from 2013 through 2043 for DHE and
pool heaters, and from 2015 through
2045 for water heaters. The forecasts
provide annual and cumulative values
for all four parameters. In addition, DOE
incorporated into its NIA spreadsheet
the capability to analyze the sensitivity
of the results to forecasted energy prices
20161
and equipment efficiency trends. Table
IV.25 summarizes the approach and
data DOE used to derive the inputs to
the NES and NPV analyses for the
December 2009 NOPR, and also
summarizes the changes DOE made for
today’s final rule. These changes are
described in the following sections, and
more details are available in chapter 10
of the final rule TSD. Comments on the
NIA, as presented in the December 2009
NOPR, and DOE’s response are
presented in the sections that follow.
TABLE IV.25—APPROACH AND DATA USED FOR THE NATIONAL IMPACTS ANALYSIS
Inputs
NOPR
Shipments ................................................
Compliance Date of Standard .................
Annual shipments from shipments model .............
Water Heaters: 2015 .............................................
DHE and Pool Heaters: 2013.
Efficiency market shares estimated for compliance year. Sales-weighted energy factor
(SWEF) remains constant except for gas and
electric water heaters, for which SWEF increases slightly over forecast period.
‘‘Roll-up’’ scenario used for determining SWEF in
2013 (or 2015) for each standards case.
SWEF remains constant except for gas and
electric water heaters, for which SWEF increases slightly over forecast period.
Annual weighted-average values as a function of
SWEF.
Water heaters: 10% ..............................................
DHE: 15%.
Pool Heaters: 10%.
Annual weighted-average values as a function of
SWEF.
Annual weighted-average values a function of the
annual energy consumption per unit and energy (and water) prices.
Annual values are a function of efficiency level ...
Base-Case Forecasted Efficiencies .........
Standards-Case Forecasted Efficiencies
Annual Energy Consumption per Unit .....
Rebound Effect ........................................
Total Installed Cost per Unit ....................
Energy Cost per Unit ...............................
Repair Cost and Maintenance Cost per
Unit.
Escalation of Energy Prices ....................
Energy Site-to-Source Conversion Factor
Discount Rate ..........................................
Present Year ............................................
Changes for the final rule
AEO2009 forecasts (to 2030) and extrapolation
to 2043 (and 2045).
Varies yearly and is generated by DOE/EIA’s
NEMS.
Three and seven percent real ...............................
Future expenses are discounted to 2010, when
the final rule will be published.
2. Shipments
The shipments portion of the NIA
spreadsheet is a model that uses
historical data as a basis for projecting
future shipments of the appliance
products that are the subject of this
rulemaking. In projecting shipments for
water heaters and pool heaters, DOE
accounted for two market segments: (1)
New construction and (2) replacement
of failed equipment. Data were
unavailable to develop separate
forecasts of direct heating equipment
shipments for replacement and new
home installations, so the forecast was
based on the time series of historical
total shipments developed for each
product class.
See table IV.4.
No change.
No change in approach; updated efficiency market shares for water heaters and DHE estimated for compliance year.
No change in approach.
No change.
No change.
No change.
No change.
No change.
Updated using AEO2010 (Early Release) forecasts.
No change.
No change.
No change.
Table IV.26 summarizes the approach
and data DOE used to derive the inputs
to the shipments analysis for the
December 2009 NOPR analysis, and the
changes DOE made for today’s final
rule, based on public comments. A
discussion of these inputs and changes
follows. For details on the shipments
analysis, see chapter 9 of the TSD.
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TABLE IV.26—APPROACH AND DATA USED FOR THE SHIPMENTS ANALYSIS
Inputs
NOPR analysis
Changes for the final rule
Historical Shipments ................................
Water Heaters: Data provided by AHRI ................
Water Heaters: Used new data for GIWH for
2008 and 2009.
DHE: Derived new data based on manufacturer
input.
DHE: Data provided by AHRI and DOE estimates, and data from manufacturers and the
trade association for hearth products.
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TABLE IV.26—APPROACH AND DATA USED FOR THE SHIPMENTS ANALYSIS—Continued
Inputs
NOPR analysis
New Construction Shipments ..................
Replacements ..........................................
Changes for the final rule
Pool Heaters: Data from 1993 TSD, inputs from
manufacturers, and DOE estimates.
For water heaters and pool heaters, determined
by multiplying housing forecasts by forecasted
saturation of products in new housing.
Housing forecasts based on AEO2009 projections.
New housing product saturations based on American Housing Survey for water heaters, consultant data for pool heaters.
For water heaters and pool heaters, determined
by tracking total product stock by vintage and
establishing the failure of the stock using retirement functions from the LCC and PBP analysis. For pool heaters, included estimated nonreplacement of some pool heaters.
Pool Heaters: Used data provided by manufacturers trade association.
No change in approach. New housing forecast
updated with AEO2010 projections.
To determine new construction
shipments, DOE used forecasts of
housing starts coupled with estimates of
product market saturation in new
housing. For the preliminary analysis,
DOE used actual data for 2008 for new
housing completions and mobile home
placements and adopted the projections
from AEO2009 for 2009 to 2030. DOE
updated its new housing projections for
today’s final rule using AEO2010 Early
Release, which provides projections
from 2010 to 2035. DOE kept
completions constant after 2035. DOE
estimated replacements using historical
shipments data and product retirement
functions that it developed from
product lifetimes. Table IV.27 provides
a summary of total shipments in 2009
for residential water heaters, direct
heating equipment, and pool heaters.
TABLE IV.27—RESIDENTIAL WATER
HEATERS, DIRECT HEATING EQUIPMENT AND POOL HEATERS SHIPMENTS (2009)
Total shipments
(million)
Residential Water Heaters
Gas-fired Storage .......................
Electric Storage ..........................
Oil-fired Storage .........................
Gas-fired Instantaneous .............
3.76
3.75
* 0.031
* 0.384
jlentini on DSKJ8SOYB1PROD with RULES2
Direct Heating Equipment
Gas
Gas
Gas
Gas
Gas
Wall Fan ..............................
Wall Gravity ........................
Floor ....................................
Room ..................................
Hearth .................................
* 0.030
* 0.103
* 0.003
* 0.020
* 0.286
Pool Heaters
Gas-fired .....................................
0.118
* Estimated.
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No change.
a. Water Heaters
For the December 2009 NOPR
analysis, DOE used information on
choice of water heater products in
recently-built housing to estimate
shipments of each product class to the
new construction market. DOE
calculated the average market shares of
water heaters using a particular fuel in
new homes during 2000 to 2008, and
assumed that these shares would hold
throughout the forecast period. AGA
stated that DOE should not fix market
shares, and should realize that
increasing disparity between gas and
electric installed cost will exacerbate a
trend away from gas-fired units. (AGA,
No. 78 at pp. 7–8) In response, DOE
notes that its data on water heater
choice in new homes does not show a
clear trend away from gas-fired units
during the period from 2000 to 2008 (as
documented in chapter 9 of the TSD),
nor did AGA provide any data to
substantiate such a trend. DOE
recognizes that future market dynamics
may result in changes from the average
pattern seen in 2000 to 2008, but DOE
does not have sufficient information to
forecast the various factors that affect
water heater choice in new homes.
Therefore, DOE has retained the
approach used in the December 2009
NOPR analysis for the final rule.
The shipments model assumes that
when a unit using a particular fuel is
retired, it generally is replaced with a
unit that uses the same fuel. Section
IV.G.2.d discusses the potential effects
of energy conservation standards on
choice of water heater product in the
new construction and replacement
markets.
For its shipments forecast for gas-fired
storage water heaters and electric
storage water heaters, DOE assumed that
the current market shares of small-
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volume products (20 to 55 gallons rated
storage volume) and large-volume
products (over 55 gallons rated storage
volume) would remain the same
throughout the forecast period. The
shipments market shares for largevolume products are 4 percent for gasfired storage water heaters and 9 percent
for electric storage water heaters.
Within the category of gas-fired water
heaters, DOE disaggregated the shares of
gas storage water heaters and gas-fired
instantaneous water heaters based on
projections of total shipments of gasfired instantaneous water heaters.
Because there is much uncertainty about
the future growth of gas-fired
instantaneous water heaters, DOE
modeled scenarios of their market
penetration based on experience with
gas-fired instantaneous water heaters in
Australia, where the proportion of
instantaneous water heaters in total gasfired storage water heater shipments has
grown considerably in the past decade.
(See chapter 9 of the TSD for
information on the past and projected
market penetration in Australia.)
Commenting on the December 2009
NOPR approach, AHRI stated that the
experience of gas-fired instantaneous
water heaters in Australia is too
dissimilar to the U.S. market to be used
to predict future U.S. shipments. (AHRI,
No. 91 at p. 3) Rheem stated that the
Australian market was primarily based
on outdoor installations, and was
influenced by local government
programs. (Rheem, No. 89 at p. 13) A.O.
Smith stated that in 2009, gas-fired
instantaneous water heater shipments
will be about 9.4 percent of the total gas
market, not 20 percent as the DOE
forecast suggests. A.O. Smith estimated
a more moderate growth curve for gasfired instantaneous water heaters,
growing to 13–15 percent of the gas
market, consistent with DOE’s low-
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penetration scenario. Moreover, A.O.
Smith stated that this level will not be
reached for 5–7 years, unlike the DOE
forecast of 1–2 years. (A.O. Smith, No.
76 at p. 5)
In response, DOE acknowledges the
uncertainty associated with basing its
forecasted market penetration of gasfired instantaneous water heaters on the
Australian experience, but it believes
that there is no other market that could
provide an approximate model for
forecasting U.S. market penetration. In
making use of the Australian
experience, DOE’s December 2009
NOPR analysis took into account some
of the differences between the two
markets that would tend to cause
shipments growth to be lower in the
U.S. In response to the comments from
A.O. Smith, however, DOE made
modifications to its approach for the
final rule. First, it incorporated A.O.
Smith’s estimated market share for 2009
(as well as data it provided on the actual
share in 2008). Second, based on the
new data on shipments, DOE
significantly moderated the growth
curve for gas-fired instantaneous water
heater market penetration such that the
rise is less steep than had been assumed
for the December 2009 NOPR. Because
of broad similarities between the U.S.
and Australian water heating markets,
DOE continued to use scenarios of
market penetration that are partly based
on the Australian experience for the
final rule. Differences in retail prices
and installation costs for instantaneous
water heaters, as well as in government
incentives, suggest that the growth in
the U.S. market will be less strong than
in Australia. However, DOE believes
that the rapid growth seen in the U.S.
before 2008, together with the
reputation of instantaneous gas-fired
water heaters as an energy-efficient
water heating option suggest that the
ultimate market penetration may be
higher than 13 to 15 percent of the gas
water heating market. Therefore, DOE
estimated that the U.S. market share
(i.e., 28 percent) approaches a level
equal to half of the Australian level (i.e.,
56 percent) by around 2025. Chapter 9
of the TSD presents more details on
DOE’s projection.
b. Direct Heating Equipment
To estimate historical shipments of
direct heating equipment for the
December 2009 NOPR analysis, DOE
used two sets of data from AHRI and
information from the 1993 TSD. As
noted above, data were unavailable to
develop separate forecasts of direct
heating equipment shipments for
replacement and new home
installations, so DOE based the forecast
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on the time series of historical total
shipments developed for each product
class, along with assumptions regarding
future trends. For gas hearth DHE
shipments, the forecast used for the
December 2009 NOPR related shipments
to projected new housing completions.
AHRI stated that the December 2009
NOPR assumption that future shipments
of traditional DHE (i.e., all of the
product classes except gas hearth DHE)
will be flat is unrealistically optimistic
and contrary to the last 30 years of
shipment history. The commenter stated
that this is a declining market not only
because these products are sold
primarily as replacements, but also
because in some cases, the failing unit
is replaced not with a similar model but
rather with a vented fireplace heater.
AHRI recommended that, at a
minimum, the shipment forecast for
traditional DHE use a 30-percent
decrease over the next 30 years. (AHRI,
No. 91 at p. 11) In response, for the final
rule analysis, DOE modified its forecast
such that total shipments of traditional
DHE decrease by 30 percent between
2005 and 2042. The modification of the
shipments forecast for each of the four
traditional DHE product classes is
described in chapter 9 of the TSD.
c. Pool Heaters
To forecast pool heater shipments for
new construction for the December 2009
NOPR analysis, DOE multiplied the
annual housing starts forecasted for
single-family and multi-family housing
by the estimated saturation of gas-fired
pool heaters in recently built new
housing. For replacement pool heaters,
DOE used a survival function based on
its distribution of product lifetimes to
determine when a unit fails. In addition,
DOE assumed that some households
would not replace their pool heater
when it fails due to cost considerations.
DOE also introduced a market segment
representing purchases by existing
households that had not owned a pool
heater. These first-time owners include
existing households that have a pool
and those that install one.
The Association of Pool and Spa
Professionals (APSP) stated that DOE’s
data on pool heater shipments are
overstated, and they submitted
shipments data for 2003–2009. (APSP,
No. 64 at p. 1) AHRI made similar
comments. (AHRI, No. 91 at p. 8) DOE
appreciates the information provided by
APSP. For the final rule, it used the data
for 2003–2009 as a basis for its
shipments forecast.
Raypak stated that the pool heater
forecasts are overstated, and that DOE’s
projection of a huge recovery in firsttime pool owners is inaccurate, because
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20163
of the significant reduction in property
values and more difficult access to
credit. (Raypak, Public Meeting
Transcript, No. 57.4 at pp. 258–259)
AHRI stated that DOE did not recognize
the increasing sales of electric heat
pump pool heaters, which will reduce
the shipments of gas-fired pool heaters.
(AHRI, No. 91 at p. 9) In response, DOE
notes that incorporating the new data
for 2003–2009 reduces the forecast of
future shipments. DOE agrees with
Raypak regarding first-time pool owners
and reduced the number of such
installations in the early years of its
forecast. DOE was not able to consider
the impact of heat pump pool heaters as
well as electric resistance pool heaters
on the market because shipments data
were not available. Furthermore, DOE
did not include electric pool heaters in
the current rulemaking for reasons
explained in the NOPR. 74 FR 65852,
65866 (Dec. 11, 2009). Finally, DOE
notes that the longer pool heater lifetime
used for the final rule (as described in
section IV.F.7.c) results in fewer
replacement shipments.
d. Impact of Standards on Shipments
i. Water Heaters
To the extent that energy conservation
standards result in an increase in the
price of a specific type of water heater
compared to a competing product, some
consumers (or home builders in the case
of shipments for new construction) may
purchase the competing product. The
consumer or builder decision is not
solely based on economic factors, as the
availability of a natural gas supply plays
a key role. Evaluation of this decision
requires an assessment of the specific
factors that influence it in the context of
the two main markets for water heaters,
replacements and new homes.
In the December 2009 NOPR analysis,
DOE determined that the greatest
potential for product switching would
exist in the case of a standard that
effectively required an electric heat
pump water heater. This type of product
often has a substantially higher installed
cost than a typical electric resistance
storage water heater and is relatively
new to consumers and builders. Because
the product choice decision partially
depends on the relative costs of
competing products, DOE considered
three potential combinations that could
result from standards: (1) Electric heat
pump water heater and a gas-fired
storage water heater using natural draft;
(2) electric heat pump water heater and
a gas-fired storage water heater using
power vent; and (3) electric heat pump
water heater and a gas-fired storage
water heater using condensing
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technology. DOE used data from the
2005 RECS to estimate the percentage of
households expected to purchase an
electric water heater in the base case
that could switch to gas-fired water
heater because they had the necessary
infrastructure. To estimate how many of
these households would switch to gasfired water heaters, DOE considered the
difference in installed cost between the
gas-fired storage water heater and an
electric heat pump water heater in each
of the combinations listed above. The
estimated fraction of households using
an electric storage water heater
estimated to switch to a gas-fired storage
water heater instead of installing a heat
pump water heater ranges from zero
with a standard level for gas-fired
storage water heaters that require
condensing technology, to 9 percent
with a standard level for gas-fired
storage water heaters that require power
vent technology.
DOE did not quantify the potential for
switching to gas water heating in the
case of a standard that requires 0.95 EF
for some or all electric water heaters, as
the installed cost is only moderately
higher than the baseline electric water
heater (0.90 EF). DOE judged that this
increase would not be sufficient to
prompt consumers to consider
switching to gas water heating, given the
higher cost of a gas water heater and the
fact that such switching would usually
require installation of a venting system,
which adds significant cost.
Commenting on DOE’s December
2009 NOPR analysis, A.O. Smith stated
that there will not be appreciable fuel
switching in retrofits. (A.O. Smith, No.
76 at p. 4) GE stated that fuel switching
is impractical for most consumers. (GE,
No. 84 at p. 2) The American Public
Power Association (APPA) stated that
TSL 3 and TSL 4 would not likely
induce fuel switching, but higher TSLs
would. (APPA, No. 92 at p. 4) Rheem
stated that TSL 6 (i.e., requiring heat
pump water heaters) would encourage a
shift to instantaneous electric water
heaters. In response, DOE believes that
the high equipment and installation cost
of instantaneous electric water heaters,
which may involve upgrading the
electrical wiring, along with the high
operating cost, will limit the prevalence
of a shift to these products. Given that
the remaining comments are generally
supportive of the estimates in the
December 2009 NOPR, DOE retained its
December 2009 NOPR analysis of fuel
switching for the final rule. However,
DOE expanded its analysis to consider
the potential for product switching
within the same fuel type, as discussed
below.
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In the December 2009 NOPR analysis,
for TSL 5, DOE combined an efficiency
level requiring heat pump technology
for large-volume electric storage water
heaters with an efficiency level
requiring condensing technology for
large-volume gas storage water heaters.
Because these technologies have
roughly comparable estimated installed
costs and there are constraints in
switching from gas to electric or from
electric to gas water heaters, DOE did
not project that fuel switching would
occur under TSL 5.
DOE received a number of comments
on potential reaction of consumers to
TSL 5. Rheem stated that TSL 5 would
provide a strong value incentive for the
replacement consumer to replace one
large electric resistance unit with two
smaller electric storage water heaters to
avoid the higher first cost impact
associated with a heat pump water
heater. It also pointed to other
approaches consumers might choose,
and noted that TSL 5 could encourage
installation of large commercial tank
type models in residential applications,
where such products often lack an
equitable certification status for safe
operation. (Rheem, No. 89 at p. 6) A.O.
Smith stated that the added cost of a
heat pump water heater would induce
consumers to install two smallerstorage-capacity, lower-cost heaters in
the place of one larger-capacity unit.
(A.O. Smith, No. 76 at p. 4) AHRI stated
that the market may react to TSL 5 by
replacing a large electric storage water
heater with either a 50-gallon model
with a tempering valve, a 50-gallon
model with higher input heating
elements, two smaller storage water
heaters, or multiple instantaneous water
heaters. (AHRI, No. 91 at p. 7) NPCC
stated that in emergency replacements
of electric water heaters, switching to
two smaller water heaters is unlikely
because it would require a new 30 amp
circuit, which would require a
contractor. (NPCC, Public Meeting
Transcript, No. 57.4 at pp. 106–107)
Regarding TSL 5’s requirement of
condensing gas-fired storage water
heaters for large-volume water heaters,
Southern stated that consumers could
instead install a non-condensing unit
with a 75,000 Btu burner and 55-gallon
tank. (Southern, No. 90 at pp. 6–7) In
contrast to these comments, NRDC
opined that it is unlikely that TSL 5
would cause product switching. (NRDC,
No. 85 at p. 6)
In response, DOE agrees that the
December 2009 NOPR TSL 5 would
present consumers of large water heaters
with a total installed cost that could
lead some of them to consider
alternatives to purchasing a new large
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water heater. To estimate the likely
incidence of switching away from largevolume units under TSL 5 and TSL 6 in
today’s final rule (see section VI.A for
description of TSLs), DOE considered
several alternatives to purchasing a new
large water heater, as well as constraints
that would likely limit their adoption.
First, DOE considered factors that
would cause some households to choose
not to install an alternative to a new
large-volume unit. Most important is the
need for emergency replacement, which,
according to comments from Bradford
White (BWC, No. 62 at p. 4), accounts
for 95 percent of water heater
replacements. This may preclude
consideration of switching in some
cases. In addition, based on shipments
data from AHRI 14 and equipment stock
information from AEO 2010 15, DOE
determined that at least 15 percent of
furnace shipments go to households that
are switching from non-condensing to
condensing gas furnace and also have a
gas water heater. Some of these
households may want to also install a
condensing gas water heater to avoid
complex venting system modifications.
The details are described in chapter 9 of
the TSD. DOE judged that the above
factors would reduce the fraction of
installations estimated to adopt an
alternative to purchasing a large-volume
water heater by 25 percent.
One alternative applicable to both gasfired storage water heaters and electric
storage water heaters involves installing
a small-volume water heater, increasing
the setpoint, and applying a tempering
valve. DOE believes that this strategy
would only be viable for a fraction of
66-gallon units.16 This strategy results
in the household having roughly the
same amount of hot water with a smallvolume water heater as they would have
with a large-volume unit; highertemperature water is stored in a smaller
tank, and then mixed with cold water
using the valve. For units larger than 66
gallons, meeting the household’s hot
water demand would require increasing
the setpoint above the 140 °F limit,
which could result in deposits on the
internal surface of the tank. To assess
the viability of this approach for each of
the sample households with 66-gallon
14 AHRI furnace shipment data. Available at
https://www.ahrinet.org/Content/
Furnaces_609.aspx.
15 AEO 2010 (Early Release): Table 31. Residential
Sector Equipment Stock and Efficiency. Available
at: https://www.eia.doe.gov/oiaf/aeo/supplement/
supref.html.
16 DOE notes that production of large gas-fired
water heaters tends to be clustered around models
with a rated storage volume of 66 gallons or 75
gallons. DOE assumed that the strategies discussed
here are likewise relevant to water heaters with a
rated capacity from 56 gallons to 66 gallons.
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water heaters, DOE calculated whether
the first-hour rating of a small-volume
water heater with a tempering valve
would meet the first-hour rating of the
existing 66-gallon water heater without
exceeding a 140 °F setpoint. (The first
hour rating is the amount of hot water
in gallons the heater can supply per
hour, starting with a tank full of hot
water). If so, DOE assumed the
household would choose this option.
For gas-fired storage water heaters,
DOE considered the approach of
switching to a small-volume unit with
high input capacity (larger burner). DOE
understands that designs for units below
56-gallon rated volume that have very
high rated input (e.g., 75 kBtu/h) are not
common. There are some 50-gallon
models with an input of 65 kBtu/h;
these designs usually incorporate a 5inch internal flue tube (instead of 4inch), and the tank is usually taller to
accommodate the same water storage
volume. These units are likely to require
venting modifications (upgrade to 4inch vent). In addition, for many
installations the input rate for the
existing 66-gallon or larger unit is
already 55 kBtu/h or higher, and a 50gallon unit with a high-capacity burner
may not satisfy the household hot water
requirements. DOE accounted for the
above constraints to estimate the
fraction of installations that would
switch to a small-volume with high
input capacity. DOE also evaluated a
similar strategy for electric storage water
heaters that involves switching to a
small-volume unit with high input
heating elements.
To consider the alternative of
installing two small-volume units, for
each sample household with a largevolume water heater that, according to
DOE’s estimation, would not adopt
either of the above two strategies, DOE
first considered space constraints that
would limit this approach, depending
on the water heater location. For those
households judged not to have such
constraints, DOE compared the total
installed cost of either a heat pump
water heater or a gas-fired condensing
water heater with the alternative of
installing two small-volume units. For
the cost of this alternative, DOE used
information from a consultant report.
Because installing two small-volume
units is more complicated and takes
longer, DOE assumed that households
would choose to install two smallvolume units only if the total installed
cost was at least 10 percent less than the
cost for a heat pump water heater or a
gas-fired condensing water heater.
The results of DOE’s analysis indicate
that switching away from a largevolume water heater would occur in 37
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percent of large-volume electric storage
water heater installations and in 22
percent of large-volume gas-fired storage
water heater installations. The details of
DOE’s approach and the estimated
degree of switching using each of the
alternatives described above are
provided in chapter 9 of the TSD.
ii. Direct Heating Equipment and Pool
Heaters
For DHE and pool heaters, in the
December 2009 NOPR analysis, DOE did
not find any data it could use to
estimate the extent of switching away
from the products subject to this
rulemaking if energy conservation
standards were to result in a significant
increase in installed costs. Raypak
stated that as pool heaters become more
expensive, more may be repaired
instead of being replaced, so the fraction
of non-replacements should be higher.
(Raypak, Public Meeting Transcript, No.
57.4 at p. 249) It also stated that the
proposed standard for pool heaters
would induce product switching to
solar or heat pump pool heaters.
(Raypak, No. 67 at p. 3) In response,
DOE believes that the standard adopted
for pool heaters in this final rule (82percent thermal efficiency) does not
increase the installed cost enough to
induce most consumers to not replace
the product or to switch to a different
product.
3. Base-Case and Standards-Case
Efficiency Distributions
A key input to DOE’s estimates of
NES and NPV is the energy efficiencies
that DOE forecasts over time for the base
case (without new standards) and each
of the standards cases. The forecasted
efficiencies represent the annual
shipment-weighted energy efficiency of
the products under consideration over
the forecast period.
For the December 2009 NOPR
analysis, DOE used the shipmentweighted average energy efficiencies for
2013 (for DHE and pool heaters) or 2015
(for water heaters) as a starting point to
forecast the base-case energy efficiency
distribution for each product class. To
represent the distribution of product
energy efficiencies in those years, DOE
used the same market shares as in the
base case for the LCC analysis. For gasfired storage water heaters and electric
storage water heaters, DOE estimated
the distribution of product energy
efficiencies in 2015 by accounting for
the estimated market impact of the
recently-established ENERGY STAR
efficiency levels for water heaters (see
section IV.F.10). The projected trend to
2015 represents an average annual
increase in energy efficiency of 0.27
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percent for gas-fired storage water
heaters and 0.55 percent for electric
storage water heaters. DOE applied the
above values to estimate the increase in
average energy efficiency until the end
of the forecast period.
DOE found no quantifiable
indications of change in energy
efficiencies over time for oil-fired and
gas-fired instantaneous water heaters,
direct heating equipment, or pool
heaters, and it did not receive any
comments on this topic. Therefore, for
these products, DOE estimated that
energy efficiencies remain constant at
the 2015 or 2013 level until the end of
the forecast period.
For its determination of standardscase forecasted efficiencies, DOE used a
‘‘roll-up’’ scenario in the preliminary
analysis and the December 2009 NOPR
to establish the SWEF for the year that
compliance with the standards would
be required and subsequent years. In
this approach, product energy
efficiencies in the base case that do not
meet the standards level under
consideration would roll up to meet the
new standard level. The market share of
energy efficiencies that exceed the
standard level under consideration
would be the same in the standards case
as in the base case. Changes over the
forecast period match those in the base
case. DOE did not receive any
comments on its forecasts of energy
efficiency distributions, so for today’s
final rule, DOE maintained the approach
described above.
4. National Energy Savings
DOE calculates NES for each year as
the difference between energy
consumption of the product stock using
the average unit energy consumption
(UEC) of the stock in the base case
(without new standards) or in a case
given new standards. In addition to
annual shipments, key inputs for
determining NES are annual UEC and
the site-to-source conversion factor.
a. Annual Unit Energy Consumption
For each year in the forecast period,
DOE used the shipments-weighted
energy efficiencies for the base case and
standards cases, along with the data on
annual energy use by efficiency level, to
estimate the shipments-weighted
average annual per-unit energy
consumption for each product class
under the base case and standards cases.
When calculating energy consumption
at each considered efficiency level
above the baseline, DOE applied a
rebound effect of 10 percent for water
heaters, 15 percent for DHE, and 10
percent for pool heaters. A rebound
effect refers to increased energy
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consumption resulting from actions that
increase energy efficiency and reduce
consumer costs. (For example, if energy
efficiency improvements were to reduce
the energy consumption of a room air
conditioner (thereby decreasing its
electricity costs), a consumer may
choose to run the unit more often,
thereby increasing comfort but returning
a portion of the savings arising from
DOE’s standards.) When the rebound
effect is incorporated, calculated energy
savings are lower than if no rebound
effect were considered.
DOE’s calculation of UEC accounts for
the product switching that DOE
anticipates will occur under specific
TSLs. That is, DOE accounted for the
energy use of the products to which
some fraction of households are
assumed to switch. For example, in the
case of switching from a large-volume
water heater to two small-volume units,
DOE calculated and incorporated the
energy use of the two small-volume
units.
b. Site-to-Source Energy Conversion
To estimate the national energy
savings expected from appliance
standards, DOE uses a multiplicative
factor to convert site energy
consumption (at the home or
commercial building) into primary or
source energy consumption (the energy
required to deliver the site energy).
These conversion factors account for the
energy used at power plants to generate
electricity and losses in transmission
and distribution, as well as for natural
gas losses from pipeline leakage and
energy used for pumping. For
electricity, the conversion factors vary
over time due to projected changes in
generation sources (i.e., the power plant
types projected to provide electricity to
the country). The factors that DOE
developed are marginal values, which
represent the response of the system to
an incremental decrease in consumption
associated with appliance standards.
In the December 2009 NOPR analysis,
DOE used annual site-to-source
conversion factors based on the version
of NEMS that corresponds to AEO2009.
For today’s final rule, DOE updated its
conversion factors based on AEO2010
Early Release. The AEO does not
provide energy forecasts beyond 2035;
DOE used conversion factors that
remain constant at the 2035 values
throughout the remainder of the forecast
period.
In response to a request from the
DOE’s Office of Energy Efficiency and
Renewable Energy (EERE), the National
Research Council (NRC) appointed a
committee on ‘‘Point-of-Use and FullFuel-Cycle Measurement Approaches to
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Energy Efficiency Standards’’ to conduct
a study called for in section 1802 of
EPACT 2005. The fundamental task
before the committee was to evaluate
the methodology used for setting energy
efficiency standards and to comment on
whether site (point-of-use) or source
(full-fuel-cycle) measures of energy
efficiency better support rulemaking to
achieve energy conservation goals. The
NRC committee defined ‘‘site (point-ofuse) energy consumption’’ as reflecting
the use of electricity, natural gas,
propane, and/or fuel oil by an appliance
at the site where the appliance is
operated. ‘‘Full-fuel-cycle energy
consumption’’ was defined as including,
in addition to site energy use, the
following: Energy consumed in the
extraction, processing, and transport of
primary fuels such as coal, oil, and
natural gas; energy losses in thermal
combustion in power generation plants;
and energy losses in transmission and
distribution to homes and commercial
buildings.17
In evaluating the merits of using
point-of-use and full-fuel-cycle
measures, the NRC committee noted
that DOE uses what the committee
referred to as ‘‘extended site’’ energy
consumption to assess the impact of
energy use on the economy, energy
security, and environmental quality.
The extended site measure of energy
consumption includes the generation,
transmission, and distribution but,
unlike the full-fuel-cycle measure, does
not include the energy consumed in
extracting, processing, and transporting
primary fuels. A majority of members on
the NRC committee concluded that
extended site energy consumption
understates the total energy consumed
to make an appliance operational at the
site. As a result, the NRC committee’s
primary general recommendation is for
DOE to consider moving over time to
use of a full-fuel-cycle measure of
energy consumption for assessment of
national and environmental impacts,
especially levels of greenhouse gas
emissions, and to providing more
comprehensive information to the
public through labels and other means,
such as an enhanced Web site. For those
appliances that use multiple fuels (e.g.,
water heaters), the NRC committee
believes that measuring full-fuel-cycle
energy consumption would provide a
more complete picture of energy used,
thereby allowing comparison across
17 See
The National Academies, Board on Energy
and Environmental Systems, Letter to Dr. John
Mizroch, Acting Assistant Secretary, U.S. DOE,
Office of EERE, from James W. Dally, Chair,
Committee on Point-of-Use and Full-Fuel-Cycle
Measurement Approaches to Energy Efficiency
Standards (May 15, 2009).
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many different appliances as well as an
improved assessment of impacts. The
NRC committee also acknowledged the
complexities inherent in developing a
full-fuel-cycle measure of energy use
and stated that a majority of the
committee recommended a gradual
transition to that expanded measure and
eventual replacement of the currently
used extended site measure.
DOE acknowledges that its site-tosource conversion factors do not capture
all of the energy consumed in
extracting, processing, and transporting
primary fuels. DOE also agrees with the
NRC committee’s conclusion that
developing site-to-source conversion
factors that capture the energy
associated with the extraction,
processing, and transportation of
primary fuels is inherently complex and
difficult. However, DOE has performed
some preliminary evaluation of a fullfuel-cycle measure of energy use.
Based on two studies completed by
the National Renewable Energy
Laboratory (NREL) in 1999 and 2000,
DOE estimated the ratio of the energy
used upstream to the energy content of
the coal or natural gas delivered to
power plants. For coal, the NREL
analysis considered typical mining
practices and mine-to-plant
transportation distances, and used data
for the State of Illinois. Based on data
in this report, the estimated
multiplicative factor for coal is 1.08 (i.e.,
it takes approximately 1.08 units of coal
energy equivalent to provide 1 unit of
coal to a power plant). A similar
analysis of the energy consumed in
upstream processes needed to produce
and deliver natural gas to a power plant
yielded a multiplicative factor of 1.19.18
While the above factors are indicative
of the magnitude of the impacts of using
full-fuel-cycle measures of energy use,
there are two aspects of the problem that
warrant further study. The first is the
refinement of the estimates of the
multiplicative factors, particularly to
incorporate regional variation. The
second is development of forecasts of
the multiplicative factors over the
timeframes used in the rulemaking
analyses, typically ten to fifty years. The
second issue, of forecasting how the
efficiency factors for various fuels may
change over time, has the potential to be
quite significant. The existing NEMS
forecast of power plant electricity
18 For further information on the NREL studies,
please see: Spath, Pamela L., Margaret K. Mann, and
Dawn Kerr, ‘‘Life Cycle Assessment of Coal-fired
Power Production, ’’ NREL/TP–570–25119 (June
1999); and Spath, Pamela L. and Margaret K. Mann,
‘‘Life Cycle Assessment of a Natural Gas CombinedCycle Power Generation System,’’ NREL/TP–570–
27715 (Sept. 2000).
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generation by fuel type can be used to
estimate the impact of a changing mix
of fuels. However, NEMS currently
provides no information on potential
changes to the relative ease with which
the different fuels can be extracted and
processed.
AGA stated that the December 2009
NOPR’s energy consumption estimates
for specific design options do not reflect
a full-fuel-cycle analysis of the energy
consumed. Referring to the NRC
committee’s report, AGA recommended
that DOE use ‘‘extended site energy’’
analysis in the near term.19 (AGA, No.
78 at pp. 2–3) In response, DOE refers
to the preceding discussion of why it
has not yet adopted a full-fuel-cycle
measure of energy use. DOE’s
calculation of national energy savings
does in fact use the extended site
measure of energy consumption, which
includes generation, transmission, and
distribution but, unlike the full-fuelcycle measure, does not include the
energy consumed in extracting,
processing, and transporting primary
fuels. The calculation of energy
consumption that DOE uses in the LCC
analysis does not use an extended site
energy measure, because the purpose of
the calculation is to estimate the
operating costs that consumers will face
with alternative appliance efficiency
levels. The site energy calculated in the
LCC analysis is converted to extended
site energy (i.e., source or primary
energy) in the NIA. DOE intends to
further evaluate the viability of using
full-fuel-cycle measures of energy
consumption for assessment of national
and environmental impacts of appliance
standards.
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5. Consumer Net Present Value
The consumer NPV is the net value in
the present of the costs and savings
experienced by consumers of the
considered products. DOE calculates the
NPV using the value of increased total
installed costs, the value of operating
cost savings (including energy, repair,
and maintenance costs) in each year in
which such savings occur, and a
discount rate.
a. Increased Total Installed Costs and
Operating Cost Savings
The increase in total annual installed
cost is equal to the annual change in the
per-unit total installed cost (difference
between base case and standards cases)
multiplied by the shipments forecasted
for the standards case. Similarly, the
total annual savings in operating costs
19 AGA cited the ‘‘Report’’ issued by the National
Academy of Sciences, but it is evident that AGA
was referring to the report by the NRC committee
cited in footnote 12.
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are equal to the change in annual
operating costs (difference between base
case and standards case) per unit
multiplied by the shipments forecasted
for the standards case.
DOE’s calculation of total annual
installed cost and total annual savings
in operating costs accounts for the fuel
and product switching that was
estimated to occur under specific TSLs
(see section IV.G.2.d). The accounting of
the energy use of the products to which
a fraction of households are assumed to
switch was described above in section
IV.G.4.a. DOE also accounted for the
installed cost of those products. For
example, in the case of switching from
a large-volume water heater to two
small-volume units, DOE calculated and
incorporated the installed cost of the
two units.
b. Discount Rates
DOE multiplies monetary values in
future years by the discount factor to
determine the present value. For the
December 2009 NOPR analysis and
today’s final rule, DOE estimated the
NPV of appliance consumer benefits
using both a 3-percent and a 7-percent
real discount rate. DOE uses these
discount rates in accordance with
guidance provided by the Office of
Management and Budget (OMB) to
Federal agencies on the development of
regulatory analysis (OMB Circular A–4
(Sept. 17, 2003), section E, ‘‘Identifying
and Measuring Benefits and Costs’’).
DOE did not receive any comments on
the discount rates used to calculate the
NPV of appliance consumer benefits,
and consequently, DOE has retained
those discount rates in this final rule.
H. Consumer Subgroup Analysis
In analyzing the potential impact of
new or amended energy conservation
standards on individual and commercial
consumers, DOE evaluates the impact
on identifiable subgroups of consumers
that may be disproportionately affected
by a national standard level. For the
December 2009 NOPR and today’s final
rule, DOE used 2005 RECS data to
analyze the potential effect of energy
conservation standards on the
considered consumer subgroups for
selected heating products. For gas-fired
and electric storage water heaters, and
gas wall fan and gas wall gravity DHE,
DOE estimated consumer subgroup
impacts for low-income households and
senior-only households. In addition, for
gas-fired and electric storage water
heaters, DOE estimated consumer
subgroup impacts for households in
multi-family housing and households in
manufactured homes as well.
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DOE did not evaluate consumer
subgroup impacts for gas-fired
instantaneous water heaters and oilfired storage water heaters. Gas-fired
instantaneous water heaters were
excluded from the consumer subgroup
analysis due to insufficient data, and
oil-fired storage water heaters were
excluded due to low product shipments.
For direct heating equipment, gas floor
DHE and gas room DHE were excluded
due to the low and decreasing levels of
product shipments. For gas hearth DHE,
DOE examined the senior-only
subgroup, but did not evaluate the lowincome subgroup because the saturation
of this product is very small among lowincome households due to the high
product cost. DOE did not evaluate
consumer subgroup impacts for pool
heaters because the sample size of the
subgroups is too small for meaningful
analysis.
DOE did not receive any comments on
its approach for the consumer subgroup
analysis, and for today’s final rule, DOE
has made no change to its method for
estimating consumer subgroup impacts.
Details on the consumer subgroup
analysis and results can be found in
chapter 11 of the TSD.
I. Manufacturer Impact Analysis
DOE conducted the MIA to estimate
the financial impact of amended energy
conservation standards on water heater,
DHE, and pool heater manufacturers
and to calculate the impact of such
standards on gross domestic
manufacturing employment and
capacity. The MIA has both quantitative
and qualitative aspects. The quantitative
part of the MIA primarily relies on the
GRIM—an industry-cash-flow model
customized for the three products
covered by this rulemaking. The GRIM
inputs are data characterizing the
industry cost structure, investments,
shipments, and markups. The key MIA
output is the INPV. Different sets of
assumptions (scenarios) produce
different results. DOE presents the
industry impacts by the major product
types. DOE estimated the industry
impacts for gas-fired and electric storage
water heaters together because these
product groupings represent a market
that is served by the same
manufacturers and these products are
typically produced in the same
factories. Similarly, DOE presents the
other MIA results separately for oil-fired
storage water heaters, gas-fired
instantaneous water heaters, the
traditional DHE product categories, gas
hearth DHE, and gas-fired pool heaters.
The qualitative part of the MIA
addresses factors such as product
characteristics, market and product
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trends, as well as an assessment of the
impacts of standards on subgroups of
manufacturers. DOE outlined its
methodology for the MIA in the
December 2009 NOPR. 74 FR 65852,
65915–22 (December 11, 2009). The
complete MIA for the December 2009
NOPR is presented in chapter 12 of the
NOPR TSD.
In overview, for the final rule, DOE
updated the MIA to reflect changes in
the outputs of two other key DOE
analyses that feed into the GRIM.
Product costs are key inputs to the
GRIM. For today’s final rule, DOE
incorporated the changes made to the
engineering analysis, including updates
to the MPCs (see section IV.C). In the
MIA, DOE updated its shipment
forecasts and efficiency distributions. In
turn, DOE updated the GRIM to
incorporate these revised costs and
shipments.
For consistency in nominal dollars,
for the final rule, DOE inflated the
NOPR capital and product conversion
costs to 2009$ from 2008$ using
producer price index (PPI) information
for the relevant industries. See https://
data.bls.gov:8080/PDQ/
outside.jsp?survey=pc. The PPI industry
information is related to the North
American Industry Classification
System (NAICS) code. For gas-fired
storage, oil-fired storage, and gas-fired
instantaneous water heaters, DOE
updated the conversion costs using PPI
information under series id
PCU3352283352283—‘‘Household water
heaters, except electric.’’ DOE updated
the conversion costs for electric storage
water heaters using series id
PCU3352283352281—‘‘Household water
heaters, electric, for permanent
installation.’’ DOE updated the DHE
conversion costs using series id
PCU3334143334147—‘‘Floor and wall
furnaces, unit heaters, infrared heaters,
and mechanical stokers.’’ Finally, DOE
updated the conversion costs for pool
heaters using series id
PCU3334143334149—‘‘Other heating
equipment, except electric.’’ For the
final rule, DOE also updated its
traditional DHE product line analysis
used to calculate industry-wide
conversion costs to account for new
products that have come on to the
market and to account for changes to the
traditional DHE efficiency levels and
TSLs, as reflected in the most current
information in the AHRI certification
database (see https://
www.ahridirectory.org/ahridirectory/
pages/home.aspx.).
DOE used the GRIM to revise the MIA
results from the December 2009 NOPR
to reflect the updated MPCs, shipments,
and conversion costs. For direct
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employment calculations, DOE revised
the GRIM to include the latest U.S.
Census information available from the
2007 Economic Census.20
The following sections discuss
interested parties’ comments on the
December 2009 NOPR MIA
methodology. In general, DOE provides
background on an issue that was raised
by interested parties, summarizes the
interested parties’ comment, and
discusses DOE’s response to the
comments.
1. Water Heater Conversion Costs
For the MIA, DOE classified one-time
conversion costs into two major
categories: (1) Product conversion costs
and (2) capital conversion costs. Product
conversion costs are one-time
investments in research, development,
testing, marketing, and other costs
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 new
product designs can be fabricated and
assembled.
In response to the December 2009
NOPR, AHRI stated that TSL 4 would
require more than 75 percent of gas 40gallon water heater models and more
than 90 percent of electric 50-gallon
water heater models from the AHRI
Directory to be either redesigned or
dropped from production. AHRI added
that the severity of this change is even
greater than this example suggests
because shipments are more skewed
towards current Federal minimum
efficiency standards than the proportion
of models suggests. (AHRI, No. 91 at pp.
1–2)
DOE acknowledges that a significant
effort may be necessary for
manufacturers to reach the efficiencies
required by TSL 4. In the December
2009 NOPR, DOE noted that over 80
percent of the gas-fired water heaters
currently sold do not meet the efficiency
requirements at TSL 2 through TSL 4
and that only a small portion of the
electric storage water heaters currently
on the market meet the required
efficiencies at TSL 4. This current
product distribution drives the estimate
of capital conversion costs at TSL 4 and,
consequently, contributes to the overall
results. These conversion costs reflect
the need for manufacturers to add
foaming stations and additional
20 Annual Economic Census: 2007, American
FactFinder, Bureau of the Census (Available at:
https://www.census.gov/econ/census07/) (Last
accessed Feb. 2010).
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production lines to maintain current
production levels with water heaters
that require much thicker insulation. 74
FR 65852, 65936–37 (Dec. 11, 2009).
BWC commented that the significant
increase in insulation thickness
necessary to achieve the proposed level
for water heaters would require
additional assembly time to
manufacture the same production
quantity. In order to achieve the same
manufacturing capacity, BWC stated
that it would require a combination of
more labor, a reconfiguration of
production lines, more foaming
equipment on production lines, and/or
additional production lines. BWC stated
that any of these options result in
expensive capital conversion costs,
which BWC does not believe were fully
taken into consideration. (BWC, No. 61
at pp. 1–2)
DOE’s initial estimates for the capital
conversion costs for water heaters at
each TSL can be found in the December
2009 NOPR. 74 FR 65852, 65936–41
(Dec. 11, 2009). During interviews with
manufacturers prior to the publication
of the December 2009 NOPR, DOE
solicited confidential information about
the required capital conversion costs at
each efficiency level. In the December
2009 NOPR, DOE stated that it based its
capital conversion costs for gas-fired
and electric storage water heaters on
information learned during these
interviews. 74 FR 65852, 65917–18
(Dec. 11, 2009). DOE verified its
industry-wide estimates for the gas-fired
and electric storage water heaters by
comparing the NOPR estimates to a
separate bottoms-up estimate of the subassembly lines, assembly lines, and
tooling changes required by each
manufacturer and the level of
investments that would be required to
maintain a historic value for net plant,
property, and equipment as a ratio of
total revenue. For oil-fired storage and
gas-fired instantaneous water heaters,
DOE estimated its capital conversion
costs using a bottoms-up approach to
estimate the cost of additional
production equipment and changes to
existing production lines that the
industry would require at each TSL.
DOE used feedback from manufacturer
interviews about the tooling
requirements at each efficiency level
and product catalogs to estimate the
total capital conversion costs for both
oil-fired storage and gas-fired
instantaneous water heaters at each
TSL. Id. Pages 12–35 to 12–39 of the
December 2009 NOPR TSD also
contained DOE’s estimated capital
conversion costs as well as additional
information about the assumptions
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behind the required changes at each
efficiency level.
For the gas-fired and electric storage
water heater capital conversion costs at
TSL 4 and TSL 5 in the December 2009
NOPR, DOE noted and agrees with
BWC’s comment that the increased
insulation thickness would require
manufacturers to lengthen existing
assembly lines or add additional
assembly lines because the much
thicker insulation requirements lower
the throughput of existing assembly
lines. However, DOE continues to
believe it has adequately addressed
BWC’s concerns about the capital
conversion cost estimates for two
reasons. First, DOE’s capital conversion
cost estimates are drawn from industrywide aggregated data gathered during
manufacturer interviews. Second, DOE’s
assumptions regarding the required
plant changes at the proposed TSL in
the December 2009 NOPR are consistent
with the plant changes noted in BWC’s
comment. Finally, BWC did not provide
any additional data supporting its
comment that DOE’s capital conversion
cost estimates did not fully capture the
potential costs.
For today’s final rule, DOE continues
to use the same methodology to
calculate the water heater conversion
costs. Additional details of DOE’s
estimates can be found in chapter 12 of
the TSD.
DOE also received several comments
from manufacturers regarding issues
that would arise under a potential
amended standard for electric storage
water heaters that would effectively
require heat pump water heaters (i.e.,
TSL 5 through TSL 8). Broadly, the
comments addressed three issues: (1)
Potential changes to current facilities;
(2) the cost to manufacture heat pump
water heaters; and (3) the unique
challenges presented by the December
2009 NOPR TSL 5.
At the public meeting, A.O. Smith
stated that it is in the final stages of
implementing production for heat pump
water heaters on a small scale relative
to what would be required if the entire
market moved to heat pump water
heaters. (A.O. Smith, Public Meeting
Transcript, No. 57.4 at pp. 91–92) In
written comments, A.O. Smith
extrapolated the cost of setting up this
limited production line to estimate the
cost of shifting the entirety of its electric
storage market share to heat pump water
heaters. A.O. Smith stated that a new
facility capable of producing two
million heat pump water heaters
annually would cost $90 million to
build—before accounting for investment
in land and other fees—and would take
2–3 years to complete. A.O. Smith
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stated that it would likely build a new
facility because line speed and assembly
operations would not allow for the
product to be integrated into current
production lines at high shipment
volumes. A.O. Smith also stated that it
would probably be cheaper to set up a
new line than to rework the production
lines in existing facilities. (A.O. Smith,
Public Meeting Transcript, No. 57.4 at p.
92)
AHRI stated that an amended
standard effectively requiring heat
pump water heaters would force all
manufacturers to continue to provide
electric storage water heaters utilizing
resistance technologies until the
compliance date of the amended
standard due to competitive pressures.
A competitor that did not have to
continue manufacturing resistance
water heaters until the compliance date
(because, presumably, it did not serve
this market in the base case) could have
an advantage. (AHRI, Public Meeting
Transcript, No. 57.4 at pp. 100–103)
BWC added that a standard that
required heat pump water heaters
would disrupt its manufacturing facility
since existing manufacturing lines are
optimized for specific products. Heat
pump water heaters would require
production lines to be redesigned to
handle all new components and their
assembly. Finally, a combination of
additional production lines and/or a
new manufacturing facility would be
required to manufacture heat pump
water heaters without interrupting
current production. (BWC, No. 61 at pp.
2–3)
DOE agrees that modifying existing
production facilities to exclusively heat
pump water heaters could be very
disruptive to ongoing operations there.
During on-site manufacturing impact
interviews, most manufacturers were
still developing their heat pump water
heaters. At that time, manufacturers
responded to questions about how they
would approach the manufacture of heat
pump water heaters by describing the
necessary changes to existing facilities.
For example, manufacturers anticipated
that they would purchase the heat pump
modules from outside vendors if heat
pump water heaters were required for
all electric storage water heaters for
three reasons: (1) They lacked
experience manufacturing high-volume
sealed refrigeration systems; (2) they
had limited refrigeration engineering
expertise; and (3) they lacked space in
their facilities to produce heat pump
module subassemblies. DOE
incorporated these comments into its
NOPR capital cost conversion analysis
in the following manner: (1)
Manufacturers would initially source
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the heat pump modules; (2) electric
storage water heater assembly and
subassembly lines would have to be
modified to accommodate the assembly
of heat pump water heaters; (3)
assembly lines would need to be
lengthened to merge new tank
assemblies with the heat pump
modules; and (4) heat pump water
heater integration would require
manufacturers to install advanced
testing equipment to verify
performance, operation, etc. In sum,
DOE estimated in the NOPR that
manufacturers would incur almost $70
million in capital conversion costs to
modify their production facilities to
exclusively manufacture heat pump
electric storage water heaters. DOE
estimated these investments take place
between 2010, the announcement date
of the standard, and 2015, the year
manufacturers must comply with the
standard. However, the capital
conversion cost estimates did not
include the cost of building
manufacturing capacity to produce the
heat pump modules in house because
DOE believed manufacturers would
likely purchase these as subassemblies.
74 FR 65852, 65921, 65938 (Dec. 11,
2009).
Manufacturers can choose among
multiple design paths and production
options for heat pump water heaters, so
capital, manufacturing, and product
development expenses will vary
accordingly. DOE agrees with A.O.
Smith that one possible reaction by
manufacturers at the NOPR TSL 6 or
TSL 7 (equivalently, TSL 7 and TSL 8
in the final rule) could be to build a new
facility to exclusively manufacture heat
pump water heaters. In the December
2009 NOPR, DOE stated that
manufacturers could consider moving
all or part of their existing production
capacity abroad if NOPR TSL 6 were
selected, as the benefit to the
manufacturer of a new facility abroad
could be greater than modifying an
existing facility. In the NOPR, DOE
noted that building a new facility could
entail less business disruption risk than
attempting to completely redesign and
upgrade existing facilities. Combined
with lower labor rates overseas, this
prospect could compel manufacturers to
move their production facilities outside
of the U.S. 74 FR 65852, 65938, 65952
(Dec. 11, 2009).
While acknowledging there are
multiple strategic paths to manufacturer
heat pump water heaters, DOE believes
it has used a consistent approach to
characterize the costs facing the
industry. DOE also believes its approach
captures manufacturers’ concerns about
the technology changes required at the
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NOPR TSL 6 and TSL 7. While DOE did
not include the conversion costs to
manufacture the heat pump module or
to build new facilities, DOE did include
the substantial costs to modify all
existing production lines. Furthermore,
DOE believes that existing facilities
could be modified to produce heat
pump water heaters at the final rule TSL
7 and TSL 8, although at a substantial
capital conversion cost. Supporting this
notion, DOE notes that most existing
heat pump water heater designs from
major manufacturers incorporate parts
of standard electric resistance water
heaters. For example, the tank portion of
existing heat pump water heater designs
are very similar to electric resistance
water heater designs, thereby limiting
most changes to the assembly line area
of a plant. The designs of heat pump
water heaters at TSL 7 or TSL 8 would
likely be similar to recently-released
heat pump water heaters and would
maintain these similarities with electric
resistance water heaters.
Current manufacturing operations are
highly optimized to manufacture water
heaters that utilize resistive elements
and relatively few additional
components (e.g., thermostats), whereas
heat pump water heater modules require
additional assembly steps even if they
are purchased as completed subassemblies. While a new manufacturing
facility would make the integration of
heat pump modules simpler, the $90
million estimate for such a facility
projected by A.O. Smith indicates that
this approach could also be more costly.
Alternatively, manufacturers could
choose to build an annex for assembling
heat pump water heater modules and
then deliver them to the final assembly
area in a manner similar to completed
tank assemblies. When queried in
manufacturer impact interviews, no
manufacturer of electric water heater
with traditional resistive elements had
yet decided on a specific path towards
high-volume heat pump water heater
production. However, DOE believes that
the capital conversion costs that assume
manufacturers modify existing facilities
to accommodate integrating a sourced
heat pump module would be the most
likely scenario on account of lower
capital expenditures than a ‘‘green field’’
facility, established supplier bases,
trained work force, etc. Hence, DOE
believes that this scenario captures the
significant impacts on electric storage
water heater manufacturers.
Finally, both the preservation of
return on invested capital scenario and
the preservation of operating profit
scenario incorporate the financial
burdens to substantially modify
facilities to manufacture heat pump
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water heaters and the significant
expenses that would be required to
carry inventory that is many times more
expensive than in the base case (because
the MPCs of heat pump water heaters
are multiple times the MPCs of
resistance water heaters). In addition,
the preservation of operating profit
scenario models the impacts on
manufacturers that would occur after
the compliance date of the standard if
they cannot fully markup the substantial
cost of a sourced heat pump module.
Therefore, the costs and market
disruption to manufacture heat pump
water heaters are modeled in the MIA
scenarios.
In response to DOE’s request for
comment at the public meeting on the
required conversion costs for all
considered NOPR TSLs, Rheem did not
comment specifically because it deemed
conversion costs confidential and
proprietary. However, Rheem wished to
advise DOE that this information was
submitted confidentially to DOE’s
contractor during MIA interviews.
(Rheem, No. 89 at p. 9) During the
public meeting, Rheem did state that
converting all of its electric water heater
models to heat pump water heaters (as
the December 2009 NOPR TSL 6 or TSL
7 would require) would be a very
significant undertaking requiring capital
and new manufacturing capabilities. As
evidence to that point, Rheem noted
that it has to date released only one heat
pump water heater model. (Rheem,
Public Meeting Transcript No. 57.4 at p.
93–94)
DOE agrees that migrating electric
storage production entirely to heat
pump water heater production would
require a significant investment in time
and resources. DOE asked each
participant during manufacturer
interviews to quantify the costs to
manufacture exclusively heat pump
water heaters. DOE’s own analysis of
these conversion costs proved
consistent with the estimates submitted
by the industry at large. Therefore, DOE
believes that its capital conversion costs
for the industry are reasonable and that
it has adequately modeled the impacts
of the significant plant changes that
would be required to exclusively
manufacture heat pump water heaters in
the electric storage water heaters
product class. The significant product
and capital conversion costs associated
with the technology and the required
production changes contribute to large,
negative impacts on INPV at the
December 2009 NOPR TSL 6 and TSL 7.
As discussed earlier, the December
2009 NOPR TSL 5 would effectively
require heat pump water heaters for
tanks with rated storage volumes greater
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than 55 gallons. BWC commented that
this proposed level would likely result
in a smaller percentage of the market
above the 55-gallon breakpoint, which
would make it more difficult to finance
the high conversion costs for moving
large tank production to heat pump
water heaters. BWC also stated it would
have to cut down on its product
offerings due to the high development
and capital conversion costs. (BWC, No.
61 at p. 2) A.O. Smith stated it has two
dedicated factories that build
commercial condensing products, and
the commenter stated, after studying the
production volumes at the December
2009 NOPR TSL 5, that it would likely
have to add production lines. Water
heater manufacturers would have to
invest a significant amount to learn how
to manufacture a device with a
refrigerant circuit for a small number of
units per year. (A.O. Smith, Public
Meeting Transcript, 122–123, 126) In its
written comments, Rheem added that
the December 2009 NOPR TSL 5
introduces added burden and risk
because it requires manufacturers to
continue to produce conventional
storage products in large quantities
while incrementally preparing for
production of maximum technology
products which could involve
additional production lines and new
facilities. (Rheem, No. 89 at p. 10) AHRI
stated that separate minimum efficiency
levels for larger size water heaters
would require separate production lines
for these models. Given the significant
differences in the process of
manufacturing either heat pump water
heaters or condensing gas-fired water
heaters, these models could not be
interspersed into the high-speed
production lines currently operating in
water heater manufacturing plants.
(AHRI, No. 91 at p. 6) Finally, BWC,
A.O. Smith, and Rheem all commented
that the lower volume of water heaters
above 55-gallons made the business case
for the investments in the advanced
technology harder to justify. (BWC, No.
61 at p. 2; A.O. Smith, Public Meeting
Transcript, No. 57.4 at pp. 98–99;
Rheem, Public Meeting Transcript No.
57.4 at pp. 99–100)
DOE agrees with BWC, A.O. Smith,
Rheem, and AHRI that the December
2009 NOPR TSL 5 (i.e., TSL 6 for this
final rule) would likely require
additional production lines for
manufacturers to produce heat pump
water heaters and condensing products
for high-volume products. While DOE
believes that existing facilities could be
modified to manufacture exclusively
heat pump water heaters, DOE does not
believe individual manufacturers could
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integrate heat pump water heaters or
condensing gas-fired water heaters
above 55-gallons into existing
production lines. Rather, DOE
calculated the cost for each
manufacturer to build a separate
production line as an annex to an
existing facility to maintain their
current market share of the gas-fired and
electric storage water heater markets
above 55-gallons. DOE also assumed
that the capital conversion costs for
rated storage volumes less than 55gallons at the NOPR TSL 5 would not
decline if the efficiency requirements
were higher for rated storage volumes
greater than 55-gallons (see pages 12–36
to 12–37 of the December 2009 NOPR
TSD). 74 FR 65852, 65918 (Dec. 11,
2009). In addition, DOE calculated the
product conversion costs for large rated
storage volumes at the December 2009
NOPR TSL 5 by multiplying its estimate
for the industry to offer heat pump
products at TSL 6 and condensing gasfired products at TSL 7 for all rated
storage volumes by the percentage of
total electric storage and gas-fired
storage water heater models that exceed
a 55-gallon rated volume. 74 FR 65852,
65917 (Dec. 11, 2009). DOE did not
modify its approach to calculate the
conversion costs at TSL 5 and TSL 6 for
the final rule because its approach is
consistent with manufacturers’
comments. Finally, DOE notes that there
are a disproportionately large number of
models above 55-gallons relative to the
shipment volumes of those products.
Thus, the economic impacts to convert
those products to a new technology are
proportionately more burdensome for
those manufacturers. Therefore, DOE
agrees that the business case is harder
to justify for the larger storage volumes
and that this is captured by the MIA, but
notes that the impacts are still less
severe than requiring manufacturers to
exclusively offer either advanced
technology.
DOE also received a number of
comments about the impacts of the oilfired storage water heater conversion
costs on manufacturers. BWC stated that
the business case to make the
investments at the December 2009
NOPR TSL 4 is difficult because the
industry is small and declining and
could lead them to exit the oil-fired
market. (BWC, No. 61 at p. 2; Public
Meeting Transcript, No. 57.4 at p. 289)
AHRI stated that the cost to redesign,
develop, and retool production for oilfired models is high at the proposed
December 2009 NOPR TSL 4 compared
to the very small market, which offers
limited opportunity for a return. AHRI
added that this TSL is not currently met
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by all current 50-gallon residential oilfired water heaters and all 30-gallon and
32-gallon models except those offered
by one manufacturer. Consequently,
some manufacturers could drop out of
the oil water heater market. (AHRI, No.
91 at p. 2)
DOE agrees that there are no existing
50-gallon oil-fired water heaters on the
market that meet the efficiencies
required at the December 2009 NOPR
TSL 4. However, DOE notes that there
are three existing 30-gallon products
from two manufacturers that meet these
efficiencies using conventional
technology. Therefore, DOE continues to
believe that models that do not meet the
required efficiencies could be made to
do so by manufacturers using insulation
changes. While not insignificant, the
conversion costs to make insulation
changes to existing products would not
be as substantial as a higher efficiency
requirement, which could require
manufacturers to use significantly
different technology. DOE noted in the
December 2009 NOPR that if any
manufacturer had to meet the standard
using a more complex technology, these
costs could force them to exit the oilfired storage water heater market. 74 FR
65852, 65940 (Dec. 11, 2009). Whether
a given manufacturer chooses to exit the
market will depend on a variety of
internal and external factors, but based
upon the available information, DOE
believes it has appropriately captured
the magnitude of investments that the
various TSLs require.
2. Manufacturer Markups and Markup
Scenarios
The MPCs from the engineering
analysis are key inputs to the GRIMs
used in this rule. For water heaters, the
MSP is comprised of production costs
(the direct manufacturing costs or
MPCs), non-production costs (indirect
costs like selling, general, and
administrative expenses (SG&A)), and
profit. For gas-fired, electric, and oilfired storage water heaters in the MIA,
MSP is calculated by multiplying the
MPC by the manufacturer markup and
adding the shipping cost. For all other
products, MSP is calculated by
multiplying the MPC by the appropriate
manufacturer markup. DOE used several
standards-case markup scenarios to
bound the range of uncertainty about
the potential impacts on prices and
profitability following the
implementation of amended energy
conservation standards.
In both its written submission and
comments at the public meeting, BWC
stated that profit margins for water
heater manufacturers are falling due to
the decline of new construction and the
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industry having excess capacity. BWC
argued that because the profitability
estimates in DOE’s analysis are
incorrect, it would be difficult to sustain
the costs associated with the December
2009 NOPR TSL 4. Detailed profit data
were supplied by BWC in previous
communication with DOE’s contractor.
(BWC, No. 61 at p. 2; Public Meeting
Transcript, No. 57.4 at p. 40)
As background, DOE used publiclyavailable information to calculate its
initial markup estimates. Because not all
manufacturers in the industry are public
and because those that are public often
compete in different businesses, DOE
calibrated its initial estimates based on
information received during
manufacturer interviews. During the
NOPR phase, DOE refined the
manufacturer markup based on feedback
from manufacturers to better reflect the
residential heating products market. 74
FR 65852, 65892 (Dec. 11, 2009). Given
this process, DOE believes the
manufacturer markups used in the
engineering analysis and manufacturer
impact analysis are representative of the
industry as a whole. In addition, DOE
used estimated market shares to weigh
feedback it received on the financial
parameters (including the industry
capital structure) to determine an
aggregate number representative of the
entire industry. While individual
manufacturers have different gross
margins depending on a variety of
factors, DOE’s use of weighted average
financial parameters yields cash flow
from operations that are consistent with
the overall industry. For example, in the
base case, earnings before interest and
taxes (EBIT) for gas-fired and electric
storage water heating manufacturing is
approximately 5 percent. Finally, with
respect to BWC’s concern that margins
have compressed due to the housing
downturn, DOE acknowledges that the
current economic environment,
particularly in new construction, has
adversely impacted the industry. DOE
notes that the two markup scenarios it
models are used to bound the potential
impacts on manufacturers due to
amended energy conservation
standards, in light of the inherent
uncertainty in how pricing will adjust
in the marketplace. The preservation of
operating profit scenario models a case
in which margins and profitability
decline in response to amended energy
conservation standards. DOE believes
that the impacts captured by the
preservation of operating profit scenario
would be a better indicator of the likely
impacts on manufacturers than
specifically attempting to model a shortterm effect that also impacts margins in
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the base case. A short-term effect that
would be impacted in the base case and
standards case would not model longterm financial impacts caused by
standards and would not consider the
impacts on INPV over the entire
analysis period. Consequently, DOE has
decided to continue to use the markup
scenarios modeled in the December
2009 NOPR.
DOE also received comments from
traditional DHE manufacturers about the
markup scenarios in the MIA. As
opposed to the preservation of return on
invested capital scenario, LTS stated
that it expects profitability to decrease,
possibly to zero or below in the event
of standards. LTS argued this outcome
is likely because manufacturers will
either have to abandon some product
categories or face lower consumer
demand following standards because
features the consumer wants would no
longer be available, such as the ability
to retrofit replacement products and
operate without line power. (LTS, No.
56.7 at p. 2; Public Meeting Transcript,
No. 57.4 at p. 21) LTS further argued
that the preservation of operating profit
scenario is too optimistic in the event
product offerings are reduced. (LTS, No.
56.7 at p. 2) Finally, LTS stated that the
large negative impacts on industry net
present values suggest that
manufacturers would be substantially
harmed if profitability were impacted.
(LTS, Public Meeting Transcript, No.
57.4 at pp. 21–22)
In response, DOE created two markup
scenarios to bound the potential impacts
on DHE manufacturers, as discussed in
TSD chapter 12. DOE believes the less
optimistic scenario—in which
manufacturers do not earn any
additional profit from any of the
changes required by standards despite
increased investment—captures LTS’s
concerns. DOE agrees with LTS that
profitability could decrease if consumer
demand was lower or product lines
were dropped. At the same time, if
manufacturers dropped selected product
lines, they would not incur the capital
investments included in DOE’s
estimates because DOE assumes
manufacturers convert all product lines.
While DOE acknowledges that
manufacturers could choose to
eliminate certain product lines, DOE
believes that its markup scenarios
would still reflect the negative impact
on industry value. DOE also agrees that
lower consumer demand would impact
profitability. All of the concerns raised
by manufacturers indicate that the range
of impacts would be towards the higher
end calculated by DOE. While DOE’s
results changed slightly from the NOPR
to account for the latest available data
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on the industry’s product lines, as
discussed in chapter 12 of the TSD, DOE
believes that the analytical tools
correctly capture the impacts on
traditional DHE manufacturers. DOE is
not adopting the same TSL for
traditional DHE as was proposed in the
NOPR, in part because of these impacts.
DOE further discusses how it weighs the
benefits and burden of the amended
energy conservation standards,
including the impact on traditional DHE
manufacturers, in section VI.D.3.
3. Pool Heater Conversion Costs
Raypak agreed with DOE’s statement
that TSL 5 and TSL 6 would require
manufacturers to incur significant
product and capital conversion costs.
Raypak commented that this statement
is also true for TSL 3 and TSL 4. While
most manufacturers have some products
at these efficiency levels, Raypak argued
that manufacturing all products at the
levels proposed in the December 2009
NOPR would require substantial tooling
and product conversion costs. (Raypak,
No. 67 at p. 2; Public Meeting
Transcript, No. 57.4 at p. 308) In
addition, Zodiac stated that even small
efficiency improvements often require
significant efforts and burden
manufacturers. (Zodiac, No. 68 at p. 1)
DOE agrees that the conversion costs
at TSL 3 and TSL 4 are also significant.
However, DOE notes that the plant
changes at TSL 5 and TSL 6 increase
substantially over those necessary at
TSL 4, because manufacturers would
have to make changes to both
component parts (including heating
exchanger fabrication) and their main
assembly lines. DOE calculated the
conversion costs for manufacturers to
convert all existing products that did
not meet the standard. Therefore, the
conversion costs for each manufacturer
would vary depending on their
experience with high-efficiency
products and the range of their current
product offerings. DOE believes it has
adequately captured the impacts of the
conversion costs in the MIA.
4. Employment
Bock stated that the employment
impacts discussion in the December
2009 NOPR for oil-fired water heaters
did not take into consideration
manufacturers shutting down or moving
production outside of the United States.
(Bock, No. 101 at p. 2)
In the December 2009 NOPR, DOE
calculated the potential impacts of
amended energy conservation standards
on direct employment by bounding the
range of potential impacts. 74 FR 65852,
65947–49 (Dec. 11, 2009). For the upper
end of the range, the direct employment
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analysis estimated the number of U.S.
production workers who are impacted
by this rulemaking, assuming that
manufacturers continue to produce the
same scope of covered products after the
compliance date and that the existing
domestic production is not shifted to
other countries. In this best case
scenario, the direct employment impact
analysis shows approximately no
change in the number of U.S.
production workers in the residential
oil-fired storage water heater market. To
calculate the lower bound of the range
of potential impacts, DOE calculated the
total number of domestic production
workers that would lose their jobs if all
production were no longer made
domestically. Id. In this scenario,
manufacturers respond to the higher
labor requirements by shifting
production to lower-labor-cost countries
or exit the oil-fired market. Since a
major US manufacturer has oil-fired
storage water heaters that exceed the
standard proposed in the December
2009 NOPR, a complete exit from the
market or a complete shift to lowerlabor-cost countries by industry is
unlikely. In the December 2009 NOPR,
DOE did not expect substantial changes
to U.S. production workers in the
residential oil-fired market if
manufacturers were able to implement
the insulation design options presented
in the engineering analysis. 74 FR
65852, 65949 (Dec. 11, 2009).
A.O. Smith stated that the December
2009 NOPR TSL 6 or TSL 7 would
require manufacturers to keep their
electric resistance water heater lines
running while implementing new heat
pump water heater production lines.
This assumption implies manufacturers
would be building new factories or
production lines, which could be
outside of the United States. (A.O.
Smith, Public Meeting Transcript, No.
57.4 at pp. 316–317) A.O. Smith also
noted that it would expect to utilize
low-cost-labor countries to produce the
heat pump portion of the assembly,
similar to the trend in the room air
conditioning industry. (A.O. Smith, No.
76 at p. 4) BWC added that a disruptive
heat pump water heater standard could
cause a new manufacturing facility to be
located abroad to not disrupt
manufacturing in their existing U.S.
facility. (BWC, No. 61 at pp. 2–3)
As stated in section IV.I.1, DOE
believes that an electric storage water
heater standard that effectively
mandated heat pump water heaters
would not require manufacturers to
build new production facilities, because
those products would mimic current
heat pump water heater designs that
simplify manufacturing by maintaining
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similarities with electric resistance
water heaters. However, DOE does
recognize that heat pump water heaters
have higher labor content than water
heaters that only use a resistance
element, which could put additional
pressure on U.S. manufacturing
employment. DOE also believes that
these pressures exist at a standard level
that would only effectively require heat
pump water heaters for products with
rated storage volumes greater than 55gallons. In particular, DOE believes TSL
5 or TSL 6 could cause a change in
direct employment if manufacturers
with multiple facilities in the U.S. build
a dedicated heat pump water heater line
at a factory abroad or relocate domestic
production for large rated storage
volumes.
Also in response to the December
2009 NOPR, ACEEE stated that focusing
on manufacturing jobs within the
heating products industry is too narrow,
because energy savings creates more
jobs, including direct employment
impacts as noted by DOE’s statement
that significant technology changes
(such as heat pump water heaters) could
increase other manufacturing
employment. Finally, ACEEE expressed
its belief that compared to the total
number of jobs in the US economy and
given the uncertainties of projections
five years into the future, the small
employment numbers estimated are not
significant and should not be a
determining factor in DOE’s decision.
(ACEEE, No. 79 at pp. 3–4)
DOE agrees with ACEEE that the
energy savings from more-efficient
standards would likely result in
increased net employment. DOE
analyzes how consumer savings
increase employment in other sectors of
the economy in the indirect
employment analysis (see section IV.J).
Furthermore, DOE agrees that moreefficient technologies such as heat
pump water heaters could increase
direct employment in the United States.
DOE noted that even at the December
2009 NOPR TSL 5, if manufacturers
build a dedicated heat pump water
heater line in the United States,
additional labor would be required.
DOE also noted that even sourcing heat
pump modules could increase U.S.
employment because existing assembly
lines would need to be lengthened and
the manufacturing process would take
additional time to assemble and test. 74
FR 65852, 65948–49 (Dec. 11, 2009).
However, DOE continues to believe that
the higher labor content for assembling
heat pump water heaters could also put
additional pressure on manufacturers to
relocate existing manufacturing
facilities in lower-labor-cost countries.
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Therefore, in light of the multiple
strategic options manufacturers could
pursue, DOE believes that presentation
and consideration of the range of direct
employment impacts is appropriate, in
that it represents these possibilities.
Lastly, while not the only determining
factor, a potential reduction in industry
employment is a consideration in terms
of the impacts on manufacturers for the
MIA.
DOE received a number of comments
about the direct employment impacts
for traditional DHE at the standard
levels proposed in the December 2009
NOPR. Specifically, LTS expressed its
agreement with DOE’s statement that
TSL 3 would likely lead to the
discontinuation of product lines and
could cause small businesses to exit the
market completely. LTS believes that
both of these outcomes could be
possible and that either would have a
significant impact on future
employment in their industry. (LTS, No.
56.7 at p. 2; Public Meeting Transcript,
No. 57.4 at p. 22) LTS also stated that
reduced demand, if product features
like retrofitability were eliminated,
would also harm employment. (LTS,
Public Meeting Transcript, No. 57.4 at p.
317) Empire stated that jobs would be
lost due to poor prospects for a
sufficient return on investment needed
in the traditional DHE categories.
(Empire, No. 100 at p. 1; Public Meeting
Transcript, No. 57.4 at p. 299) Finally,
Williams added that increased
efficiency standards would force them
to eliminate jobs as a result of current
products not meeting the new
standards. (Williams, No. 96 at p. 1)
In response, DOE notes that it
calculated the potential impacts of
amended energy conservation standards
on domestic production employment for
traditional DHE by bounding the range
of potential impacts. The upper end of
the range assumes that domestic
production is not shifted to lower-laborcost countries and that production
volume does not decrease. In this bestcase scenario, where shipments do not
decrease and higher-efficiency products
require more labor, the direct
employment impact analysis shows a
net increase in the number of domestic
jobs for traditional direct heating
equipment. To calculate the upper end
of the range of direct employment
impacts, DOE believes it is reasonable to
assume that production volume could
be sustained by selectively upgrading
certain product lines and increasing
shipments of products that meet the
amended energy conservation standard.
Under this set of assumptions,
customers would likely continue to
demand these products for the
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replacement market, and manufacturers
would likely selectively upgrade their
most popular products to maintain as
many sales as possible with their
limited resources.
However, at some standard levels,
including the December 2009 NOPR
TSL 3, the capital conversion and
product development costs could be
prohibitive for the small domestic
manufacturers of traditional DHE.
Because DOE agrees that the December
2009 NOPR TSL 3 could lead to the risk
of manufacturers exiting the market or
reducing the scope of their product
lines, the lower end of the range
illustrates the industry dynamic in
which not all product lines continue to
be produced in the U.S. In this scenario,
small domestic manufacturers could
exit the market rather than invest in
new designs, which would result in a
loss of domestic employment at these
firms. In summary, DOE agrees that all
the possibilities raised by manufacturers
could result in a loss of direct
employment in the traditional DHE
market. DOE acknowledged this
possibility in the December 2009 NOPR.
74 FR 65852, 65949–50 (Dec. 11, 2009).
However, DOE believes it has
appropriately bounded the range of
employment impacts. DOE continues to
believe that amended energy
conservation standards could impact
DHE direct employment, but believes it
has taken the potential into
consideration in examining the
economic impact on manufacturers in
the industry. DOE also notes that it has
reviewed its analysis on the potential
impacts on small business
manufacturers in light of the changes
made since the December 2009 NOPR
publication and believes it has taken the
necessary steps to limit the possibility
of manufacturers exiting the market.
AHRI stated that the negative direct
employment impacts for traditional
direct heating equipment could be larger
than the indirect employment gains.
(AHRI, Public Meeting Transcript, No.
57.4 at pp. 324–325)
In response, DOE notes that direct and
indirect employment impacts are
assessed in different analyses for this
rulemaking. The MIA assesses the direct
employment impacts on manufacturers
that make the covered products. The
indirect employment impacts are jobs
that are created from the consumer
savings on energy as a result of the
amended energy conservation
standards. In light of the results of these
analyses, DOE agrees with AHRI that the
positive, indirect employment impacts
due to the traditional DHE energy
conservation standards could be offset
by possible direct industry employment
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losses. Specifically, DOE calculated that
the indirect net employment benefits
would be fewer than 250 jobs gained in
any year, whereas DOE calculated that
there are approximately 300 production
workers currently in the traditional DHE
market. See chapter 14 of the TSD for
a more complete discussion of the
indirect employment impacts related to
the traditional DHE industry.
BWC stated that while it does not
meet the SBA definition of a small
business, BWC is a small company,
especially compared to its closest
competitors. BWC stated that the
December 2009 NOPR TSL 4, and the
large cost increases and capital
investments it would entail, could
threaten the company’s survival,
because it would place a
disproportionate burden on their small
company. (BWC, No. 61 at p. 1)
While BWC is not a small business,
DOE recognizes that the impacts on all
manufacturers are not uniform.
However, DOE believes that as a fullline competitor in the residential water
heater market, BWC’s concerns about
the capital investments are most
appropriately captured in the industrywide impacts which are considered
when determining what TSL is
economically justifiable. DOE also notes
that DOJ was primarily concerned about
the potential impacts on competition in
the traditional DHE market which is
discussed in section VI.C.5.
5. Access to Capital
BWC stated that financing the costs
associated with the December 2009
NOPR TSL 4 for water heaters would be
difficult, because banks are more
hesitant to lend in the current economic
environment. (BWC, No. 61 at p. 2)
In response, DOE acknowledges that it
may be difficult for a given
manufacturer to access the capital
necessary to finance the investments
required by this final rule, particularly
given the recent state of capital markets.
In response to a similar comment in the
December 2009 NOPR, DOE noted that
the compliance date for the residential
water heater standard is 2015. In the
GRIM, DOE assumes the product
conversion and capital conversion costs
are allocated in between the
announcement of the final rule adopting
amended energy conservation standards
(estimated to be March 2010) and the
compliance date of the standard, with
more of conversion costs occurring
closer to the compliance date than the
announcement date. Because most of
the product conversion and capital
conversion costs are allocated several
years in the future, the economic
conditions at that time will likely be
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different than they are currently. 74 FR
65852, 65919 (Dec. 11, 2009). With that
said, DOE’s current analytical tools do
not have the capability to model the
state of financial markets in future
years, nor how those changes will
impact the industry’s financing
capabilities. DOE acknowledges that the
impacts on individual manufacturers
are not uniform, particularly in terms of
access to capital. However, during the
course of manufacturer interviews, DOE
received feedback from manufacturers
on their capital structure, and DOE
adjusted the discount rate for each of
the water heater product types to be
reflective of the manufacturers in the
industry. While it could be difficult to
obtain the necessary funding for TSL 4
and higher TSLs, DOE believes it has
accurately captured the requisite level
of expenditures to meet the amended
energy conservation standards.
LTS stated it does not have the
required capital estimated by DOE to
make the necessary conversions at TSL
3 and, with the current credit markets,
LTS does not think it can borrow it.
(LTS, No. 56.7 at pp. 2–3; Public
Meeting Transcript, No. 57.4 at p. 23)
Again, DOE acknowledges that it may
be difficult for a given manufacturer to
access the capital necessary to finance
the investments required by this final
rule, particularly given the recent state
of capital markets. This is particularly
true for small business manufacturers
who cannot rely on a parent company’s
other operations to help finance the
necessary investments. At the same
time, DOE believes it would be
inappropriate to extrapolate the health
of the financial markets at any one
particular time to future periods of time.
As discussed above, there is a real
possibility that small manufacturers
may choose not to improve all product
lines, whether due to limited access to
capital or insufficient expected return
on capital. To that point, DOE believes
it has captured the level of expenditures
necessary to meet the amended energy
conservation standards and included
the cost for manufacturers to convert all
existing product lines to model the
impacts these changes would have on
the industry. These considerations are
included in the assessment of the
economic justification of the standard.
Finally, DOE notes that the impact of
amended energy conservation standards
specifically considered the potential
impacts on small business
manufacturers.
J. Employment Impact Analysis
DOE considers employment impacts
in the domestic economy as one factor
in selecting an energy conservation
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standard. Employment impacts include
direct and indirect impacts. Direct
employment impacts are changes in the
number of employees for manufacturers
of equipment subject to standards, their
suppliers, and related service firms. The
MIA addresses these impacts.
Indirect employment impacts from
standards consist of the net jobs created
or eliminated in the national economy,
other than in the manufacturing sector
being regulated, due to: (1) Reduced
spending by end users on energy
(electricity, gas (including liquefied
petroleum gas), and oil); (2) reduced
spending on new energy supply by the
utility industry; (3) increased spending
on the purchase price of new
equipment; and (4) the effects of those
three factors throughout the economy.
DOE expects the net monetary savings
from standards to be redirected to other
forms of economic activity. DOE also
expects these shifts in spending and
economic activity to affect the demand
for labor in the short term, as explained
below.
One method for assessing the possible
effects on the demand for labor of such
shifts in economic activity is to compare
employment statistics in different
economic sectors, which are compiled
and published by the Bureau of Labor
Statistics (BLS). The 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. 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.21
Energy conservation standards have the
effect of reducing consumer utility bills.
Because reduced consumer
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 manufacturing sectors). Thus, based
on the BLS data alone, DOE believes net
national employment will increase due
21 See U.S. Department of Commerce, Bureau of
Economic Analysis, ‘‘Regional Multipliers: A User
Handbook for the Regional Input-Output Modeling
System (RIMS II)’’ (1992).
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to shifts in economic activity resulting
from standards.
In developing the December 2009
NOPR, DOE estimated indirect national
employment impacts using an input/
output model of the U.S. economy
called Impact of Sector Energy
Technologies (ImSET).22 ImSET is a
special-purpose version of the ‘‘U.S.
Benchmark National Input-Output’’
(I–O) model designed to estimate the
national employment and income
effects of energy-saving technologies.
The ImSET software includes a
computer-based I–O model with
structural coefficients to characterize
economic flows among 188 sectors most
relevant to industrial, commercial, and
residential building energy use.
DOE did not receive any comments on
its employment impacts analysis, and
DOE has made no change to its method
for estimating employment impacts for
today’s final rule. For further details, see
chapter 14 of the final rule TSD.
K. Utility Impact Analysis
The utility impact analysis estimates
the change in the forecasted power
generation capacity for the Nation that
would be expected to result from
adoption of new energy conservation
standards. For the December 2009
NOPR and today’s final rule, DOE
calculated this change using the NEMS–
BT computer model. NEMS–BT models
certain policy scenarios such as the
effect of reduced energy consumption
by fuel type. The output of the analysis
provides a forecast for the needed
generation capacities at each TSL. While
DOE was able to use the forecasts from
the AEO 2010 Early Release for the
national impacts analysis, the NEMS–
BT model corresponding to this case
was not yet available. Thus, for the
utility impact analysis, the estimated
net benefit of the standards in today’s
final rule is the difference between the
forecasted generation capacities by
NEMS–BT and the AEO 2009 April
Release Reference Case. DOE expects
that the results would be only
minimally different if it had been able
to use the NEMS–BT model
corresponding to the AEO 2010 Early
Release. DOE obtained the energy
savings inputs associated with
efficiency improvements to considered
products from the NIA. These inputs
reflect the effects of both fuel (natural
gas) and electricity consumption
savings. Chapter 13 of the final rule TSD
presents more information on the utility
impact analysis.
22 More information regarding ImSET is available
online at: https://www.pnl.gov/main/publications/
external/technical_reports/PNNL-15273.pdf.
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1. Effects of Standards on Energy Prices
and Associated Benefits
To evaluate potentially important
indirect effects of energy conservation
standards on energy users in general, in
its December 2009 NOPR analysis, DOE
analyzed the potential impact on natural
gas prices resulting from amended
standards on water heaters and the
associated benefits for all natural gas
users in all sectors of the economy. 74
FR 65852, 65914–15 (Dec. 11, 2009).
(DOE did not include natural gas
savings from amended standards on
DHE and pool heaters in its analysis
because they are not large enough to
have a noticeable impact.) DOE used
NEMS–BT to model the impact of the
natural gas savings associated with
possible standards on natural gas prices.
Like other widely-used energyeconomic models, NEMS incorporates
parameters to estimate the changes in
energy prices that would result from an
increase or decrease in energy demand.
The response of price observed in the
NEMS output changes over the forecast
period based on the model’s dynamics
of natural gas supply and demand. For
each year, DOE calculated the nominal
savings in total natural gas expenditures
by multiplying the estimated annual
change in the average end-user natural
gas price by the annual total U.S.
natural gas consumption, adjusted for
the estimated natural gas savings
associated with each TSL. DOE then
calculated the NPV of the savings in
natural gas expenditures for 2015 to
2045 using 3- and 7-percent discount
rates for each scenario. However,
because there is uncertainty about the
extent to which the calculated impacts
from reduced natural gas prices are a
benefits transfer, DOE tentatively
concluded that it should not give a
heavy weight to this factor in its
consideration of the economic
justification of standards on heating
products.
NRDC stated that DOE should give
full weight to the aggregate benefit of
reduced natural gas prices that result
from the standards. NRDC stated that
this consumer benefit needs to be
quantified and included in the national
impact analysis. NRDC disagreed with
DOE that this factor not be given heavy
weight because lower natural gas prices
may be a benefits transfer from
producers to consumers, and stated that
there is no logical or statutory basis for
failing to give the reduction in natural
gas prices from efficiency standards
their full weight (NRDC, No. 85 at p. 4)
In response, DOE notes that the benefits
to all consumers associated with
reductions in energy prices resulting
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20175
from standards is not listed among the
seven factors that EPCA directs DOE to
evaluate in determining whether an
energy conservation standard for
covered products is economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)–
(VII)) Indeed, EPCA specifically directs
DOE to consider the economic impact of
the standard on manufacturers and
consumers of the products subject to the
standard. While it is true that EPCA
directs DOE to consider other factors the
Secretary of Energy considers relevant,
in so doing, DOE takes under
advisement the guidance provided by
OMB on the development of regulatory
analysis. Specifically, at page 38,
Circular A–4 states, ‘‘You should not
include transfers in the estimates of the
benefits and costs of a regulation.’’
As discussed in the December 2009
NOPR, when gas prices drop in
response to lower demand and a lower
output of existing natural gas
production capacity, consumers benefit
but producers suffer. In economic terms,
the situation represents a benefits
transfer to consumers (whose
expenditures fall) from producers
(whose revenue falls equally). When
prices decrease because extraction costs
decline, however, consumers and
producers both benefit, and the change
in natural gas prices represents a net
gain to society. Consumers benefit from
the lower prices, and producers, whose
revenues and costs both fall, are no
worse off. DOE is continuing to
investigate the extent to which a change
in natural gas prices projected to result
from standards represents a net gain to
society. At this time, however, DOE
retains the position that it should not
give a heavy weight to this factor in its
consideration of the economic
justification of standards on heating
products.
In its December 2009 NOPR analysis,
DOE also considered the possibility of
estimating the impact of specific
standard levels on electricity prices.
Investigation conducted for the
rulemaking for general service
fluorescent lamps and incandescent
reflector lamps 23 found that whereas
natural gas markets exhibit a fairly
simple chain of agents from producers
to consumers, the electric power
industry is a complex mix of fuel
suppliers, producers, and distributors.
While the distribution of electricity is
regulated everywhere, its institutional
structure varies, and upstream actors are
23 See U.S. Department of Energy, Office of
Energy Efficiency and Renewable Energy, ‘‘Energy
Conservation Standards for General Service
Fluorescent Lamps and Incandescent Reflector
Lamps; Proposed Rule,’’ 74 FR 16920, 16978–79
(April 13, 2009).
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more diverse. For these and other
reasons, DOE decided not to estimate
the value of potentially reduced
electricity costs for all consumers
associated with amended standards for
heating products.
NPCC stated that DOE should
estimate the economic benefits of the
reduced need for new electric power
plants and infrastructure and include
such estimation in the utility impacts
analysis. It stated that since a primary
goal of the Federal appliance standards
program is to avoid construction and
operation of unnecessary generating
facilities and their associated
environmental impacts, failure to
quantify the economic value of doing so
appears to be a fundamental oversight.
(NPPC, No. 87 at p. 6) In a similar vein,
NRDC criticized DOE for not analyzing
the benefits associated with reduced
electricity prices resulting from
standards. NDRC stated that the use of
NEMS–BT should be explored as a way
to quantify the benefit of avoided
generation and the corresponding rate
impact, and that DOE should give full
weight to the aggregate benefit of
reduced electricity prices that result
from the standards. (NRDC, No. 85 at p.
4–5)
In response to the above comments,
DOE used NEMS–BT to assess the
impacts of the reduced need for new
electric power plants and infrastructure
projected to result from standards. In
NEMS–BT, changes in power generation
infrastructure affect utility revenue
requirements, which in turn affect
electricity prices. As described in
chapter 13 of the TSD, DOE found that
the impact on electricity prices from a
change in electricity demand is smaller
than the impact seen for natural gas
prices. Although the aggregate benefits
for all electricity users are potentially
large, DOE believes that there is
uncertainty about the extent to which
the calculated impacts from reduced
electricity prices are a benefits transfer
from the actors involved in electricity
supply. Because of the aforementioned
complexity and diversity of the electric
power sector in the U.S., DOE has
concluded that, at present, it should not
give a heavy weight to this factor in its
consideration of the economic
justification of standards on heating
products. DOE is continuing to
investigate the extent to which change
in electricity prices projected to result
from standards represents a net gain to
society.
L. Environmental Assessment
Pursuant to the National
Environmental Policy Act of 1969
(NEPA) (42 U.S.C. 4321 et seq.) 42
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U.S.C. 6295(o)(2)(B)(i)(VI), DOE
prepared a draft environmental
assessment (EA) of the potential impacts
of the standards for heating products in
today’s final rule, which it has included
as chapter 16 of the TSD. DOE found
that the environmental effects
associated with the standards for
heating products were not significant.
Therefore, DOE is issuing a Finding of
No Significant Impact (FONSI),
pursuant to NEPA, the regulations of the
Council on Environmental Quality (40
CFR parts 1500–1508), and DOE’s
regulations for compliance with NEPA
(10 CFR part 1021). The FONSI is
available in the docket for this
rulemaking.
In the EA, DOE estimated the
reduction in power sector emissions of
CO2, NOX, and Hg using the NEMS–BT
computer model. In the EA, NEMS–BT
is run similarly to the AEO NEMS,
except that energy use of the heating
products is reduced by the amount of
energy saved (by fuel type) due to the
TSLs. The inputs of national energy
savings come from the NIA analysis; the
output is the forecasted physical
emissions. The estimated net benefit of
the standards in today’s final rule is the
difference between the forecasted
emissions by NEMS–BT at each TSL
and the AEO 2009 April Early Release
Reference Case. NEMS–BT tracks CO2
emissions using a detailed module that
provides results with broad coverage of
all sectors and inclusion of interactive
effects. Because the on-site operation of
non-electric heating products requires
use of fossil fuels and results in
emissions of CO2, NOX, and sulfur
dioxide (SO2), DOE also accounted for
the reduction in these emissions due to
standards at the sites where these
appliances are used.
DOE has determined that SO2
emissions from affected Electric
Generating Units (EGUs) are subject to
nationwide and regional emissions cap
and trading programs that create
uncertainty about the impact of energy
conservation standards on SO2
emissions. Because of the cap, energy
reductions due to energy conservation
standards result in no reduction in SO2
emissions, although the costs of meeting
such emission cap requirements are
reflected in the electricity prices and
forecasts used in DOE’s analysis of the
standards. Title IV of the Clean Air Act
sets an annual emissions cap on SO2 for
all affected EGUs. SO2 emissions from
28 eastern States and the District of
Columbia (D.C.) are also limited under
the Clean Air Interstate Rule (CAIR,
published in the Federal Register on
May 12, 2005; 70 FR 25162 (May 12,
2005), which creates an allowance-
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based trading program that will
gradually replace the Title IV program
in those States and DC. (The recent legal
history surrounding CAIR is discussed
below.) The attainment of the emissions
caps is flexible among EGUs and is
enforced through the use of emissions
allowances and tradable permits. Under
existing EPA regulations, any excess
SO2 emission allowances resulting from
the lower electricity demand caused by
the imposition of an efficiency standard
could be used to permit offsetting
increases in SO2 emissions by any
regulated EGU. However, if the standard
resulted in a permanent increase in the
quantity of unused emission
allowances, there would be an overall
reduction in SO2 emissions from the
standards. While there remains some
uncertainty about the ultimate effects of
efficiency standards on SO2 emissions
covered by the existing cap-and-trade
system, the NEMS–BT modeling system
that DOE uses to forecast emissions
reductions currently indicates that no
physical reductions in power sector
emissions would occur for SO2.
Much like SO2 emissions, NOX
emissions from 28 eastern States and
D.C. are limited under the CAIR.
Although CAIR has been remanded to
EPA by the U.S. Court of Appeals for the
District of Columbia Circuit (D.C.
Circuit), it will remain in effect until it
is replaced by a rule consistent with the
Court’s July 11, 2008, opinion in North
Carolina v. EPA, 531 F.3d 896 (D.C. Cir.
2008); see also North Carolina v. EPA,
550 F.3d 1176 (D.C. Cir. 2008). These
court positions were taken into account
in the analysis conducted for the
December 2009 NOPR and in today’s
final rule. Because all States covered by
CAIR opted to reduce NOX emissions
through participation in cap-and-trade
programs for electric generating units,
emissions from these sources are capped
across the CAIR region.
In the 28 eastern States and D.C.
where CAIR is in effect, DOE’s forecasts
indicate that no NOX emissions
reductions will occur due to energy
conservation standards because of the
permanent cap. Energy conservation
standards have the potential to produce
an economic impact in the form of
lower prices for NOX emissions
allowances, if their impact on electricity
demand is large enough. However, DOE
has concluded that the standards in
today’s final rule will not have such an
effect because the estimated reduction
in electricity demand in States covered
by the CAIR cap would be too small to
affect allowance prices for NOX under
the CAIR.
New or amended energy conservation
standards would reduce NOX emissions
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in those 22 States that are not affected
by the CAIR. DOE used the NEMS–BT
to forecast emission reductions from the
standards in today’s final rule.
Similar to emissions of SO2 and NOX,
future emissions of Hg would have been
subject to emissions caps. The Clean Air
Mercury Rule (CAMR) would have
permanently capped emissions of
mercury from new and existing coalfired plants in all States beginning in
2010 (70 FR 28606). However, the
CAMR was vacated by the D.C. Circuit
in its decision in New Jersey v.
Environmental Protection Agency, 517 F
3d 574 (D.C. Cir. 2008). Thus, DOE was
able to use the NEMS–BT model, which
reflects CAMR being vacated and does
not incorporate CAMR emission caps, to
estimate the changes in Hg emissions
resulting from today’s final rule.
However, DOE continues to review the
impact of rules that reduce energy
consumption on Hg emissions, and may
revise its assessment of Hg emission
reductions in future rulemakings.
The operation of non-electric heating
products requires use of fossil fuels and
results in emissions of CO2, NOX and
SO2 at the sites where these appliances
are used. NEMS–BT provides no means
for estimating such emissions. DOE
calculated the effect of the standards in
today’s final rule on the above site
emissions based on emissions factors
derived from the literature. See Chapter
16 of the final rule TSD for additional
details.
EEI stated that if DOE examines
changes in power plant emissions, then
it should also examine changes in the
emissions associated with oil extraction
(domestic and overseas), crude oil
transportation (sea-based and landbased), natural gas flaring, oil refining,
refined oil delivery, natural gas
production, natural gas delivery, natural
gas delivery system methane leaks,
propane production and delivery, and
emissions associated with the extraction
and importation of liquefied natural gas.
(EEI, No. 95 at p. 5)
As noted in chapter 16 of the TSD,
DOE developed only qualitative
estimates of effects on upstream fuel-
cycle emissions because NEMS–BT does
a thorough accounting only of emissions
at the power plant due to downstream
energy consumption. In other words,
NEMS–BT does not account for
upstream emissions. Therefore, the
environmental assessment for today’s
final rule reports only power plant
emissions.
EEI stated that DOE should consider
the production process in the EA,
especially if higher efficiency standards
result in more water heaters being
manufactured in other countries. (EEI,
No. 95 at p. 5) In response, DOE believes
that the standards in today’s final rule
are unlikely to result in significant
change in the location of water heater
manufacturing. The dimensions and
weight of water heaters, and the
resulting shipping expense, mitigate
against overseas production of the entire
unit.
M. Monetizing Carbon Dioxide and
Other Emissions Impacts
As part of the development of this
final rule, DOE considered the estimated
monetary benefits likely to result from
the reduced emissions of CO2 and other
pollutants that are expected to result
from each of the TSLs considered. This
section summarizes the basis for the
estimated monetary values used for each
of these emissions and presents the
benefits estimates considered.
For today’s final rule, DOE is relying
on a new set of values for the social cost
of carbon (SCC) that were recently
developed by an interagency process. A
summary of the basis for these new
values is provided below, and a more
detailed description of the
methodologies used is provided as an
Annex to Chapter 16 of the TSD.
1. Social Cost of Carbon
Under Executive Order 12866,
agencies are required, to the extent
permitted by law, ‘‘to 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
20177
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
social benefits of reducing CO2
emissions into cost-benefit analyses of
regulatory actions that have small, or
‘‘marginal,’’ impacts on cumulative
global emissions. 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.
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 due to climate
change.
As part of the interagency process that
developed these 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.
The interagency group selected four
SCC values for use in regulatory
analyses. Three values are based on the
average SCC from three integrated
assessment models, at discount rates of
2.5, 3, and 5 percent. The fourth value,
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.
TABLE IV.28—SOCIAL COST OF CO2, 2010–2050 (IN 2007 DOLLARS)
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Discount year
2010
2015
2020
2025
2030
2035
2040
2045
2050
5% Avg
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
.........................................................................................
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3% Avg
2.5% Avg
4.7
5.7
6.8
8.2
9.7
11.2
12.7
14.2
15.7
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23.8
26.3
29.6
32.8
36.0
39.2
42.1
44.9
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3% 95th
35.1
38.4
41.7
45.9
50.0
54.2
58.4
61.7
65.0
16APR2
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72.8
80.7
90.4
100.0
109.7
119.3
127.8
136.2
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a. Monetizing Carbon Dioxide Emissions
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The ‘‘social cost of carbon’’ (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 social cost of carbon are
provided in dollars per metric ton of
carbon dioxide. 24
When attempting to assess the
incremental economic impacts of carbon
dioxide emissions, the analyst faces a
number of serious challenges. A recent
report from the National Academies of
Science (Hidden Costs of Energy:
Unpriced Consequences of Energy
Production and Use. National
Academies Press. 2009) 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 serious questions of science,
economics, and ethics and should be
viewed as provisional.
Despite the serious limits of both
quantification and monetization, SCC
estimates can be useful in estimating the
social benefits of reducing carbon
dioxide emissions. Under Executive
Order 12866, agencies are required, to
the extent permitted by law, ‘‘to 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 make it possible for
agencies to incorporate the social
benefits from reducing carbon dioxide
emissions into cost-benefit analyses of
regulatory actions that have small, or
‘‘marginal,’’ impacts on cumulative
global emissions. Most Federal
regulatory actions can be expected to
24 In this document, DOE presents all values of
the SCC as the cost per metric ton of CO2 emissions.
Alternatively, one could report the SCC as the cost
per metric ton of carbon emissions. The multiplier
for translating between mass of CO2 and the mass
of carbon is 3.67 (the molecular weight of CO2
divided by the molecular weight of carbon
= 44/12 = 3.67).
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have marginal impacts on global
emissions.
For such policies, the benefits from
reduced (or costs from increased)
emissions in any future year can be
estimated 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 each of these
future benefits by an appropriate
discount factor and summing across all
affected years. This approach assumes
that the marginal damages from
increased emissions are constant for
small departures from the baseline
emissions path, an approximation that
is reasonable for policies that have
effects on emissions that are small
relative to cumulative global carbon
dioxide emissions. For policies that
have a large (non-marginal) impact on
global cumulative emissions, there is a
separate question of whether the SCC is
an appropriate tool for calculating the
benefits of reduced emissions; we do
not attempt to answer that question
here.
An interagency group convened on a
regular basis to consider public
comments, explore the technical
literature in relevant fields, and discuss
key inputs and assumptions in order to
generate SCC estimates. Agencies that
actively participated in the interagency
process include the Environmental
Protection Agency, and the Departments
of Agriculture, Commerce, Energy,
Transportation, and Treasury. This
process was convened by the Council of
Economic Advisers and the Office of
Management and Budget, with active
participation and regular input from the
Council on Environmental Quality,
National Economic Council, Office of
Energy and Climate Change, and Office
of Science and Technology Policy. The
main objective of this process was to
develop a range of SCC values using a
defensible set of input assumptions that
are grounded in the existing literature.
In this way, key uncertainties and
model differences can more
transparently and consistently inform
the range of SCC estimates used in the
rulemaking process.
The interagency group selected four
SCC estimates for use in regulatory
analyses. For 2010, these estimates are
$4.7, $21.4, $35.1, and $64.9 (in 2007
dollars). The first three estimates are
based on the average SCC across models
and socio-economic and emissions
scenarios at the 5, 3, and 2.5-percent
discount rates, respectively. The fourth
value is included to represent the
higher-than-expected impacts from
temperature change further out in the
tails of the SCC distribution. For this
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purpose, we use the SCC value for the
95th percentile at a 3-percent discount
rate. The central value is the average
SCC across models at the 3-percent
discount rate. For purposes of capturing
the uncertainties involved in regulatory
impact analysis, we emphasize the
importance and value of considering the
full range. These SCC estimates also
grow over time. For instance, the central
value increases to $24 per ton of CO2 in
2015 and $26 per ton of CO2 in 2020.
See Appendix A of the Annex to
Chapter 16 of the TSD for the full range
of annual SCC estimates from 2010 to
2050.
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. Specifically, the
interagency group set a preliminary goal
of revisiting the SCC values within two
years or at such time as substantially
updated models become available, and
to continue to support research in this
area. In the meantime, we will continue
to explore the issues raised by this
analysis and consider public comments
as part of the ongoing interagency
process.
b. Social Cost of Carbon Values Used in
Past Regulatory Analyses
To date, economic analyses for
Federal regulations have used a wide
range of values to estimate the benefits
associated with reducing carbon dioxide
emissions. In the final model year 2011
CAFE rule, the Department of
Transportation (DOT) used both a
‘‘domestic’’ SCC value of $2 per ton of
CO2 and a ‘‘global’’ SCC value of $33 per
ton of CO2 for 2007 emission reductions
(in 2007 dollars), increasing both values
at 2.4 percent per year. It also included
a sensitivity analysis at $80 per ton of
CO2. 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.
A 2008 regulation proposed by DOT
assumed a domestic SCC value of $7 per
ton CO2 (in 2006 dollars) for 2011
emission reductions (with a range of $0$14 for sensitivity analysis), also
increasing at 2.4 percent per year. A
regulation finalized by DOE in October
of 2008 used a domestic SCC range of
$0 to $20 per ton CO2 for 2007 emission
reductions (in 2007 dollars). In addition,
EPA’s 2008 Advance Notice of Proposed
Rulemaking for Greenhouse Gases
identified what it described as ‘‘very
preliminary’’ SCC estimates subject to
revision. EPA’s global mean values were
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$68 and $40 per ton CO2 for discount
rates of approximately 2 percent and 3
percent, respectively (in 2006 dollars for
2007 emissions).
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 dollars)
of $55, $33, $19, $10, and $5 per ton of
CO2. The $33 and $5 values represented
model-weighted means of the published
estimates produced from the most
recently available versions of three
integrated assessment models—DICE,
PAGE, and FUND—at approximately 3
and 5 percent discount rates. The $55
and $10 values were derived by
adjusting the published estimates for
uncertainty in the discount rate (using
factors developed by Newell and Pizer
(2003)) at 3 and 5 percent discount
rates, respectively. The $19 value was
chosen as a central value between the $5
and $33 per ton estimates. All of these
values were assumed to increase at 3
percent annually to represent growth in
incremental damages over time as the
magnitude of climate change increases.
These interim values represent 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 and were offered for public
comment in connection with proposed
rules, including the joint EPA–DOT fuel
economy and CO2 tailpipe emission
proposed rules.
c. Approach and Key Assumptions
Since the release of the interim
values, interagency group reconvened
on a regular basis to generate improved
SCC estimates considered for this final
rule. Specifically, the group considered
public comments and further explored
the technical literature in relevant
fields.
It is important to recognize that a
number of key uncertainties remain, and
that current SCC estimates should be
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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 Academy
of Science (2009) 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 concerns and problems that
should be addressed by the research
community, including research
programs housed in many of the
agencies participating in the interagency
process to estimate the SCC.
The U.S. Government will
periodically review and reconsider
estimates of the SCC used for costbenefit analyses to reflect increasing
knowledge of the science and
economics of climate impacts, as well as
improvements in modeling. In this
context, statements recognizing the
limitations of the analysis and calling
for further research take on exceptional
significance. The interagency group
offers the new SCC values with all due
humility about the uncertainties
embedded in them and with a sincere
promise to continue work to improve
them.
In summary, in considering the
potential global benefits resulting from
reduced CO2 emissions, DOE used the
most recent values identified by the
interagency process, adjusted to 2009$
using the standard GDP deflator values
for 2008 and 2009. For each of the four
cases specified, the values for emissions
in 2010 used were approximately $5,
$22, $36, and $67 per metric ton
avoided (values expressed in 2009$). To
monetize the CO2 emissions reductions
expected to result from amended
standards for residential water heaters
in 2015–2045 and for direct heating
equipment and pool heaters in 2013–
2043, DOE used the values identified in
Table A1 of the ‘‘Social Cost of Carbon
for Regulatory Impact Analysis Under
Executive Order 12866,’’ which is
reprinted as an Annex to Chapter 16 of
the TSD, appropriately escalated to
2009$. To calculate a present value of
the stream of monetary values, DOE
discounted the values in each of the
four cases using the discount rates that
had been used to obtain the SCC values
in each case.
NRDC stated that the economic
impacts of avoided CO2 emissions
should be aggregated into the NIA.
(NRDC, No. 85 at p. 3) As discussed in
section IV.G.1, the NIA assesses the
national energy savings and the national
net present value of total consumer
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costs and savings expected to result
from standards at specific efficiency
levels. The NPV is not intended as a
measure of all national economic
benefits associated with standards.
Although DOE does not aggregate the
estimated economic benefits of avoided
CO2 emissions (and other emissions)
into the NIA, it does believe that 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. Therefore, in section VI of
this final rule, DOE presents the NPV
values that would result if DOE were to
add 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.
2. Monetary Values of Non-Carbon
Emissions
As previously stated, DOE’s analysis
assumed the presence of nationwide
emission caps on SO2 and caps on NOX
emissions in the 28 States covered by
CAIR. In the presence of these caps, the
NEMS–BT modeling system that DOE
used to forecast emissions reduction
indicated that no physical reductions in
power sector emissions would occur
(although there remains uncertainty
about whether physical reduction of
SO2 will occur), but that the standards
could put slight downward pressure on
the prices of emissions allowances in
cap-and-trade markets. Estimating this
effect is very difficult because of factors
such as credit banking that can change
the trajectory of prices. From its
modeling to date, DOE is unable to
estimate a benefit from energy
conservation standards on the prices of
emissions allowances at this time. See
the environmental assessment in the
final rule TSD for further details.
DOE also investigated the potential
monetary benefit of reduced NOX
emissions from the TSLs it considered.
As noted above, new or amended energy
conservation standards would reduce
NOX emissions in those 22 States that
are not affected by CAIR, in addition to
the reduction in site NOX emissions
nationwide. DOE estimated the
monetized value of NOX emissions
reductions resulting from each of the
TSLs considered for today’s final rule
based on environmental damage
estimates from the literature. Available
estimates suggest a very wide range of
monetary values for NOX emissions,
ranging from $370 per ton to $3,800 per
ton of NOX from stationary sources,
measured in 2001$ (equivalent to a
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range of $447 to $4,591 per ton in
2009$).25
EEI stated that the costs of
remediating emissions are included in
the electricity rates that consumers pay,
and care should be taken not to double
count the benefits of reduced emissions.
(EEI, No. 95 at p. 5) DOE understands
the comment as referring to actions
power plant operators take to meet
environmental regulations, the costs of
which are reflected in electricity rates.
With regulations currently in place,
revised standards for heating products
would result in a reduction in CO2 and
NOX emissions by avoiding electricity
generation. Because these emissions
impose societal costs, their reduction
has an economic value that can be
estimated.
DOE is not including monetization
estimates of Hg in today’s final rule.
DOE is aware of multiple agency efforts
to determine the appropriate range of
values used in evaluating the potential
economic benefits of reduced Hg
emissions. DOE has decided to await
further guidance regarding consistent
valuation and reporting of Hg emissions
before further monetizing Hg in its
rulemakings. As explained earlier, DOE
was able to use the NEMS–BT model to
estimate the changes in Hg emissions
resulting from today’s final rule, and it
has considered these physical emissions
reductions as part of the standardsetting process. DOE notes that the
amounts of Hg under consideration in
today’s final rule are not large, so the
monetized results would be unlikely to
be significant as compared to the total
costs and benefits of the rule.
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V. Discussion of Other Comments
A. Trial Standard Levels and Proposed
Standards
Since DOE opened the docket for this
rulemaking, it has received more than
one hundred unique written comments,
with hundreds of signatories, from a
diverse set of parties, including
manufacturers and their representatives,
State Attorneys General, members of
Congress, energy conservation
advocates, consumer advocacy groups,
electric and gas utilities, and private
citizens. DOE also received more than
17,000 form letter submissions
recommending that DOE strengthen the
proposed energy conservation
standards. All substantive comments on
the analytical methodologies DOE used
25 Refer to the OMB, 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, for additional
information.
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are discussed above. DOE also received
many comments related to the relative
merits of various TSLs. Generally, these
comments either stated that a certain
TSL was economically justified,
technologically feasible, and maximized
energy, or they argued how DOE should
weigh the various factors that go into
making that determination. See section
VI.D for a discussion of DOE’s analytical
results and how it weighed those factors
in establishing today’s final rule.
For today’s final rule, DOE has
revised the NOPR TSLs for water
heaters and direct heating equipment
and continued to analyze the same TSLs
for pool heaters. A detailed description
of these TSL revisions for water heaters
and direct heating equipment is
provided in section VI.A. A brief
summary is provided in the sections
that follow.
1. Water Heaters
In the NOPR, DOE proposed TSL 4 for
water heaters. 74 FR 65852, 65854 (Dec.
11, 2009). As discussed in that
document, DOE strongly considered
NOPR TSL 5, which would provide
additional energy and carbon savings,
while mitigating some of the issues
associated with a national heat pump
water heater standard, but it identified
a number of potential issues for which
DOE did not have adequate information
to address before the publication of the
NOPR. (See 74 FR 65852, 65965–67
(Dec. 11, 2009)). DOE is adding a new
TSL 5 for the final rule, which is a slight
modification of the NOPR TSL 5. The
NOPR TSL 5 is now referred to as TSL
6 for the final rule. DOE tentatively
concluded that at NOPR TSL 5 (now
final rule TSL 6), the benefits would be
outweighed by several burdens, but it
stated that it will revisit this decision
and strongly consider adoption of TSL
6 in the final rule in light of any
comments and data submitted by
interested parties. Many of those
comments were discussed in section IV.
Below DOE presents further comments
on NOPR TSL 5 (now final rule TSL 6),
as well as on the proposed NOPR TSL
4.
Support for setting a standard at
NOPR TSL 5 (TSL 6 for this final rule)
was expressed by several interested
parties. As noted above, DOE received
over 17,000 form letters from private
citizens advocating stronger standards
for water heaters. (Private Citizens, No.
63 and 74) The Joint Advocacy
comment (submitted by ASAP) stated
that its signatories are very pleased with
the DOE’s proposed new efficiency
standards for most storage-type
residential water heaters but urged DOE
to adopt stronger efficiency levels
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(NOPR TSL 5) for the largest units,
which would help assure a market for
these new emerging products where
they are most cost-effective. It stated
that NOPR TSL 5 offers a middle ground
that increases savings relative to NOPR
TSL 4 while also fostering the
development of precisely the knowledge
base and market infrastructure needed
for a longer term, market-wide transition
to high-efficiency technologies. It
strongly urged DOE to choose NOPR
TSL 5 (now TSL 6), for the final rule.
(ASAP, No. 102 at p. 2) NRDC stated
that NOPR TSL 5 should be adopted for
water heaters as it is technically
feasible, economically justified, and
provides significant additional energy,
economic, and environmental savings.
(NRDC, No. 85 at p. 2) A comment
provided by eight utilities stated
support for NOPR TSL 5 because
stronger standards for the biggest units
would boost total energy and economic
savings by more than 40 percent
compared to the proposed rule, and
DOE would be helping advanced
technologies become mainstream
products, thereby speeding transition to
next-generation water heaters. (Eight
utilities, No. 72 at p. 1) ASE stated that
at NOPR TSL 5 the advanced technology
requirements are limited to a modest
share of total water heater shipments,
which is a sensible means of addressing
the issue of manufacturers being able to
scale up the production of these
products to meet the needs of the
market. (ASE, No. 77 at p. 2) Other
parties expressing support for choosing
NOPR TSL 5 included Alabama
Consumer Advocate, Avista, Energy
Consumers Alliance of New England,
KCP&L, Energy Trust of Oregon,
Alliance to Save Energy, and NEEA.
(ACA, No. 60 at p. 1; Avista, No. 66 at
pp.1–2; Energy Consumers Alliance of
New England, No. 59 at p. 1; KCP&L,
No. 97 at p. 1; Energy Trust of Oregon,
No. 69 at p. 1; Alliance to Save Energy,
No. 56.4 at p.1; NEEA, No. 88 at p. 1)
Opposition to setting a standard at
NOPR TSL 5 (now TSL 6 for the final
rule) was also expressed by several
interested parties. AHRI stated that
NOPR TSL 5 would cause installation
issues for large-volume, advancedtechnology models and that consumers
may opt for less-efficient alternative
options. It stated that DOE’s analysis has
undervalued these factors, and as a
result, AHRI expects that the actual
energy savings will fall well short of the
savings projected in the TSD. (AHRI,
No. 91 at p. 6) A.O. Smith stated that it
does not support NOPR TSL 5. It
believes that the energy savings are
overstated because many consumers,
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when faced with the increased cost of
large-storage-capacity water heaters that
are required to use either condensing
gas or electric heat pump technology,
would elect to install two smallerstorage-capacity water heaters instead of
one larger capacity unit. (A.O. Smith,
No. 76 at p. 4) Rheem commented that
the energy savings from TSL 6 are
significantly overstated, and it pointed
to several options for consumers to work
around the standards on large-volume
units. (Rheem, No. 89 at pp. 6–7) BWC
stated that the efficiency levels under
consideration for larger-capacity water
heaters would be difficult and
expensive to obtain. (BWC, No. 61 at p.
1) Referring to NOPR TSL 5 and NOPR
TSL 6, APPA stated that they do not
support a standard that eliminates high
efficiency electric resistance water
heaters as a consumer option. It believes
that these TSLs would cause an adverse
economic impact for consumers and
lessen the utility of the product. (APPA,
No. 92 at p. 2) Southern Company stated
that it does not agree with NOPR TSL
6 because performance of heat pump
water heaters depends on climate and
installation location. (Southern, No. 90
at pp. 3–4)
Support for NOPR TSL 4 (unchanged
in the final rule), was expressed by
APPA and A.O. Smith. (APPA, No. 92
at p. 2; A.O. Smith, No. 76 at p. 1) AHRI
recommended that DOE should adopt
minimum efficiency requirements for
gas-fired and electric storage water
heaters that have their basis in TSL 4
but have been modified to address
issues related to the needs of the
replacement market and unique
attributes of some models. For electric
storage water heaters 65 gallons and
larger, AHRI recommended that DOE
select TSL 3 (also unchanged for the
final rule), as TSL 4 for this size
presents a disproportionately large
increase in efficiency. For oil-fired
storage water heaters it recommended
that DOE adopt TSL 3. For gas-fired
instantaneous water heaters, AHRI
recommended that the standard be
changed to a minimum EF of 0.80 for
models using an external electric supply
and a minimum EF of 0.78 for models
that do not use an external electric
supply. (AHRI, No. 91 at p. 1) Rheem
also supported a 0.80 EF level for gasfired instantaneous water heaters and
noted that the 0.82 EF level has a high
payback period. (Rheem, No. 89 at p. 13)
Bock supported TSL 3 because all
storage water heater manufacturers are
capable of meeting the standard, and it
would allow consumers to have
abundant hot water at a reasonable cost.
(Bock, No. 101 at p. 3)
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DOE acknowledges the positions
expressed regarding adoption of either
the proposed standards (TSL 4) or
NOPR TSL 5 for water heaters. It
addresses the arguments raised by the
commenters, as well as other factors, in
its discussion of the merits of the
various considered TSLs in section
VI.D.
2. Direct Heating Equipment
In the NOPR, DOE proposed TSL 3 for
direct heating equipment. 74 FR 65852,
65854 (Dec. 11, 2009). The only
modifications made to the TSLs
analyzed for the final rule compared to
those analyzed for the NOPR were to the
efficiency levels in TSLs 3, 4, 5, and 6
for gas wall gravity DHE. DOE revised
the efficiency levels analyzed for gas
wall gravity DHE in the final rule to
more accurately reflect the current
market for products within the
representative rated capacity. A detailed
description of these changes is provided
in section IV.C.2.b.
AHRI stated that no amended energy
conservation standards should be set for
traditional DHE because of the
significant impact on manufacturers and
the small energy savings. (AHRI, No. 91
at p. 10) AGA stated that standards
should not be set for DHE because the
low and declining shipments represent
a minimal opportunity for energy
savings, and the increased installed cost
of DHE may lead to greater use of
central heating, thereby increasing
overall energy consumption (AGA, No.
78 at p. 11) Williams recommended that
DOE not adopt standards for DHE
because of the significant impact on
manufacturers, the unique utility of
DHE to heat homes without ductwork,
design constraints, and safety concerns.
Williams stated that manufacturers, as
well as consumers, would be negatively
impacted by the proposed rule.
(Williams, No. 96 at pp. 1–2)
AHRI stated its belief that the
proposed standards for traditional DHE
(NOPR TSL 3) are too high and that the
impact on manufacturers needs to be
reconsidered. According to the
commenter, the proposed levels would
have very significant and costly effects
on manufacturers. The DHE results
show negative impact on the
profitability of the manufacturers, all of
which are small manufacturers, and
there is a real concern about whether
they could stay in business and make a
profit at these levels. (AHRI, Public
Meeting Transcript, No. 57.4 at pp. 28–
29) AHRI reiterated DOE’s estimates for
the INPV decreasing between 6 and 33.5
percent at the proposed level, industry
cash flow dropping from $1.4 million to
¥$0.9 million (a 162-percent decrease),
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and the conversion costs reaching $2.31
million per manufacturer (about 350
percent of estimated earnings before
interest and taxation). AHRI also stated
that the number of product lines per
manufacturer would drop from 5 to 3
and that all of AHRI’s members
indicated a loss of employment would
result. Finally, AHRI stated all these
negative impacts would be compounded
by a decline in sales. Because of all
these negative impacts and insignificant
energy savings, AHRI stated that DOE
should not consider TSL 3 for the final
rule (AHRI, No. 91 at p. 13)
LTS stated that DOE estimated that
the conversion costs for a typical small
DHE manufacturer at the proposed level
would be $2.3 million or 347 percent of
each company’s earnings before interest
and taxes. LTS questioned having to
spend three or four years’ profit to meet
a standard they are certain will make
them less profitable overall. (LTS, No.
56.7 at pp. 2–3; Public Meeting
Transcript, No. 57.4 at p. 23) LTS
reiterated the NOPR’s estimate that
industry cash flow could decrease up to
161.8 percent. Finally, LTS reiterated
DOE’s statement that the large estimated
impact on INPV suggests that
manufacturers would be substantially
harmed if profitability were impacted.
(LTS, No. 56.7 at p. 2)
Congressman Costello and
Congressman Shimkus urged DOE to
consider Empire’s testimony and related
concerns. Congressman Costello and
Congressman Shimkus stated that
Empire strongly believes the technology
necessary to meet these proposed
efficiency standards is not in place and
that the cost of retrofitting these product
lines does not justify the small energy
savings for the small traditional DHE
market. (Costello, No. 62 at p. 1)
DOE acknowledges the positions
expressed regarding adoption of the
proposed standards (TSL 3) for direct
heating equipment. It addresses the
arguments raised by the commenters, as
well as other factors, in its discussion of
the merits of the various considered
TSLs in section VI.D.
3. Pool Heaters
In the NOPR, DOE proposed NOPR
TSL 3 for pool heaters. 74 FR 65852,
65854 (Dec. 11, 2009). The TSLs
analyzed in the final rule are identical
to those analyzed in the NOPR. AHRI
stated that the proposed standard for
pool heaters is not economically
justified because its payback period well
exceeds product lifetime. It
recommended the proposed standard for
pool heaters be lowered to 81 percent.
(AHRI, No. 91 at p. 9) Raypak stated that
the proposed standard for pool heaters
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has a very high payback period which
is outside the lifetime of the appliance,
so the commenter argued that such level
should not be considered economically
justified. Raypak supported adoption of
amended energy conservation standards
at TSL 1 for pool heaters because it
would raise the efficiency level by 3
percentage points, while preventing the
elimination of the millivolt design
option. (Raypak, No. 67 at pp. 3–4)
APSP stated that the proposed level
could result in a significantly negative
impact on the pool heater industry in
these already turbulent economic times.
(APSP, No. 64 at p. 1)
DOE acknowledges the positions
expressed regarding adoption of the
proposed standards (TSL 3) for pool
heaters. It addresses the arguments
raised by the commenters, as well as
other factors, in its discussion of the
merits of the various considered TSLs in
section VI.D.
B. Compliance Date of Amended
Standards
As discussed in section IV.F.9,
compliance with amended energy
conservation standards for direct
heating equipment and pool heaters is
required three years after the final rule
is published in the Federal Register
(i.e., in 2013); compliance with
amended energy conservation standards
for water heaters is required five years
after the final rule is published (i.e., in
2015).
Raypak stated that the date of when
the standard goes into effect should be
changed to five years for pool heaters.
(Raypak, No. 67 at p. 3) In response,
DOE notes that the language in 42
U.S.C. 6295(e)(4) specifies compliance
dates for amended standards (if any) for
the heating products that are the subject
of this rulemaking. These statutory dates
were set such that they were to apply to
products manufactured on or after the
36-month period beginning on the date
such final rule was to be published for
the first iteration of rulemaking and on
or after the 60-month period beginning
on the date such final rule was to be
published for the second iteration of
rulemaking. (42 U.S.C. 6295(e)(4)(A)–
(B)) The language of 42 U.S.C.
6295(e)(4)(B) anticipates that a standard
will be in place for covered pool heaters
that are manufactured precisely three
years after publication of the final rule
and prospectively thereafter. Although
DOE did not meet the rulemaking dates
set by the statute, DOE continues to
believe that the time differential, as
specified in EPCA, between the
publication of the final rule and the
compliance deadline reflects Congress’s
judgment as to what constitutes
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adequate lead time. Consequently, for
the final rule, DOE has maintained a
compliance date corresponding to three
years after final rule publication in the
Federal Register for direct heating
equipment and pool heaters, and five
years after the date of publication in the
Federal Register for water heaters.
VI. Analytical Results and Conclusions
A. Trial Standard Levels
DOE analyzed the benefits and
burdens of a number of TSLs for each
of the three types of heating products
separately. For a given product
consisting of several product classes,
DOE developed some of the TSLs so that
each TSL is comprised of energy
efficiency levels from each product class
that exhibit similar characteristics. For
example, in the case of water heaters,
one of the TSLs consists of the max-tech
efficiency levels from each product class
being considered for this rulemaking.
DOE attempted to limit the number of
TSLs considered for the December 2009
NOPR by eliminating efficiency levels
that do not exhibit significantly
different economic and/or engineering
characteristics from the efficiency levels
already selected as a TSL. For the
December 2009 NOPR, DOE analyzed
seven TSLs for water heaters, six TSLs
for direct heating equipment, and six
TSLs for pool heaters. 74 FR 65852,
65929–32 (Dec. 11, 2009).
For today’s final rule, DOE has
revised the TSLs for water heaters and
direct heating equipment and continued
to analyze the same TSLs for pool
heaters. A description of each TSL DOE
analyzed for each of the three types of
heating products is provided below.
While DOE only presents the results for
those efficiency levels used in TSL
combinations in today’s final rule, DOE
presents the results for all efficiency
levels analyzed in the final rule TSD.
1. Water Heaters
Table VI.1 shows the eight TSLs DOE
analyzed for water heaters for the final
rule. Since amended water heater
standards would apply to the full range
of storage volumes, DOE is presenting
the TSLs for water heaters in terms of
the energy efficiency equations, rather
than only showing the required
efficiency level at the representative
capacities. As further discussed in the
December 2009 NOPR (74 FR 65852,
65929 (Dec. 11, 2009)), DOE is grouping
the energy efficiency equations for each
of the four water heater product classes
to show the benefits and burdens of
amended energy conservation
standards.
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For TSLs 1, 2, 3, and 4, DOE is using
the rated storage volume divisions
developed in the engineering analysis
and the energy efficiency equations as
shown in section IV.C.6, which specify
a two-slope approach. TSLs 1, 2, 3, and
4 are identical to those presented in the
December 2009 NOPR. TSL 1 consists of
the efficiency levels for each product
class that are approximately equal to the
current shipment-weighted average
efficiency. TSL 2 and TSL 3 consist of
efficiency levels with slightly higher
efficiencies compared to TSL 1 for most
of the product classes. TSL 4 represents
the maximum electric resistance water
heater efficiency across the entire range
of storage volumes that DOE analyzed
for electric storage water heaters, and
the maximum atmospherically-vented
efficiency across the entire range of
storage volumes that DOE analyzed for
gas-fired storage water heaters.
DOE is adding a new TSL 5 for the
final rule, which is a slight modification
of the December 2009 NOPR TSL 5
(currently referred to as TSL 6 for the
final rule). For both TSL 5 and TSL 6,
DOE considered a pairing of efficiency
levels that would promote the
penetration of advanced technologies
into the electric and gas-fired storage
water heater markets and potentially
save additional energy by using a twoslope approach with different
requirements for each category.
Consequently, DOE pairs an efficiency
level effectively requiring heat pump
technology for large-volume electric
storage water heaters with an efficiency
level achievable using electric resistance
technology for small-volume electric
storage water heaters. In addition, DOE
pairs an efficiency level effectively
requiring condensing technology for
large-volume gas storage water heaters
with an efficiency level that can be
achieved in atmospherically-vented gasfired storage water heaters with
increased insulation thickness for small
storage volumes. The only difference
between TSL 5 and TSL 6 for the final
rule is the requirements for gas-fired
storage water heaters. DOE reanalyzed
these levels due to potential safety
concerns, which were discussed above
and are further discussed below. For
gas-fired water heaters at TSL 5, DOE
analyzed energy efficiency level 1 for
small volumes paired with efficiency
level 6 for large volumes. For gas-fired
water heaters at TSL 6, DOE analyzed
energy efficiency level 2 for small
volumes paired with efficiency level 6
for large volumes.
Although it paired different
technologies for small-volume and
large-volume products for TSL 5 and
TSL 6, DOE maintained the same
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division point between small-volume
and large-volume gas-fired and electric
storage water heaters just as was done
in the December 2009 NOPR. As further
explained in the December 2009 NOPR,
DOE is concerned that increased
standards for large-volume water heaters
may drive production and sales of water
heaters at volumes just below the
division points. 74 FR 65852, 65929
(Dec. 11, 2009). As a result, in analyzing
TSL 5 and 6 for the final rule, DOE is
using the same division points as it used
for the December 2009 NOPR TSL 5,
which is 55 gallons for gas-fired and
electric storage water heaters, to attempt
to mitigate the potential migration to
small-volume units described above.
TSL 5 and 6 include efficiency levels
that effectively require heat pump
technology for electric storage water
heater with rated storage volumes above
55 gallons, and efficiency levels that
effectively require condensing
technology for gas-fired storage water
heaters with rated storage volumes
above 55 gallons. Using DOE’s
shipments model and market
assessment, DOE estimated
approximately 4 percent of gas-fired
storage water heater shipments and 11
percent of models would be subject to
the large-volume water heater
requirements using the TSL 5 and TSL
6 division. Similarly, DOE estimated
approximately 9 percent of electric
storage water heater shipments and 27
percent of models would be subject to
the large-volume water heater
requirements using the TSL 5 and TSL
6 division.
TSL 7 uses the same divisions as TSLs
1, 2, 3, and 4 for gas-fired water heaters
(i.e., does not include the distinction at
TSL 5 and TSL 6 for units above and
below a 55-gallon storage capacity). TSL
7 is identical to TSL 4 except DOE is
considering what is effectively a heat
pump water heater level for electric
storage water heaters across the entire
range of storage volumes that is
compatible with ENERGY STAR criteria
20183
for electric storage water heaters at the
representative rated storage volume.
TSL 8 consists of the max-tech
efficiency levels for each of the water
heater product classes at the time the
analysis was developed. The max-tech
efficiency levels were revised for the
final rule as described in the
engineering analysis. TSL 7 and 8 both
set efficiency levels that effectively
require use of heat pump technology for
electric storage water heaters. TSL 8,
however, requires a higher efficiency
level than TSL 7, which corresponds to
the max-tech efficiency level for the
representative rated storage capacity
(i.e., 2.35 EF at 50 gallons). TSL 8 also
sets efficiency levels that effectively
require use of condensing technology
for gas-fired storage and instantaneous
water heaters.
Table VI.1 presents the energy
efficiency equations and associated twoslope divisions for TSL 1 through
TSL 8.
TABLE VI.1—TRIAL STANDARD LEVELS FOR RESIDENTIAL WATER HEATERS (ENERGY FACTOR)
Trial standard level
Energy efficiency equation
TSL 1 .......................................................
For GSWHs with a Rated Storage Volume at or
below 60 gallons:
EF = 0.675¥(0.0015 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
60 gallons:
EF = 0.699¥(0.0019 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume at or
below 80 gallons:
EF = 0.967¥(0.00095 × Rated Storage Volume
in gallons).
For ESWHs with a Rated Storage Volume above
80 gallons:
EF = 1.013¥(0.00153 × Rated Storage Volume
in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.64¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
TSL 2 .......................................................
For GSWHs with a Rated Storage Volume at or
below 60 gallons:
EF = 0.675¥(0.0012 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
60 gallons:
EF = 0.717¥(0.0019 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume at or
below 80 gallons:
EF = 0.966¥(0.0008 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume above
80 gallons:
EF = 1.026¥(0.00155 × Rated Storage Volume
in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.66¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
jlentini on DSKJ8SOYB1PROD with RULES2
TSL 3 .......................................................
For GSWHs with a Rated Storage Volume at or
below 60 gallons:
EF = 0.675¥(0.0012 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
60 gallons:
EF = 0.717¥(0.0019 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume at or
below 80 gallons:
EF = 0.965¥(0.0006 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume above
80 gallons:
EF = 1.051¥(0.00168 × Rated Storage Volume
in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
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TABLE VI.1—TRIAL STANDARD LEVELS FOR RESIDENTIAL WATER HEATERS (ENERGY FACTOR)—Continued
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
TSL 4 .......................................................
For GSWHs with a Rated Storage Volume at or
below 60 gallons:
EF = 0.675¥(0.0012 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
60 gallons:
EF = 0.717¥(0.0019 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume at or
below 80 gallons:
EF = 0.960¥(0.0003 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume above
80 gallons:
EF = 1.088¥(0.0019 × Rated Storage Volume in
gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
TSL 5 .......................................................
For GSWHs with a Rated Storage Volume at or
below 55 gallons:
EF = 0.675¥(0.0015 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
55 gallons:
EF = 0.8012¥(0.00078 × Rated Storage Volume
in gallons).
For ESWHs with a Rated Storage Volume at or
below 55 gallons:
EF = 0.960¥(0.0003 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume above
55 gallons:
EF = 2.057¥(0.00113 × Rated Storage Volume
in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
TSL 6 .......................................................
For GSWHs with a Rated Storage Volume at or
below 55 gallons:
EF = 0.675¥(0.0012 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
55 gallons:
EF = 0.8012¥(0.00078 × Rated Storage Volume
in gallons).
For ESWHs with a Rated Storage Volume at or
below 55 gallons:
EF = 0.960¥(0.0003 × Rated Storage Volume in
gallons).
For ESWHs with a Rated Storage Volume above
55 gallons:
EF = 2.057¥(0.00113 × Rated Storage Volume
in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
TSL 7 .......................................................
For GSWHs with a Rated Storage Volume at or
below 60 gallons:
EF = 0.675¥0.0012 × Rated Storage Volume in
gallons).
For GSWHs with a Rated Storage Volume above
60 gallons:
EF = 0.717¥(0.0019 × Rated Storage Volume in
gallons).
For ESWHs (over the Entire Rated Storage Volume range):
EF = 2.057¥(0.00113 × Rated Storage Volume in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
jlentini on DSKJ8SOYB1PROD with RULES2
TSL 8 .......................................................
For GSWHs (over the Entire Rated Storage Volume range):
EF = 0.8012¥(0.00078 × Rated Storage Volume in gallons).
For ESWHs (over the Entire Rated Storage Volume range):
EF = 2.406¥(0.00113 × Rated Storage Volume in gallons).
For OSWHs (over the Entire Rated Storage Volume range):
EF = 0.74¥(0.0019 × Rated Storage Volume in gallons).
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TABLE VI.1—TRIAL STANDARD LEVELS FOR RESIDENTIAL WATER HEATERS (ENERGY FACTOR)—Continued
For GIWHs (over the Entire Rated Storage Volume range):
EF = 0.95¥(0.0019 × Rated Storage Volume in gallons).
2. Direct Heating Equipment
Table VI.2 presents the six TSLs DOE
analyzed for DHE in the final rule. The
only modifications made to the TSLs
analyzed for the final rule compared to
those analyzed for the December 2009
NOPR were to the efficiency levels in
TSLs 3, 4, 5, and 6 for gas wall gravity
efficiency. TSL 2, TSL 3, and TSL 4
consist of efficiency levels that have
gradually higher efficiency than TSL 1.
TSL 5 consists of the efficiency levels
that include electronic ignition and fan
assist (where applicable), and TSL 6
consists of the max-tech efficiency
levels for all of the DHE product classes.
DHE. These changes were made due to
a review of the gas wall gravity units
currently offered for sale and the
adjustment of the max-tech efficiency
level in response to commenters.
In general, TSL 1 consists of the
efficiency levels that are close to the
current shipment-weighted average
TABLE VI.2—TRIAL STANDARD LEVELS FOR DIRECT HEATING EQUIPMENT (AFUE)
Product class
Gas
Gas
Gas
Gas
Gas
TSL 1
Wall Fan (over 42,000 Btu/h) ...................................
Wall Gravity (over 27,000 and up to 46,000 Btu/h)
Floor (over 37,000 Btu/h) .........................................
Room (over 27,000 and up to 46,000 Btu/h) ...........
Hearth (over 27,000 and up to 46,000 Btu/h) .........
3. Gas-Fired Pool Heaters
TSL 2
75%
66%
58%
66%
67%
TSL 3
76%
66%
58%
67%
67%
77%
69%
58%
68%
67%
December 2009 NOPR. TSL 1 consists of
the efficiency level that is close to the
current shipment-weighted average
efficiency. TSL 2 and TSL 3 consist of
efficiency levels that have gradually
Table VI.3 shows the six TSLs DOE
analyzed for pool heaters, which are
identical to the TSLs analyzed in the
TSL 4
TSL 5
80%
69%
58%
68%
72%
TSL 6
75%
70%
58%
83%
72%
80%
70%
58%
83%
93%
higher efficiency than TSL 1. TSL 4 is
the highest efficiency level with positive
NPV. TSL 5 is the highest analyzed noncondensing efficiency level, and TSL 6
consists of the max-tech efficiency level.
TABLE VI.3—TRIAL STANDARD LEVELS FOR POOL HEATERS (THERMAL EFFICIENCY)
Product class
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
Gas-fired ..........................................................................
81%
82%
83%
84%
86%
95%
B. Significance of Energy Savings
To estimate the energy savings due to
potential standards, from 2013 to 2043
for DHE and pool heaters and from 2015
to 2045 for water heaters, DOE
compared the energy consumption
attributable to the three types of heating
products under the base case (no
standards) to energy consumption
attributable to these products under
each standards case (each TSL that DOE
has considered). Table VI.4, Table VI.5,
and Table VI.6 present DOE’s national
energy savings (NES) estimates
(undiscounted) for each of the three
types of heating products, by product
class at each TSL. Chapter 10 of the TSD
describes these estimates in more detail.
TABLE VI.4—WATER HEATERS: CUMULATIVE NATIONAL ENERGY SAVINGS IN QUADS
Product class
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
TSL 7
TSL 8
Gas-Fired Storage ...........................
Electric Storage ................................
Oil-Fired Storage ..............................
Gas-Fired Instantaneous .................
0.69
0.29
0.00
0.08
1.17
0.41
0.01
0.08
1.17
0.79
0.01
0.08
1.17
1.09
0.01
0.08
0.81
1.67
0.01
0.08
1.29
1.67
0.01
0.08
1.17
8.90
0.01
0.08
4.91
11.22
0.02
0.58
Total ..........................................
1.07
1.66
2.05
2.35
2.58
3.06
10.16
16.73
TABLE VI.5—DIRECT HEATING EQUIPMENT: CUMULATIVE NATIONAL ENERGY SAVINGS IN QUADS
jlentini on DSKJ8SOYB1PROD with RULES2
Product class
Gas
Gas
Gas
Gas
Gas
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
Wall Fan ...................................................................
Wall Gravity ..............................................................
Floor .........................................................................
Room ........................................................................
Hearth .......................................................................
0.01
0.01
0.0001
0.001
0.19
0.01
0.01
0.0001
0.002
0.19
0.01
0.03
0.0001
0.004
0.19
0.03
0.03
0.0001
0.004
0.37
0.01
0.06
0.0001
0.04
0.37
0.03
0.06
0.0001
0.04
1.13
Total ..........................................................................
0.20
0.21
0.23
0.43
0.48
1.26
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.6—POOL HEATERS: CUMULATIVE NATIONAL ENERGY SAVINGS IN QUADS
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
0.01
0.02
0.04
0.06
0.09
0.22
Gas-Fired .....................................................................................
C. Economic Justification
1. Economic Impact on Consumers
a. Life-Cycle Costs and Payback Period
Consumers affected by amended
standards usually experience higher
product purchase prices and lower
operating costs. Generally, these
impacts are captured by changes in lifecycle costs and by the payback period.
Therefore, DOE calculated the LCC and
PBP for the standard levels considered
in this rulemaking.
DOE’s LCC and PBP analyses provide
seven key outputs for each TSL, which
are reported in Table VI.7 through Table
VI.16 below. The first two of these
outputs is the average LCC and average
LCC savings. (A negative ‘‘LCC savings’’
for a standard level indicates that the
life-cycle cost of a standards-compliant
product would be higher than the lifecycle cost of a baseline product.) The
next three outputs are the proportion of
purchases of the product that already
comply with the TSL and that would
create a net life-cycle cost, no impact, or
a net life-cycle savings for the
purchaser.
The sixth and seventh outputs are the
median and average PBPs, respectively,
for the consumer purchasing a design
that complies with the TSL compared
with purchasing a baseline product. The
PBP is the number of years it would take
for the purchaser to recover, as a result
of energy savings, the increased cost of
a higher-efficiency product based on
operating cost savings from the first year
of ownership. The PBP is an economic
benefit-cost measure that uses benefits
and costs without discounting. DOE’s
analysis includes both the analysis
contemplated under the rebuttable
presumption test, which is based on
energy use as determined under
conditions prescribed by the DOE test
procedure, and analysis of the payback
period based on conditions of actual use
of the product by purchasers. DOE
derived the median and average PBPs in
Table VI.7 through Table VI.16 by using
the latter method. While DOE examined
the rebuttable presumption criterion
(see chapter 8 of the TSD), it also
evaluated the standard levels adopted in
today’s rule through a more detailed
analysis of the economic impacts of
these levels pursuant to section
325(o)(2)(B)(i) of EPCA. (42 U.S.C.
6295(o)(2)(B)(i))
TSD chapter 8 provides detailed
information on the LCC and PBP
analyses.
TABLE VI.7—GAS-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS
LCC
Energy
factor
TSL
1 .......................................
2, 3, 4 ...............................
5 * .....................................
6 * .....................................
7 .......................................
8 .......................................
0.62
0.63
0.62
0.63
0.67
0.77
Average
LCC 2009$
Average
LCC savings 2009$
$3,528
3,537
3,528
3,537
3,793
3,771
Payback period
Households with
$16
7
18
9
¥218
¥195
Net cost
%
No impact
%
25
32
27
34
70
70
Net benefit
%
36
22
33
21
6
1
39
45
40
46
23
28
Median
years
Average
years
2.0
4.5
2.3
4.7
21.5
15.6
17.0
18.6
16.9
18.3
27.1
16.8
* For TSL 5 and 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small- and large-volume
water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (40 gal).
TABLE VI.8—ELECTRIC STORAGE WATER HEATERS: LCC AND PBP RESULTS
LCC
Energy
factor
jlentini on DSKJ8SOYB1PROD with RULES2
TSL
1 .......................................
2 .......................................
3 .......................................
4 .......................................
5, 6 ...................................
7 .......................................
8 .......................................
0.92
0.93
0.94
0.95
* 1.04
2.00
2.35
Average
LCC
2009$
Average
LCC
savings
2009$
$3,255
3,245
3,236
3,236
3,188
3,136
3,076
Payback period
Net cost
%
$5
11
18
18
64
112
171
No impact
%
11
12
21
32
33
50
50
Net benefit
%
44
39
17
10
9
5
1
45
48
62
59
58
45
49
Median
years
4.0
4.0
5.0
6.7
6.8
9.4
9.0
Average
years
10.2
10.0
9.3
9.9
10.2
26.2
20.0
* For TSL 5 and 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and large-volume
water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (50 gal).
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TABLE VI.9—OIL-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS
Average
LCC
2009$
Energy
factor
TSL
1 .......................................
2 .......................................
3, 4, 5, 6, 7 ......................
8 .......................................
LCC
0.58
0.60
0.62
0.68
Average
LCC
savings
2009$
$8,102
7,885
7,721
7,463
Payback period
Households with
Net cost
%
$101
203
295
495
No impact
%
0
0
0
0
Median
years
Average
years
Net benefit
%
76
54
47
17
24
46
53
83
0.9
0.3
0.5
1.9
0.9
0.2
0.7
2.1
TABLE VI.10—GAS-FIRED INSTANTANEOUS WATER HEATERS: LCC AND PBP RESULTS
LCC
Energy
factor
TSL
1 through 7 .......................
8 .......................................
Average
LCC
2009$
0.82
0.95
Average
LCC
savings
2009$
$5,505
5,913
Payback period
Households with
Net cost
%
$9
¥259
No impact
%
5
77
Net benefit
%
91
12
4
11
Median
years
Average
years
14.8
38.7
24.3
55.0
TABLE VI.11—GAS WALL FAN DHE: LCC AND PBP RESULTS
LCC
TSL
AFUE %
1, 5 ...................................
2 .......................................
3 .......................................
4, 6 ...................................
75
76
77
80
Average
LCC
2009$
Average
LCC
savings
2009$
$7,170
7,131
7,114
7,189
Payback period
Households with
Net cost
%
$83
102
114
43
No impact
%
0
3
19
53
Net benefit
%
60
53
26
7
40
44
55
40
Median
years
Average
years
2.7
3.2
5.0
12.2
2.7
3.9
9.9
33.7
TABLE VI.12—GAS WALL GRAVITY DHE: LCC AND PBP RESULTS
LCC
TSL
AFUE %
1, 2 ...................................
3, 4 ...................................
5, 6 ...................................
66
69
70
Average
LCC
2009$
Average
LCC
savings
2009$
$6,848
6,760
6,880
Payback period
Households with
Net cost
%
$21
64
¥56
No impact
%
10
33
70
Net benefit
%
75
37
0
15
30
30
Median
years
Average
years
7.5
11.0
16.5
13.8
22.5
18.6
TABLE VI.13—GAS FLOOR DHE: LCC AND PBP RESULTS
LCC
TSL
AFUE %
jlentini on DSKJ8SOYB1PROD with RULES2
1, 2, 3, 4, 5, 6 ..................
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2009$
Average
LCC
savings
2009$
$7,755
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%
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%
23
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%
58
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years
10.7
Average
years
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TABLE VI.14—GAS ROOM DHE: LCC AND PBP RESULTS
LCC
TSL
AFUE %
1 .......................................
2 .......................................
3, 4 ...................................
5, 6 ...................................
Average
LCC
2009$
66
67
68
83
Average
LCC
savings
2009$
$7,349
7,284
7,226
6,628
Payback period
Households with
Net cost
%
$26
60
104
702
No impact
%
9
12
19
32
Net benefit
%
74
50
25
0
16
38
57
68
Median
years
Average
years
6.7
4.5
4.8
6.9
11.8
8.3
8.2
8.7
TABLE VI.15—GAS HEARTH DHE: LCC AND PBP RESULTS
LCC
TSL
AFUE %
1, 2, 3 ...............................
4, 5 ...................................
6 .......................................
Average
LCC
2009$
67
72
93
Average
LCC
savings
2009$
$5,146
5,324
5,475
Payback period
Households with
Net cost
%
$112
¥28
¥179
No impact
%
3
55
77
Net benefit
%
61
23
1
37
21
22
Median
years
Average
years
0.0
17.1
26.8
3.1
47
60.2
TABLE VI.16—GAS-FIRED POOL HEATERS: LCC AND PBP RESULTS
LCC
Thermal
efficiency %
TSL
1
2
3
4
5
6
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
Average
LCC
2009$
81
82
83
84
86
95
Average
LCC
savings
2009$
$8,212
8,217
8,264
8,322
8,959
9,698
b. Consumer Subgroup Analysis
For water heaters, DOE estimated
consumer subgroup impacts for lowincome households and senior-only
households by determining the LCC
impacts of the TSLs considered for gasfired and electric storage water heaters.
In addition, DOE estimated consumer
subgroup impacts on households in
multi-family housing and households in
manufactured homes for the TSLs
considered for gas-fired and electric
storage water heaters. DOE also
Payback period
Households with
Net cost
%
$25
22
¥6
¥52
¥632
¥1,361
No impact
%
5
27
60
64
88
95
Net benefit
%
72
51
23
21
9
1
estimated the consumer subgroup
impacts for low-income households and
senior-only households for gas wall fan
and gas wall gravity DHE.
For gas-fired storage water heaters, the
impacts of the standard in today’s final
rule are roughly the same for the senioronly subgroup and the low-income
subgroup as they are for the full
household sample for this product class
(see Table VI.17 and Table VI.18). For
the multi-family subgroup, the results
report an average LCC increase (i.e.,
23
22
17
15
3
4
Median
years
Average
years
2.7
8.6
18.2
19.2
38.1
33.2
5.4
15.2
32.3
39.0
85.8
74.1
negative savings) of $13, and they also
show a 36-percent share of households
with a net LCC benefit, and a 31-percent
share of households with a net LCC cost
(see Table VI.19). For the manufactured
home subgroup, the results report an
average LCC increase (i.e., negative
savings) of $17, and they also show a
35-percent share of households with a
net LCC benefit, and a 36-percent share
of households with a net LCC cost (see
Table VI.20).
TABLE VI.17—GAS-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR SENIOR-ONLY HOUSEHOLDS
LCC
Energy
factor
jlentini on DSKJ8SOYB1PROD with RULES2
TSL
1 .......................................
2, 3, 4 ...............................
5 * .....................................
6 * .....................................
7 .......................................
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0.62
0.63
0.62
0.63
0.67
Jkt 220001
Average
LCC
2009$
Average
LCC
savings
2009$
$3,072
3,081
3,071
3,079
3,355
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Households with
Net cost
%
$14
7
16
9
¥235
Fmt 4701
Payback period
No impact
%
27
34
27
34
71
Sfmt 4700
Net benefit
%
32
19
31
19
6
E:\FR\FM\16APR2.SGM
41
47
41
47
22
16APR2
Median
years
1.9
4.1
2.0
4.2
22.5
Average
years
19.4
19.5
19.4
19.3
27.8
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.17—GAS-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR SENIOR-ONLY HOUSEHOLDS—
Continued
LCC
Energy
factor
TSL
8 .......................................
Average
LCC
2009$
0.77
Average
LCC
savings
2009$
Households with
Net cost
%
¥257
3,377
Payback period
No impact
%
75
Net benefit
%
1
24
Median
years
Average
years
17.4
18.2
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (40 gal).
TABLE VI.18—GAS-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR LOW-INCOME HOUSEHOLDS
LCC
Energy
factor
TSL
1 .......................................
2, 3, 4 ...............................
5 * .....................................
6 * .....................................
7 .......................................
8 .......................................
Average
LCC
2009$
0.62
0.63
0.62
0.63
0.67
0.77
Average
LCC
savings
2009$
$3,591
3,610
3,586
3,605
3,877
3,847
Payback period
Households with
Net cost
%
$9
¥8
15
¥2
¥243
¥213
No impact
%
29
36
29
36
71
70
Net benefit
%
31
19
31
19
6
2
40
45
41
45
23
28
Median
years
Average
years
2.1
6.1
2.1
6.2
22.9
16.4
18.7
21.2
18.7
21.2
28.5
17.6
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (40 gal).
TABLE VI.19—GAS-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR MULTI-FAMILY HOUSEHOLDS
LCC
Energy
factor
TSL
1 .......................................
2, 3, 4 ...............................
5 * .....................................
6 * .....................................
7 .......................................
8 .......................................
Average
LCC
2009$
0.62
0.63
0.62
0.63
0.67
0.77
Average
LCC
savings
2009$
Households with
Net cost
%
¥$11
¥45
¥13
¥46
¥324
¥380
$2,825
2,868
2,827
2,870
3,182
3,239
Payback period
No impact
%
31
41
31
41
74
79
Net benefit
%
33
21
32
21
6
2
36
38
36
37
19
19
Median
years
Average
years
2.4
11.0
2.5
11.0
27.2
21.2
26.5
27.2
26.5
27.2
35.2
23.2
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (40 gal).
TABLE VI.20—GAS-FIRED STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR MANUFACTURED HOME
HOUSEHOLDS
LCC
Energy
factor
TSL
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1 .......................................
2, 3, 4 ...............................
5 * .....................................
6 * .....................................
7 .......................................
8 .......................................
Average
LCC
2009$
0.62
0.63
0.62
0.63
0.67
0.77
Average
LCC
savings
2009$
$4,035
4,082
4,035
4,082
4,275
4,207
Payback period
Households with
Net cost
%
¥$17
¥59
¥17
¥59
¥232
¥164
No impact
%
36
48
36
48
69
64
Net benefit
%
29
17
29
17
6
2
35
34
35
34
25
34
Median
years
9.9
13.1
9.9
13.1
21.1
14.7
Average
years
25.1
26.7
25.1
26.7
27.3
17.0
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (40 gal).
For electric storage water heaters, the
impacts of the standard in today’s final
rule are approximately the same for the
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full household sample for this product
class (see Table VI.21). For the low-
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income subgroup, the results show an
average LCC savings of $18, a 53-percent
share of households with a net LCC
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benefit, and a 39-percent share of
households with a net LCC cost (see
Table VI.22). For the multi-family
subgroup, the results report an average
LCC increase (i.e., negative savings) of
$8, and they also show a 53-percent
share of households with a net LCC
benefit, and a 38-percent share of
households with a net LCC cost (see
Table VI.23). For the manufactured
home subgroup, the results report an
average LCC increase (i.e., negative
savings) of $20, and they also show a
38-percent share of households with a
net LCC benefit, and a 54-percent share
of households with a net LCC cost (see
Table VI.24).
TABLE VI.21—ELECTRIC STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR SENIOR-ONLY HOUSEHOLDS
LCC
Energy
factor
TSL
1 .......................................
2 .......................................
3 .......................................
4 .......................................
5, 6 ...................................
7 .......................................
8 .......................................
0.92
0.93
0.94
0.95
* 1.04
2.00
2.35
Average
LCC
2009$
Average
LCC
savings
2009$
$2,859
2,849
2,839
2,837
2,826
2,937
2,895
Payback period
Households with
Net cost
%
$6
11
19
20
31
¥76
¥34
No impact
%
11
12
21
30
32
59
58
Net benefit
%
42
38
16
10
9
5
1
47
50
63
60
59
36
41
Median
years
Average
years
3.8
3.8
5.0
6.3
6.6
11.0
10.5
10.1
9.9
9.2
9.6
10.1
21.6
17.5
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (50 gal).
TABLE VI.22—ELECTRIC STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR LOW-INCOME HOUSEHOLDS
LCC
Energy
factor
TSL
1 .......................................
2 .......................................
3 .......................................
4 .......................................
5, 6 ...................................
7 .......................................
8 .......................................
0.92
0.93
0.94
0.95
* 1.04
2.00
2.35
Average
LCC
2009$
Average
LCC
savings
2009$
Households with
Net cost
%
¥$3
1
0
¥1
18
61
114
$3,203
3,196
3,196
3,197
3,178
3,132
3,078
Payback period
No impact
%
15
16
29
38
39
54
54
Net benefit
%
39
36
14
9
9
5
1
46
48
57
53
53
41
45
Median
years
Average
years
4.2
4.2
5.5
7.1
7.3
10.1
9.9
12.4
12.2
11.1
11.3
11.5
28.4
23.0
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small- and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (50 gal).
TABLE VI.23—ELECTRIC STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR MULTI-FAMILY HOUSEHOLDS
LCC
Energy
factor
TSL
1 .......................................
2 .......................................
3 .......................................
4 .......................................
5, 6 ...................................
7 .......................................
8 .......................................
0.92
0.93
0.94
0.95
* 1.04
2.00
2.35
Average
LCC
2009$
Average
LCC
savings
2009$
Households with
Net cost
%
¥$2
1
¥6
¥7
¥8
¥436
¥447
$2,015
2,009
2,017
2,018
2,019
2,468
2,479
Payback period
No impact
%
14
15
31
37
38
79
81
Net benefit
%
35
32
13
9
9
5
1
50
52
56
54
53
16
18
Median
years
Average
years
4.0
4.0
5.6
6.9
7.0
25.5
24.4
11.6
11.3
11.7
11.6
11.9
67.9
50.8
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small- and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (50 gal).
TABLE VI.24—ELECTRIC STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR MANUFACTURED HOME HOUSEHOLDS
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LCC
Energy
factor
TSL
1 .......................................
2 .......................................
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0.92
0.93
Jkt 220001
Average
LCC
2009$
Average
LCC
savings
2009$
$3,152
3,151
PO 00000
Frm 00080
Households with
Net cost
%
¥$32
¥31
Fmt 4701
Payback period
No impact
%
31
33
Sfmt 4700
Net benefit
%
35
33
E:\FR\FM\16APR2.SGM
33
35
16APR2
Median
years
7.0
7.7
Average
years
21.8
21.4
20191
Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.24—ELECTRIC STORAGE WATER HEATERS: LCC AND PBP RESULTS FOR MANUFACTURED HOME
HOUSEHOLDS—Continued
LCC
Energy
factor
TSL
3 .......................................
4 .......................................
5, 6 ...................................
7 .......................................
8 .......................................
Average
LCC
2009$
0.94
0.95
* 1.04
2.00
2.35
Average
LCC
savings
2009$
3,153
3,154
3,140
3,103
3,055
Payback period
Households with
Net cost
%
¥33
¥35
¥20
14
61
No impact
%
47
54
54
56
55
Median
years
Net benefit
%
14
9
9
5
1
40
38
38
39
44
Average
years
13.0
12.9
13.4
10.5
10.1
15.4
14.8
15.0
25.0
21.4
* For TSL 5 and TSL 6, the EF and the results represent shipments-weighted averages of the EFs and results that apply to small-and largevolume water heaters, respectively. For the other TSLs, the EF and the results refer to the representative rated volume (50 gal).
For gas wall fan and gas wall gravity
DHE, DOE estimated that the impacts of
the standards in today’s final rule are
roughly the same for the senior-only
sample and the low-income sample as
they are for the full household sample
for these product classes. For gas hearth
DHE, DOE performed the senior-only
analysis but did not perform the lowincome analysis due to the extremely
small sample size and relatively high
product cost. The results for the gas
hearth DHE senior-only sample were
about the same as for the full household
sample. (See tables in chapter 11 of the
TSD).
DOE did not estimate the impacts of
consumer subgroups for oil-fired storage
water heaters, gas floor DHE, and gas
room DHE due to low product
shipments, and for gas-fired
instantaneous water heaters due to
insufficient data. For pool heaters, DOE
did not perform consumer subgroup
analyses since this product is typically
not owned by these subgroups.
Chapter 11 of the TSD explains DOE’s
methodology for conducting the
consumer subgroup analysis and
presents the detailed results of that
analysis for each considered efficiency
level.
c. Rebuttable Presumption Payback
As discussed in section III.D.2, EPCA
provides a rebuttable presumption that
an energy conservation standard is
economically justified if the increase in
purchase cost for a product that meets
the standard is less than three times the
value of the first-year energy (and, as
applicable, water) savings resulting from
the standard. DOE’s LCC and PBP
analyses generate values that calculate
the payback period for consumers of
potential energy conservation standards,
which include, but are not limited to,
the payback period contemplated under
the rebuttable presumption test
discussed above. However, DOE
routinely conducts a full economic
analysis that considers the full range of
impacts, including those to the
consumer, manufacturer, Nation, and
environment, as required under 42
U.S.C. 6295(o)(2)(B)(i). The results of
this analysis serve as the basis for DOE
to evaluate definitively the economic
justification for a potential standard
level (thereby supporting or rebutting
the results of any preliminary
determination of economic
justification).
As required by EPCA, DOE based the
calculation of rebuttable presumption
payback period on the assumptions in
the DOE test procedures for each of the
three types of heating products. For
water heaters and DHE, respectively,
Table VI.24 and Table VI.25 show the
rebuttable presumption PBPs for those
TSLs that have a rebuttable presumption
payback period of less than 3 years. For
pool heaters, only one of the considered
efficiency levels has a rebuttable
presumption payback period of less
than 3 years—81 percent thermal
efficiency has a rebuttable presumption
payback period of 2.7 years.
TABLE VI.24—WATER HEATERS: REBUTTABLE PRESUMPTION PAYBACK PERIODS
Payback period, years
TSL
1
2
3
4
5
6
7
8
Gas-fired
storage
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
Electric
storage
>3
>3
>3
>3
>3
>3
>3
>3
Oil-fired
storage
>3
>3
>3
>3
>3
>3
>3
>3
Gas-fired
instantaneous
0.8
0.4
0.6
0.6
0.6
0.6
0.6
0.9
>3
>3
>3
>3
>3
>3
>3
>3
jlentini on DSKJ8SOYB1PROD with RULES2
TABLE VI.25—DIRECT HEATING EQUIPMENT: REBUTTABLE PRESUMPTION PAYBACK PERIODS
Payback period, years
TSL
Gas wall fan
DHE
Gas wall
gravity DHE
Gas furnace
DHE
>3
>3
>3
>3
>3
>3
1 ...............................................................................................................
2 ...............................................................................................................
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Gas wall
room DHE
>3
>3
Gas hearth
DHE
2.5
2.5
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.25—DIRECT HEATING EQUIPMENT: REBUTTABLE PRESUMPTION PAYBACK PERIODS—Continued
Payback period, years
TSL
3
4
5
6
Gas wall fan
DHE
Gas wall
gravity DHE
Gas furnace
DHE
>3
>3
>3
>3
>3
>3
>3
>3
>3
>3
>3
>3
...............................................................................................................
...............................................................................................................
...............................................................................................................
...............................................................................................................
2. Economic Impact on Manufacturers
For the MIA in the December 2009
NOPR, DOE used the INPV to compare
the financial impacts of different TSLs
on water heater, DHE, and pool heater
manufacturers. 74 FR 65852, 65935–47
(Dec. 11, 2009). DOE presented the
results by grouping product classes
made by the same manufacturers and
uses the scenarios that show the likely
changes in industry value following
amended energy conservation
standards. DOE used the GRIM to
compare the INPV of the base case (no
new energy conservation standards) to
that of each TSL for each covered
product. The INPV is the sum of all net
cash flows discounted by the industry’s
cost of capital (discount rate). The
difference in INPV between the base
case and the standards case is an
estimate of the economic impacts that
implementing that standard level would
have on the entire industry.
For today’s final rule, DOE continues
to use the methodology presented in the
December 2009 NOPR (74 FR 65852,
65915–22 (Dec. 11, 2009)) and in section
IV.I. DOE modeled two different markup
scenarios to estimate the potential
impacts of amended energy
conservation standards on
manufacturers. To assess the lower end
of the range of potential impacts on
manufacturers, DOE modeled the
preservation of return on invested
Gas wall
room DHE
Gas hearth
DHE
>3
>3
>3
>3
2.5
>3
>3
>3
Reference Case gas-fired instantaneous
water heater market share scenario, the
AEO Reference Case economic growth
scenario, and the moderate rate of
efficiency growth scenarios. The main
NIA scenario for water heaters also
accounts for fuel switching at a level
that effectively requires HPWHs for all
rated storage volumes (final rule TSL 7
and TSL 8) and capacity switching at a
level that required advanced technology
for water heaters with rated storage
volumes above 55 gallons (final rule
TSL 5 and TSL 6). In all standards-case
shipment scenarios for all three types of
heating products, DOE assumed that
shipments at efficiencies below the
projected minimum standard levels
would roll up to the new standard levels
in response to amended energy
conservation standards.
The sections below outline comments
on the economic impacts on
manufacturers presented in the
December 2009 NOPR and provide
DOE’s response. The complete MIA
results section can be found in the
December 2009 NOPR (74 FR 65852,
65935–54 (Dec. 11, 2009)) and chapter
12 of the TSD.
capital scenario. In addition to the
impact of the main NIA shipment
scenario and the required capital and
product conversion costs on INPV, this
case models a situation in which
manufacturers would maintain the basecase return on invested capital in the
standards case. This scenario represents
the lower (more favorable) end of the
range of potential impacts on
manufacturers because the industry
generates a historical rate of operating
profit on the physical and financial
investments required by energy
conservation standards. To assess the
higher end of the range of potential
impacts on the manufacturers of the
three types of heating products, DOE
modeled the preservation of operating
profit markup scenario in which higher
energy conservation standards result in
lower manufacturer markups. This
scenario models a scenario in which the
higher production costs of moreefficient technology and required
investments are not fully passed on to
customers, consequently lowering
operating profit margins. This scenario
represents the upper end of the range of
potential impacts on manufacturers only
because no additional operating profit is
earned on the investments required to
meet the amended energy conservation
standards.
In overview, DOE notes that for water
heaters, the main NIA scenario used the
a. Cash-Flow Analysis Results for Water
Heaters
i. Cash-Flow Analysis Results for GasFired and Electric Storage Water Heaters
TABLE VI.26—MANUFACTURER IMPACT ANALYSIS FOR GAS-FIRED AND ELECTRIC STORAGE WATER HEATERS—
PRESERVATION OF RETURN ON INVESTED CAPITAL MARKUP SCENARIO
Trial standard level
Base
case
Units
1
2
3
4
5
6
7
8
(2009$ millions) ...............
(2009$ millions) ...............
(%) ...................................
$880.4
................
................
$875.5
¥4.9
¥0.56%
$876.0
¥4.3
¥0.49%
$875.1
¥5.2
¥0.59%
$875.5
¥4.8
¥0.55%
$854.4
¥25.9
¥2.94%
$856.8
¥23.6
¥2.68%
$869.9
¥10.5
¥1.19%
$959.6
79.2
9.00%
Product Conversion Costs
Capital Conversion Costs
jlentini on DSKJ8SOYB1PROD with RULES2
INPV ................................
Change in INPV ...............
(2009$ millions) ...............
(2009$ millions) ...............
................
................
12.1
0.0
14.5
4.3
14.5
4.3
14.5
40.7
31.8
63.7
31.8
63.7
61.1
76.0
79.7
208.0
Total Conversion
Costs.
(2009$ millions) ...............
................
12.1
18.7
18.7
55.1
95.4
95.4
137.1
287.8
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.27—MANUFACTURER IMPACT ANALYSIS FOR GAS-FIRED AND ELECTRIC STORAGE WATER HEATERS—
PRESERVATION OF OPERATING PROFIT MARKUP SCENARIO
Base
case
Units
INPV ................................
Change in INPV ...............
Product Conversion Costs
Capital Conversion Costs
Total Conversion Costs ...
(2009$ millions) ...............
(2009$ millions) ...............
(%) ...................................
(2009$ millions) ...............
(2009$ millions) ...............
(2009$ millions) ...............
The December 2009 NOPR discusses
the estimated impact of amended energy
conservation standards on INPV for gasfired and electric storage water heater
manufacturers in further detail. 74 FR
$880.4
................
................
................
................
................
Trial standard level
1
$866.1
¥14.2
¥1.62
12.1
0.0
12.1
2
$849.0
¥31.4
¥3.56
14.5
4.3
18.7
3
4
$842.1
¥38.3
¥4.35
14.5
4.3
18.7
5
$790.9
¥89.4
¥10.16
14.5
40.7
55.1
65852, 65936–39 (Dec. 11, 2009). DOE
did not receive any comments on the
gas-fired and electric storage water
heaters INPV results. Those comments
related to conversion costs and
$757.8
¥122.6
¥13.93
31.8
63.7
95.4
6
$745.7
¥134.6
¥15.29
31.8
63.7
95.4
7
$530.2
¥350.2
¥39.78
61.1
76.0
137.1
8
$233.4
¥647.0
¥73.49
79.7
208.0
287.8
methodology are discussed in section
IV.I.1.
ii. Cash-Flow Analysis Results for OilFired Storage Water Heaters
TABLE VI.28—MANUFACTURER IMPACT ANALYSIS FOR OIL-FIRED STORAGE WATER HEATERS—PRESERVATION OF
RETURN ON INVESTED CAPITAL MARKUP SCENARIO
Base
case
Units
INPV ................................
Change in INPV ...............
Product Conversion Costs
Capital Conversion Costs
Total Conversion Costs ...
(2009$ millions) ...............
(2009$ millions) ...............
(%) ...................................
(2009$ millions) ...............
(2009$ millions) ...............
(2009$ millions) ...............
$9.1
................
................
................
................
................
Trial standard level
1
2
3
4
5
6
7
$8.9
(0.2)
¥1.98
0.3
0.2
0.5
$8.9
(0.2)
¥1.85
0.3
0.2
0.5
$8.9
(0.2)
¥2.01
0.3
0.2
0.5
$8.9
(0.2)
¥2.01
0.3
0.2
0.5
$8.9
(0.2)
¥2.01
0.3
0.2
0.5
$8.9
(0.2)
¥2.01
0.3
0.2
0.5
$8.9
(0.2)
¥2.01
0.3
0.2
0.5
8
$7.7
(1.4)
¥15.37
1.1
4.0
5.1
TABLE VI.29—MANUFACTURER IMPACT ANALYSIS FOR OIL-FIRED STORAGE WATER HEATERS—PRESERVATION OF
OPERATING PROFIT MARKUP SCENARIO
Base
case
Units
INPV ................................
Change in INPV ...............
Product Conversion Costs
Capital Conversion Costs
Total Conversion Costs ...
(2009$ millions) ...............
(2009$ millions) ...............
(%) ...................................
(2009$ millions) ...............
(2009$ millions) ...............
(2009$ millions) ...............
The December 2009 NOPR discusses
the estimated impact of amended energy
conservation standards on INPV for oilfired storage water heater manufacturers
in further detail. 74 FR 65852, 65939–
$9.1
................
................
................
................
................
Trial standard level
1
2
3
4
5
6
7
$8.8
(0.4)
¥3.85
0.3
0.2
0.5
$8.8
(0.3)
¥3.56
0.3
0.2
0.5
$8.7
(0.4)
¥4.23
0.3
0.2
0.5
$8.7
(0.4)
¥4.23
0.3
0.2
0.5
$8.7
(0.4)
¥4.23
0.3
0.2
0.5
$8.7
(0.4)
¥4.23
0.3
0.2
0.5
$8.7
(0.4)
¥4.23
0.3
0.2
0.5
40 (Dec. 11, 2009). DOE did not receive
any comments on the oil-fired water
heaters INPV results. Those comments
related to conversion costs and
8
$5.3
(3.8)
¥41.44
1.1
4.0
5.1
methodology are discussed in section
IV.I.1.
iii. Cash-Flow Analysis Results for GasFired Instantaneous Water Heaters
TABLE VI.30—MANUFACTURER IMPACT ANALYSIS FOR GAS-FIRED INSTANTANEOUS WATER HEATERS –PRESERVATION OF
RETURN ON INVESTED CAPITAL MARKUP SCENARIO
Base
case
Units
INPV ................................
Change in INPV ...............
jlentini on DSKJ8SOYB1PROD with RULES2
Product Conversion Costs
Capital Conversion Costs
Total Conversion Costs ...
VerDate Nov<24>2008
(2009$ millions) ...............
(2009$ millions) ...............
(%) ...................................
(2009$ millions) ...............
(2009$ millions) ...............
(2009$ millions) ...............
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$648.2
................
................
................
................
................
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1
$650.6
2.3
0.36
0.0
0.0
0.0
Fmt 4701
2
$650.6
2.3
0.36
0.0
0.00
0.0
Sfmt 4700
3
$650.6
2.3
0.36
0.0
0.00
0.0
4
$650.6
2.3
0.36
0.0
0.0
0.0
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5
$650.6
2.3
0.36
0.0
0.0
0.0
16APR2
6
$650.6
2.3
0.36
0.0
0.0
0.0
7
$650.6
2.3
0.36
0.0
0.0
0.0
8
$739.7
91.4
14.10
8.8
10.6
19.4
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TABLE VI.31—MANUFACTURER IMPACT ANALYSIS FOR GAS-FIRED INSTANTANEOUS STORAGE WATER HEATERS—
PRESERVATION OF OPERATING PROFIT MARKUP SCENARIO
INPV ................................
Change in INPV ...............
Product Conversion Costs
Capital Conversion Costs
Total Conversion Costs ...
Trial standard level
Base
case
1
2
3
4
5
6
7
8
$648.2
................
................
................
................
................
$647.0
(1.2)
¥0.19%
0.0
0.0
0.0
$647.0
(1.2)
¥0.19%
0.0
0.00
0.0
$647.0
(1.2)
¥0.19%
0.0
0.00
0.0
$647.0
(1.2)
¥0.19%
0.0
0.0
0.0
$647.0
(1.2)
¥0.19%
0.0
0.0
0.0
$647.0
(1.2)
¥0.19%
0.0
0.0
0.0
$647.0
(1.2)
¥0.19%
0.0
0.0
0.0
$590.6
(57.6)
¥8.89%
8.8
10.6
19.4
Units
(2009$ millions) ...............
(2009$ millions) ...............
(%) ...................................
(2009$ millions) ...............
(2009$ millions) ...............
(2009$ millions) ...............
The December 2009 NOPR discusses
the estimated impact of amended energy
conservation standards on INPV for gasfired instantaneous water heater
manufacturers in further detail. 74 FR
65852, 65940–41 (Dec. 11, 2009). DOE
did not receive any comments on the
gas-fired instantaneous water heater
INPV results.
b. Cash-Flow Analysis Results for Direct
Heating Equipment
i. Cash-Flow Analysis Results for
Traditional Direct Heating Equipment
(Gas Wall Fan, Gas Wall Gravity, Gas
Floor, and Gas Room Direct Heating
Equipment)
TABLE VI.32—MANUFACTURER IMPACT ANALYSIS FOR TRADITIONAL DIRECT HEATING EQUIPMENT—PRESERVATION OF
RETURN ON INVESTED CAPITAL MARKUP SCENARIO
Trial standard level
Units
Base case
1
INPV .............................
Change in INPV ...........
Product Conversion
Costs.
Capital Conversion
Costs.
Total Conversion Costs
2
3
4
5
6
(2009$ millions) ...........
(2009$ millions) ...........
(%) ...............................
(2009$ millions) ...........
$16.6
..................
..................
..................
$15.7
(0.9)
¥5.24%
0.95
$15.4
(1.2)
¥7.17%
1.38
$14.7
(1.9)
¥11.31%
2.41
$14.7
(1.9)
¥11.62%
2.95
$12.8
(3.8)
¥22.74%
5.02
$12.7
(3.9)
¥23.65%
5.91
(2009$ millions) ...........
..................
1.96
3.24
5.60
6.95
6.75
9.11
(2009$ millions) ...........
..................
2.91
4.62
8.00
9.90
11.77
15.02
TABLE VI.33—MANUFACTURER IMPACT ANALYSIS FOR TRADITIONAL DIRECT HEATING EQUIPMENT—PRESERVATION OF
OPERATING PROFIT MARKUP SCENARIO
Trial standard level
Units
Base case
1
INPV .............................
Change in INPV ...........
Product Conversion
Costs.
Capital Conversion
Costs.
Total Conversion Costs
2
3
4
5
6
(2009$ millions) ...........
(2009$ millions) ...........
(%) ...............................
(2009$ millions) ...........
$16.6
..................
..................
..................
$14.1
(2.5)
¥14.88%
0.95
$12.7
(3.9)
¥23.61%
1.38
$9.6
(7.0)
¥42.38%
2.41
$7.8
(8.8)
¥53.12%
2.95
$6.2
(10.4)
¥62.40%
5.02
$3.2
(13.4)
¥80.85%
5.91
(2009$ millions) ...........
..................
1.96
3.24
5.60
6.95
6.75
9.11
(2009$ millions) ...........
..................
2.91
4.62
8.00
9.90
11.77
15.02
The December 2009 NOPR discusses
the estimated impact of amended energy
conservation standards on INPV for
traditional DHE manufacturers in
further detail. 74 FR 65852, 65942–44
(Dec. 11, 2009). DOE addresses all the
comments about the impacts on
traditional DHE manufacturers in
sections IV.I.4 and VII.B of today’s final
rule.
ii. Cash-Flow Analysis Results for Gas
Hearth Direct Heating Equipment
jlentini on DSKJ8SOYB1PROD with RULES2
TABLE VI.34—MANUFACTURER IMPACT ANALYSIS FOR GAS HEARTH DIRECT HEATING EQUIPMENT—PRESERVATION OF
RETURN ON INVESTED CAPITAL MARKUP SCENARIO
Trial standard level
Units
Base case
1
INPV .............................
Change in INPV ...........
VerDate Nov<24>2008
(2009$ millions) ...........
(2009$ millions) ...........
(%) ...............................
19:13 Apr 15, 2010
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$77.1
..................
..................
Frm 00084
2
$76.2
(0.9)
¥1.22%
Fmt 4701
Sfmt 4700
$76.2
(0.9)
¥1.22%
3
$76.2
(0.9)
¥1.22%
E:\FR\FM\16APR2.SGM
4
5
$78.7
1.6
2.04%
$78.7
1.6
2.04%
16APR2
6
$85.7
8.6
11.09%
20195
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TABLE VI.34—MANUFACTURER IMPACT ANALYSIS FOR GAS HEARTH DIRECT HEATING EQUIPMENT—PRESERVATION OF
RETURN ON INVESTED CAPITAL MARKUP SCENARIO—Continued
Trial standard level
Units
Base case
1
Product Conversion
Costs.
Capital Conversion
Costs.
Total Conversion Costs
2
3
4
5
6
(2009$ millions) ...........
..................
0.56
0.56
0.56
1.46
1.46
8.42
(2009$ millions) ...........
..................
0.21
0.21
0.21
0.55
0.55
4.20
(2009$ millions) ...........
..................
0.77
0.77
0.77
2.01
2.01
12.62
TABLE VI.35—MANUFACTURER IMPACT ANALYSIS FOR GAS HEARTH DIRECT HEATING EQUIPMENT—PRESERVATION OF
OPERATING PROFIT MARKUP SCENARIO
Trial standard level
Units
Base case
1
INPV .............................
Change in INPV ...........
Product Conversion
Costs.
Capital Conversion
Costs.
Total Conversion Costs
2
3
4
5
6
(2009$ millions) ...........
(2009$ millions) ...........
(%) ...............................
(2009$ millions) ...........
$77.1
..................
..................
..................
$76.9
(0.2)
¥0.30%
0.56
$76.9
(0.2)
¥0.30%
0.56
$76.9
(0.2)
¥0.30%
0.56
$63.9
(13.2)
¥17.13%
1.46
$63.9
(13.2)
¥17.13%
1.46
$23.5
(53.6)
¥69.49%
8.42
(2009$ millions) ...........
..................
0.21
0.21
0.21
0.55
0.55
4.20
(2009$ millions) ...........
..................
0.77
0.77
0.77
2.01
2.01
12.62
The December 2009 NOPR discusses
the estimated impact of amended energy
conservation standards on INPV for gas
hearth DHE manufacturers in further
detail. 74 FR 65852, 65944–45 (Dec. 11,
2009). DOE did not receive any
comments on the gas hearth DHE INPV
results.
c. Cash-Flow Analysis Results for Pool
Heaters
TABLE VI.36—MANUFACTURER IMPACT ANALYSIS FOR GAS-FIRED POOL HEATERS—PRESERVATION OF RETURN ON
INVESTED CAPITAL MARKUP SCENARIO
Trial standard level
Units
Base case
1
INPV .............................
Change in INPV ...........
Product Conversion
Costs.
Capital Conversion
Costs.
Total Conversion Costs
2
3
4
5
6
(2009$ millions) ...........
(2009$ millions) ...........
(%) ...............................
(2009$ millions) ...........
$49.0
..................
..................
..................
$49.1
0.0
0.10%
0.0
$49.3
0.3
0.54%
0.0
$48.2
(0.8)
¥1.72%
2.7
$48.7
(0.3)
¥0.63%
2.7
$49.8
0.8
1.61%
4.8
$56.4
7.3
14.93%
5.7
(2009$ millions) ...........
..................
0.0
0.3
1.3
1.5
4.6
7.4
(2009$ millions) ...........
..................
0.0
0.3
4.0
4.2
9.4
13.1
TABLE VI.37—MANUFACTURER IMPACT ANALYSIS FOR GAS-FIRED POOL HEATERS—PRESERVATION OF OPERATING
PROFIT MARKUP SCENARIO
Trial standard level
Units
Base case
1
jlentini on DSKJ8SOYB1PROD with RULES2
INPV .............................
Change in INPV ...........
Product Conversion
Costs.
Capital Conversion
Costs.
Total Conversion Costs
3
4
5
6
(2009$ millions) ...........
(2009$ millions) ...........
(%) ...............................
(2009$ millions) ...........
$49.0
..................
..................
..................
$48.9
(0.1)
¥0.25%
0.0
$48.2
(0.8)
¥1.72%
0.0
$44.0
(5.0)
¥10.22%
2.7
$42.4
(6.6)
¥13.48%
2.7
$31.9
(17.2)
¥35.05%
4.8
$10.8
(38.3)
¥78.00%
5.7
(2009$ millions) ...........
..................
0.0
0.3
1.3
1.5
4.6
7.4
(2009$ millions) ...........
..................
0.0
0.3
4.0
4.2
9.4
13.1
The December 2009 NOPR discusses
the estimated impact of amended energy
conservation standards on INPV for gas-
VerDate Nov<24>2008
2
19:13 Apr 15, 2010
Jkt 220001
fired pool heaters in further detail. 74
FR 65852, 65945–47 (Dec. 11, 2009).
DOE did not receive any comments on
PO 00000
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Sfmt 4700
the pool heaters INPV results. Those
comments related to conversion costs
E:\FR\FM\16APR2.SGM
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and methodology are discussed in
section IV.I.3.
jlentini on DSKJ8SOYB1PROD with RULES2
d. Impacts on Employment
As discussed in detail in the
December 2009 NOPR and in today’s
final rule, DOE quantitatively assessed
the impacts of potential amended
energy conservation standards on gross
employment for each of the three types
of heating products that are the subject
of this rulemaking. DOE presented a
range of the potential production
employment levels that could result
following the implementation of
amended energy conservation
standards. The upper end of the results
represented the maximum potential
increase in production workers after
amended energy conservation standards
if manufacturers continue to produce
the same scope of covered products in
the same production facilities. The
lower end of the range of employment
results included the estimate of the total
number of U.S. production workers in
the industry that could lose their jobs if
all existing production were to no
longer be made domestically. For
example, DOE calculates that the
impacts on gas-fired and electric storage
water heaters could range from an
increase of 439 employees to a decrease
of 3,610. For oil-fired water heaters,
DOE expects an increase of one
employee to a decrease of 37 employees.
Similarly, at the upper end of modeled
impacts, the traditional DHE, gas hearth
DHE, and pool heater industries could
experience an increase of six, six, and
19 employees, respectively. At the low
end, these three industries could sustain
decreases in direct employment of 275,
1280, and 512 employees, respectively.
74 FR 65852, 65947–51 (Dec. 11, 2009).
Further details are also found in chapter
12 of the TSD. DOE discusses and
responds to public comments received
regarding the impacts on the direct
employment in section IV.I.4.
e. Impacts on Manufacturing Capacity
In the December 2009 NOPR, DOE
provided a complete discussion of the
potential impacts on manufacturing
capacity for the three types of heating
products as a result of amended energy
conservation standards. 74 FR 65852,
65951–53 (Dec. 11, 2009).
In response to that discussion, Raypak
stated that it does not believe three
years would allow sufficient time for the
proper development, testing, and
tooling necessary to achieve reliable
pool heater products, because pool
heaters are installed outdoors and face
harsher operating conditions than the
other products covered by this
rulemaking. (Raypak, No. 67 at p. 3) The
VerDate Nov<24>2008
19:13 Apr 15, 2010
Jkt 220001
commenter agreed with DOE’s statement
that setting an amended energy
conservation standard for pool heaters
at or above TSL 5, which would require
condensing or near-condensing
technology, could lead to short-term
capacity problems if manufacturers
cannot make the substantially higher
tooling, equipment, and assembly
changes required at these levels in time
to meet the standard. Moreover, Raypak
argued that these same issues exist at
TSL 3 and TSL 4, because at TSL 3 and
above manufacturers would have
difficulty changing their production
lines and tooling to a new construction
while still producing product to meet
current market demands. (Raypak, No.
67 at p. 2; Public Meeting Transcript,
No. 57.4 at pp. 308–310)
In response, DOE agrees that the
proposed standard in the December
2009 NOPR would require substantial
changes for pool heater manufacturers.
At an 84-percent thermal efficiency
level, manufacturers would be required
to make multiple improvements over
the most common atmospheric models
on the market today. However, DOE did
not receive any comments that
suggested the conversion costs for the
industry presented in the NOPR were
not representative at any TSL. Also,
multiple manufacturers have products
that meet and/or exceed the proposed
standard in the December 2009 NOPR.
While manufacturers would be required
to spend resources to increase the
production of those products or to
modify existing products, DOE believes
that manufacturers have the experience
necessary to achieve the requisite
operating conditions at the level
proposed in the December 2009 NOPR
(TSL 4) and, in general, to offer durable
products by the compliance date for the
amended standards being adopted in
this final rule.
f. Cumulative Regulatory Burden
While any one regulation may not
impose a significant burden on
manufacturers, the combined effects of
several impending regulations may have
serious consequences for some
manufacturers, groups of manufacturers,
or an entire industry. Assessing the
impact of a single regulation may
overlook this cumulative regulatory
burden. In addition to energy
conservation standards, other
regulations can significantly affect
manufacturers’ financial operations. The
cumulative regulatory burden focuses
on the impacts on manufacturers of
other Federal requirements with a
compliance date three years prior to and
three years after the anticipated
compliance dates of the amended
PO 00000
Frm 00086
Fmt 4701
Sfmt 4700
energy conservation standards of this
rulemaking. The cumulative burden was
outlined in the December 2009 NOPR,
which included a discussion of the
impact of low and ultra-low NOX
regulations and other environmental
and safety regulations. 74 FR 65852,
65953 (Dec. 11, 2009). For further detail,
see the cumulative regulatory burden
discussion in Chapter 12 of the TSD.
Regarding the cumulative regulatory
burden discussed in the NOPR, BWC
stated that refrigerant regulations are
constantly changing and could force
manufacturers to redesign heat pump
water heaters that have been recently
commercialized. To this point, BWC
noted that R–134a is being phased out
in Europe, but the prospect of a similar
phase-out in the U.S. was not
considered in the NOPR analysis. (BWC,
No. 61 at p. 2) Rheem also stated that
proposed legislation that phases out
hydrofluorocarbons (HFCs) would
require double the amount of
refrigerant, because the alternative is not
as efficient. Rheem also added that a
cap-and-trade program would have a
significant effect on the heat pump
water heater business. (Rheem, Public
Meeting Transcript No. 57.4 at pp. 294–
295)
DOE acknowledges that an HFC
phase-out or alternative legislation
requiring a refrigerant change could
necessitate substantial design changes
for heat pump water heaters. However,
for this heating products energy
conservation standards rulemaking,
DOE did not consider proposed
legislation that would require a
reduction in consumption of HFCs
including refrigerants (i.e., phase-down)
or a cap and trade program. It would be
highly speculative to try to predict the
passage of such legislation, much less
the details of its provisions, all of which
are highly uncertain.
BWC stated that DOE should consider
that additional Air Quality Management
Districts have enacted standards since
the rulemaking began. (BWC, No. 61 at
pp. 3–4) In response, DOE has
monitored the Air Quality Management
Districts’ regulations. In the analysis,
DOE assumed that the Air Quality
Managements Districts with ultra-low
NOX requirements would represent 50
percent of shipments to California, or
8.7 percent of shipments nationally, by
the compliance date of today’s final rule
in 2015. Thus, DOE’s analysis of the
ultra-low NOX water heater shipments is
up to date. DOE accounted for the
higher costs of these ultra-low NOX gasfired water heaters in both the LCC and
the MIA.
AHRI stated lower NOX requirements
will affect future designs of gas-fired
E:\FR\FM\16APR2.SGM
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
instantaneous water heaters and may
cause design changes that reduce the
efficiency of the product. (AHRI, No. 91
at p. 3)
DOE accounted for the added
production costs for manufacturers of
gas-fired storage water heaters to
comply with regional ultra-low NOX
requirements (see section IV.C.2). DOE
agrees with AHRI that the California Air
Quality Management Districts will begin
to regulate the emissions of gas-fired
instantaneous water heaters beginning
in 2012. However, DOE is not aware of
any ultra-low NOX instantaneous gasfired water heaters currently on the
market and could not create a separate
cost curve to account for the additional
cost of instantaneous water heaters.
Raypak stated that pool heaters are
not exempt from ultra-low NOX
requirements, but have only been
exempted from any revisions to the
existing requirements. Raypak stated
that pool heaters are required to meet a
maximum of 55 ppm of NOX in the
South Coast Air Quality Management
District. In addition, the Bay Area Air
Quality Management District has
implemented new NOX requirements for
pool heaters starting on January 1, 2012.
(Raypak, No. 67 at p. 2; Public Meeting
Transcript, No. 57.4 at pp. 336–37)
DOE agrees with Raypak that it
should have indicated that gas-fired
pool heaters were only exempted from
revisions to existing low-NOX
requirements that would have required
more-stringent emission standards.
Furthermore, DOE agrees with Raypak
that gas-fired pool heaters must meet the
local low-NOX requirements in the Air
Quality Management Districts shown in
Table 12.7.9 of the TSD. In the
engineering analysis, DOE examined
several low-NOX pool heaters and
believes its analysis is representative of
both types of pool heaters. Chapter 12
of the TSD also addresses in greater
detail the issue of cumulative regulatory
burden.
g. Impacts on Manufacturers That Are
Small Businesses
As discussed in the December 2009
NOPR, DOE identified small business
manufacturers of all three types of
heating products. 74 FR 65852, 65953–
54 (Dec. 11, 2009). Due to the large
number of comments about the impacts
on traditional DHE manufacturers, DOE
has moved and addressed all these
comments in sections IV.I and VII.B.
Section VII.B also contains DOE’s
discussion about the impacts of
amended energy conservation standards
on small business manufacturers.
3. National Net Present Value of
Consumer Costs and Benefits and
National Employment Impacts
The NPV analysis estimates the
cumulative benefits or costs to the
Nation of total heating product
consumer costs and savings that would
result from particular standard levels.
The NPV analysis estimates the national
economic impacts of each such level
relative to the base case. In accordance
with the OMB Circular A–4, DOE
calculated the NPV using both a 7percent and a 3-percent real discount
rate. Table VI.38 through Table VI.40
show the consumer NPV results for each
TSL DOE considered for the three types
of heating products. See chapter 10 of
the December 2009 NOPR TSD for more
detailed NPV results.
TABLE VI.38—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR WATER HEATERS
[Impacts for units sold from 2015 to 2045]
Product class
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
TSL 7
TSL 8
billion 2009 dollars
Discounted at 3%:
Gas-Fired Storage .......
Electric Storage ...........
Oil-Fired Storage .........
Gas-Fired Instantaneous.
.....................................
.....................................
.....................................
.....................................
3.13
2.10
0.15
0.24
3.13
3.46
0.22
0.24
3.13
3.96
0.22
0.24
2.38
5.84
0.22
0.24
2.78
5.84
0.22
0.24
3.13
19.80
0.22
0.24
¥7.47
32.24
0.38
¥8.27
Total ......................
4.39 .....................................
5.62
7.05
7.55
8.67
9.08
23.39
16.87
Discounted at 7%:
Gas-Fired Storage .......
Electric Storage ...........
Oil-Fired Storage .........
Gas-Fired Instantaneous.
0.59 .....................................
0.35 .....................................
0.03 .....................................
¥0.004 ...............................
0.22
0.61
0.06
¥0.004
0.22
0.85
0.09
¥0.004
0.22
0.73
0.09
¥0.004
0.27
1.03
0.09
¥0.004
¥0.10
1.03
0.09
¥0.004
0.22
¥0.52
0.09
¥0.004
¥9.95
3.25
0.15
¥5.02
Total ......................
0.96 .....................................
0.88
1.55
1.03
1.39
1.01
¥0.22
¥11.57
2.72
1.35
0.08
0.24
TABLE VI.39—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR DIRECT HEATING EQUIPMENT
[Impacts for units sold from 2013 to 2043]
Product class
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
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billion 2009 dollars
Discounted at 3%:
Gas Wall Fan ...................................
Gas Wall Gravity .............................
Gas Floor .........................................
Gas Room .......................................
Gas Hearth ......................................
0.06 .........................................................
0.04 .........................................................
0.0002 .....................................................
0.01 .........................................................
1.21 .........................................................
0.07
0.04
0.0002
0.02
1.21
0.07
0.07
0.0002
0.03
1.21
¥0.01
0.07
0.0002
0.03
¥1.35
0.06
¥0.12
0.0002
0.20
¥1.35
¥0.01
¥0.12
0.0002
0.20
¥5.04
Total ..........................................
1.32 .........................................................
1.34
1.39
¥1.26
¥1.22
¥4.97
Discounted at 7%:
Gas Wall Fan ...................................
0.02 .........................................................
0.03
0.03
¥0.03
0.02
¥0.03
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TABLE VI.39—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR DIRECT HEATING EQUIPMENT—
Continued
[Impacts for units sold from 2013 to 2043]
Product class
Gas
Gas
Gas
Gas
TSL 1
Wall Gravity .............................
Floor .........................................
Room .......................................
Hearth ......................................
Total ..........................................
TSL 2
0.01 .........................................................
0.0001 .....................................................
0.003 .......................................................
0.50 .........................................................
0.54 .........................................................
TSL 3
0.01
0.0001
0.01
0.50
0.55
TSL 4
0.02
0.0001
0.01
0.50
0.56
TSL 5
TSL 6
¥0.14
0.0001
0.07
¥1.19
¥1.24
0.02
0.0001
0.01
¥1.19
¥1.19
¥0.14
0.0001
0.07
¥4.28
¥4.38
TABLE VI.40—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR POOL HEATERS
[Impacts for units sold from 2013 to 2043]
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
billion 2009 dollars
Discounted at 3% .............................................................
Discounted at 7% .............................................................
DOE also estimated for each TSL the
indirect employment impact of
standards—the impact on the economy
in general—in addition to considering
the direct employment impacts on
manufacturers of products covered in
this rulemaking as discussed in section
IV.I.4. DOE expects that consumers will
redirect the net monetary savings from
standards to other forms of economic
0.10
0.04
¥0.01
¥0.06
0.10
0.04
activity, and that these shifts in
spending and economic activity will
affect the demand for labor. As shown
in Table VI.41, DOE estimates that net
indirect employment impacts from
energy conservation standards for water
heaters would be positive, though very
small relative to total national
employment. These increases would
likely be sufficient to offset fully any
¥0.15
¥0.16
¥2.33
¥1.39
¥4.57
¥2.87
adverse impacts on employment that
might occur in the water heater
industry. The estimated impacts from
the amended standards for DHE and
pool heaters are much smaller. For
details on the employment impact
analysis methods and results, see TSD
Chapter 14.
TABLE VI.41—INCREASE IN NATIONAL INDIRECT EMPLOYMENT UNDER WATER HEATER TSLS
2015 thousands
Trial standard level
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1
2
3
4
5
6
7
8
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
4. Impact on Utility or Performance of
Products
As indicated in section III.D.1.d, DOE
has concluded that the TSLs it
considered for the three types of heating
products would not lessen the utility or
performance of those products.
Manufacturers of these products
currently offer heating products that
meet or exceed the efficiency levels
being considered and would not
necessitate changes in product design
that would reduce the overall utility or
performance of the three types of
heating products that are the subject of
this rulemaking. Therefore, DOE has
concluded that none of the TSLs
presented in today’s final rule would
reduce the utility or performance of the
products under consideration.
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¥0.40
¥0.72
¥0.83
¥0.97
¥0.85
¥1.20
¥3.89
¥8.21
5. Impact of Any Lessening of
Competition
As discussed in the December 2009
NOPR (74 FR 65852, 65863, 65956 (Dec.
11, 2009)) and in section III.D.1.e of this
preamble, DOE considers any lessening
of competition likely to result from
standards; the Attorney General
determines, in writing, the impact, if
any, of any such lessening of
competition. (42 U.S.C.
6295(o)(2)(B)(i)(V) and (ii)) The
Attorney General’s determination (DOJ
determination) is summarized below,
along with DOE’s response, and it is
also reprinted in its entirety at the end
of this final rule.
After considering the NOPR, DOJ
determined that DOE’s proposed
standards for water heaters, pool
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0.44
0.48
1.04
1.43
3.07
2.89
12.70
13.82
2030 thousands
1.56
2.08
3.54
4.63
8.34
8.37
34.97
43.69
2044 thousands
2.06
2.80
4.60
5.96
10.41
10.56
43.46
56.26
heaters, and gas hearth DHE are not
likely to lead to a lessening of
competition; however, DOJ expressed
concern that the proposed standards
could adversely affect competition in
the traditional DHE product categories.
DOJ noted that only three manufacturers
currently market products for each of
the four traditional DHE categories. DOJ
stated that the proposed standards could
require manufacturers, even those
currently producing models that meet
the proposed standards, to make a
substantial capital investment to convert
or expand their production facilities.
DOJ also stated that it also appeared that
each manufacturer would have to
commit significant resources for
research and development. DOJ believed
these costs create a significant risk that
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no more than one or two DHE
manufacturers would choose to
continue to produce products in any
one DHE category. DOJ asked DOE to
consider the possible impact on
competition in determining its final
energy efficiency standards for DHE.
(DOJ, No. 99 at p. 2)
DOE is also concerned about the
impacts on competition in the
traditional DHE market. For any new or
amended energy conservation standard,
DOE must consider the impacts on
manufacturers and consumers of the
products in addition to the impacts of
any lessening of competition. (42 U.S.C.
6295(o)(2)(B)(i)) DOE notes that the
potential impacts on small business
manufacturers factored heavily in DOE’s
proposed standard. 74 FR 65852,
65972–73 (Dec. 11, 2009).
DOE has carefully considered the
potential adverse impacts on traditional
DHE manufacturers in setting the
amended energy conservation standards
(see section VI.D.3). In total, DOE
estimates that it will take approximately
$4.6 million for the traditional DHE
industry to upgrade all of it products to
meet the amended energy conservation
standards. Despite including the
conversion costs for the additional
product lines that were released since
the December 2009 NOPR analysis was
completed, the total conversion costs
estimated by the industry to upgrade all
products that do not meet the amended
energy conservation standards is down
$1.8 million from the $6.4 million total
estimated for the proposed standards in
the December 2009 NOPR. The
conversion costs have been revised
downward for gas wall gravity DHE due
to the changes in the engineering
analysis and a new TSL structure for gas
wall gravity DHE that resulted in AFUE
requirements that were 5 percentage
points less stringent than the level
proposed in the December 2009 NOPR.
Finally, for other product categories,
setting a lower TSL than proposed in
the December 2009 NOPR also resulted
in fewer product lines across the
industry that need to be upgraded to
meet the level established by today’s
final rule.
For the amended energy conservation
standards for traditional DHE, one major
manufacturer has a total of 3 product
lines (7 models) that do not meet the
amended energy conservation standards
in the two smallest categories (gas floor
and gas room DHE) but has a majority
of product lines and models that meet
the amended standards in the two
largest product categories (gas wall fan
and gas wall gravity). The other two
major manufacturers have existing
product lines that meet the amended
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energy conservation standards in all 4
product categories. Therefore, without
incurring any conversion costs, at least
two manufacturers already have existing
products in all four product categories.
In the most important gas wall gravity
category, 57 percent of the existing
models and 71 percent of the existing
product lines identified by DOE already
meet the amended energy conservation
standards. One manufacturer indicated
in written comments that the important
gas wall gravity products that meet the
amended energy conservation standard
represent a small portion of total sales.
However, DOE believes it has addressed
the concerns of this manufacturer by
setting an amended energy conservation
standard that would require much less
substantial changes than those proposed
in the December 2009 NOPR (a two
percentage point improvement in AFUE
versus the six percentage point
improvement in AFUE proposed in the
December 2009 NOPR). While the $4.6
million in total conversion costs to
upgrade all product lines that do not
meet the amended energy conservation
standards is substantial, DOE believes
that a combination of products that meet
the amended energy conservation
standards and selectively upgrading
popular product lines that fall below the
standards will allow all three traditional
DHE manufacturers to maintain a viable
production volume. Because DOE has
fully addressed the comments raised
about the impacts on traditional DHE
manufacturers, has considered the
potential impacts on small business
manufacturers of traditional DHE, and
has adopted a less stringent standard
than originally proposed for these
products, DOE believes it has taken the
potential impacts on competition in the
traditional DHE market into
consideration for today’s final rule.
DOE also prepared a final regulatory
flexibility analysis (FRFA) for direct
heating equipment pursuant to the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.). In particular, the FRFA
carefully considers the impacts of the
rule on the two manufacturers in the
traditional DHE market that are small
businesses. DOE’s FRFA is found in
section VII.B of today’s final rule.
Several comments on the December
2009 NOPR raised issues related to
competitive impacts. These comments
and DOE’s response are discussed
below. In both its written submission
and comments at the NOPR public
meeting, Empire expressed concern
about the potential for amended
standards to create monopolies in
certain DHE product categories.
(Empire, Public Meeting Transcript, No.
57.4 at p. 300; Empire, No. 100 at p. 1)
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In addition, Empire stated that in order
to increase efficiency, the industry
would need to spend millions of dollars.
With the small number of shipments
and the shrinking market for traditional
DHE, Empire opined that manufacturers
would likely eliminate product
categories. For those few categories
where only one manufacturer meets the
minimums (e.g., floor furnaces), a
monopoly would be created. (Empire,
No. 100 at p. 2)
In response and as noted above, DOE
is concerned about the impacts on
competition in the traditional DHE
market and has considered these
impacts for today’s final rule. In
response to the concern that the
amended energy conservation standards
could create a monopoly in the floor
furnace category, DOE notes that two of
the major manufacturers currently offer
products in the AHRI certification
database that meet the required
efficiencies, which implies that the
creation of a monopoly is unlikely to
result due to amended energy
conservation standards. Additionally,
DOE also recognizes that the traditional
DHE market is mostly a replacement
market. Even if only one manufacturer
offered floor furnaces, for example, in
response to the energy conservation
standards, all other DHE categories are
also potential substitutes. Finally, DOE
has included the conversion costs for
manufacturers to convert all existing
products that do not meet the required
efficiencies. While manufacturers
currently in the industry would likely
upgrade their most popular products
that did not meet the standards, DOE
notes that these conversion costs could
also be made by manufacturers that are
not currently in the market (i.e., new
entrants to the market).
Rheem stated that the U.S. residential
water heater market currently has little
or no presence of max-tech systems.
Rheem commented that as a current
manufacturer of conventional storage
water heater products, it would be
competitively disadvantaged by a
standard at TSL 5 or higher in the
December 2009 NOPR, as compared to
companies that do not manufacture
conventional technology. (Rheem, No.
89 at p. 9)
In response, DOE does not believe
offering conventional technology would
place a manufacturer at a disadvantage
if DOE selected a TSL that used
advanced technology. While TSL 5 or
higher would drive a market for the
advanced technology, full-line
manufacturers that offer commercial
condensing products, for example,
could actually be in a better position
because of their experience with the
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condensing technology. Most water
heaters sales are made on a replacement
basis. The large installed base of
existing manufacturers could make it
more difficult for new entrants to gain
market share if customers look for a
similar replacement. Also, the major
manufacturers have very established
brands. In short, there are too many
factors to conclude that manufacturers
who produce conventional storage water
heaters would be placed at a
competitive disadvantage.
Bock claimed that the proposed
amended energy conservation standards
for oil-fired water heaters would lessen
competition. Bock stated that many
manufacturers have exited the market
since the last water heater rulemaking in
the 1990s (Bock, No. 101 at p. 3)
In response, DOE notes that whether
a given manufacturer chooses to exit the
residential oil-fired water heater market
will depend on a variety of internal and
external factors, and DOE also believes
that the decision of any manufacturer to
exit the market would not necessarily
result in a lessening of competition.
Consumers today have a number of fuel
sources that could be substituted for oilfired products if any decrease in
competition resulted in higher prices for
consumers. Furthermore, any increase
in prices could also attract new entrants
to the market. While there are only two
manufacturers that have a significant
market share in the residential oil-fired
water heater market, there are a number
of manufacturers that offer lower
volumes of residential oil-fired water
heaters, commercial oil-fired water
economy. The estimated present value
of the benefits to consumers are
presented in chapter 13 of the TSD.
As discussed in section IV.K.1, DOE
believes that there is uncertainty about
the extent to which the calculated
impacts from reduced energy prices are
a benefits transfer from energy
producers to energy consumers.
Therefore, DOE has concluded that, at
present, it should not give a heavy
weight to this factor in its consideration
of the economic justification of
standards on heating products. DOE is
continuing to investigate the extent to
which benefits associated with change
in energy prices projected to result from
standards represents a net gain to
society.
Enhanced energy efficiency also
produces environmental benefits in the
form of reduced emissions of air
pollutants and greenhouse gases
associated with energy production.
Table VI.42 and Table VI.43 provide
DOE’s estimate of cumulative CO2, NOX,
and Hg emissions reductions expected
to result from the TSLs considered in
this rulemaking. The estimated
cumulative CO2, NOX, and Hg emissions
reductions for the standards in today’s
rule are 164 Mt for CO2, 125 kt for NOX,
and 0.54 tons for Hg. The expected
energy savings from these standards
may also reduce the cost of maintaining
nationwide emissions standards and
constraints. In the environmental
assessment (chapter 16 of the TSD),
DOE reports estimated annual changes
in CO2, NOX, and Hg emissions
attributable to each TSL.
heaters, and oil-fired boilers. Any of
these manufacturers could find it
attractive to enter this market or expand
production, if other manufacturers
exited the residential oil-fired water
heater market. Finally, as noted above,
DOJ did not express concern about the
potential lessening of competition in the
oil-fired water heater market at the
proposed standard level. (DOJ, No. 99 at
pp. 1–2)
6. Need of the Nation To Conserve
Energy
Improving the energy efficiency of
heating products, where economically
justified, would likely improve the
security of the Nation’s energy system
by reducing overall demand for energy,
thereby reducing the Nation’s reliance
on foreign sources of energy. Reduced
electricity demand may also improve
the reliability of the electricity system,
particularly during peak-load periods.
As a measure of this reduced demand,
DOE expects the energy savings from
today’s standards for the three types of
heating products to eliminate the need
for approximately 0.857 gigawatts (GW)
of generating capacity by 2045.
As discussed in section IV.K.1, DOE
analyzed the potential impact on natural
gas prices resulting from amended
standards on water heaters and the
associated benefits for all natural gas
users in all sectors of the economy. DOE
also analyzed the potential impact on
electricity prices resulting from
amended standards on water heaters
and the associated benefits for all
electricity users in all sectors of the
TABLE VI.42—SUMMARY OF EMISSIONS REDUCTIONS UNDER WATER HEATER TSLS
[Cumulative for products sold from 2015 to 2045]
TSL
Emission type
1
3
4
5
6
74.3
57.5
0.056
CO2 (Mt) ...........................................................
NOX (kt) ...........................................................
Hg (t) ................................................................
2
122
94.3
0.090
131
101
0.103
137
106
0.113
154
116
0.553
7
209
159
0.704
8
609
456
2.32
1,001
755
3.59
TABLE VI.43—SUMMARY OF EMISSIONS REDUCTIONS UNDER DIRECT HEATING EQUIPMENT AND POOL HEATER TSLS
[Cumulative for products sold from 2013 to 2043]
TSL
Emission type
1
2
3
4
5
6
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Direct Heating Equipment
CO2 (Mt) ...........................................................................
NOX (kt) ...........................................................................
Hg (t) ................................................................................
8.3
7.5
(0.01)
8.8
8.1
(0.01)
9.3
8.5
(0.01)
17.9
16.4
0.03
20.2
18.6
0.03
49.9
46.0
0.08
0.75
1.72
2.38
3.61
8.89
Pool Heaters
CO2 (Mt) ...........................................................................
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TABLE VI.43—SUMMARY OF EMISSIONS REDUCTIONS UNDER DIRECT HEATING EQUIPMENT AND POOL HEATER TSLS—
Continued
[Cumulative for products sold from 2013 to 2043]
TSL
Emission type
1
NOX (kt) ...........................................................................
Hg (t) ................................................................................
As noted in section IV.L of this final
rule, DOE does not report SO2 emissions
reductions from power plants because
DOE is uncertain that an energy
conservation standard would affect the
overall level of U.S. SO2 emissions due
to emissions caps. DOE also did not
include NOX emissions reduction from
power plants in States subject to CAIR
because an energy conservation
standard would likely not affect the
overall level of NOX emissions in those
States due to the emissions caps
mandated by CAIR.
It should be noted that, for DHE, DOE
estimates a very small increase in Hg
emissions under the adopted standard.
The reason for this result is that the
more-efficient products save natural gas,
but they also use more electricity due to
electronic ignition and, for some DHE
TSLs, use of a fan. This results in higher
electricity generation than in the AEO
Reference Case, which leads to higher
emissions. For CO2 and NOX, the higher
emissions from the power sector are
more than canceled out by lower
2
0.37
0.00
3
0.67
0.00
4
1.53
0.00
household emissions from gas
combustion, such that total emissions
decrease under the considered TSLs.
For Hg, this is not the case because there
are no offsetting household emissions.
In the December 2009 NOPR, DOE
investigated and considered the
potential monetary benefit of reduced
CO2 emissions that could result from the
TSLs it considered. 74 FR 65852,
65924–28 (Dec. 11, 2009). DOE valued
the potential global benefits resulting
from such reductions at the interim
values of $5, $10, $20, $34, and $57 per
metric ton in 2007 (in 2008$), and also
valued the domestic benefits at
approximately $1 per metric ton. For
today’s final rule, DOE has updated its
analysis to reflect the outcome of the
most recent interagency process
regarding the social cost of carbon
dioxide emissions (SCC). See section
IV.M for a full discussion. The four
values of CO2 emissions reductions
resulting from that process (expressed in
2007$) are $4.70/ton (the average value
from a distribution that uses a 5-percent
5
2.10
0.00
6
3.18
0.00
7.84
0.00
discount rate), $21.40/ton (the average
value from a distribution that uses a 3percent discount rate), $35.10/ton (the
average value from a distribution that
uses a 2.5-percent discount rate), and
$64.90/ton (the 95th-percentile value
from a distribution that uses a 3-percent
discount rate). These values correspond
to the value of emission reductions in
2010; the values for later years are
higher due to increasing damages as the
magnitude of climate change increases.
Table VI.44, Table VI.45, and Table
VI.46 present the global values of
emissions reductions at each TSL. For
each of the four cases, DOE calculated
a present value of the stream of annual
values using the same discount rate as
was used in the studies upon which the
dollar-per-ton values are based. DOE
calculated domestic values as a range
from 7 percent to 23 percent of the
global values, and these results are
presented in Table VI.47, Table VI.48,
and Table VI.49.
TABLE VI.44—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTIONS FOR THE PERIOD 2015–2045
UNDER WATER HEATER TRIAL STANDARD LEVELS
Global Value of CO2 Emission Reductions, Million 2009$
Cumulative CO2
emission reductions, Mt
TSL
1
2
3
4
5
6
7
8
5% discount
rate, average*
3% discount
rate, average*
2.5% discount
rate, average*
74.3
122
131
137
154
209
609
1,001
266
436
468
492
524
714
2,060
3,399
1,351
2,213
2,374
2,496
2,682
3,653
10,560
17,411
2,285
3,742
4,014
4,220
4,545
6,190
17,898
29,505
.......................................................................................
.......................................................................................
.......................................................................................
.......................................................................................
.......................................................................................
.......................................................................................
.......................................................................................
.......................................................................................
3% discount
rate, 95th
percentile*
4,122
6,750
7,242
7,614
8,179
11,142
32,204
53,098
jlentini on DSKJ8SOYB1PROD with RULES2
* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the
distribution. Values presented in the table are based on escalating 2007$ to 2009$ for consistency with other values presented in this notice, and
incorporate the escalation of the SCC with each year.
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.45—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTIONS FOR THE PERIOD 2013–2043
UNDER DIRECT HEATING EQUIPMENT TRIAL STANDARD LEVELS
Global value of CO2 emission reductions, million 2009$
Cumulative
CO2 emission
reductions, Mt
TSL
1
2
3
4
5
6
5% discount
rate, average*
3% discount
rate, average*
2.5% discount
rate, average*
8.2
8.8
9.3
17.9
20.2
49.9
31
33
35
67
76
187
154
165
174
335
378
933
259
278
293
565
637
1,572
...........................................................................................
...........................................................................................
...........................................................................................
...........................................................................................
...........................................................................................
...........................................................................................
3% discount
rate, 95th
percentile*
470
503
530
1,023
1,154
2,849
* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the
distribution. Values presented in the table are based on escalating 2007$ to 2009$ for consistency with other values presented in this notice, and
incorporate the escalation of the SCC with each year.
TABLE VI.46—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTIONS FOR THE PERIOD 2013–2043
UNDER POOL HEATER TRIAL STANDARD LEVELS
Global value of CO2 emission reductions, million 2009$
Cumulative
CO2 emission
reductions, Mt
TSL
1
2
3
4
5
6
5% discount
rate, average*
3% discount
rate, average*
2.5% discount
rate, average*
0.4
0.8
1.7
2.4
3.6
8.9
2
3
6
9
14
33
8
14
32
45
68
167
13
24
54
75
114
281
...........................................................................................
...........................................................................................
...........................................................................................
...........................................................................................
...........................................................................................
...........................................................................................
3% discount
rate, 95th
percentile*
24
43
99
136
206
509
* Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the
distribution. Values presented in the table are based on escalating 2007$ to 2009$ for consistency with other values presented in this notice, and
incorporate the escalation of the SCC with each year.
TABLE VI.47—ESTIMATES OF DOMESTIC PRESENT VALUE OF CO2 EMISSIONS REDUCTIONS FOR THE PERIOD 2015–2045
UNDER WATER HEATER TRIAL STANDARD LEVELS
Domestic value of CO2 emission reductions, million 2009$ *
TSL
1
2
3
4
5
6
7
8
5% discount rate,
average**
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
3% discount rate,
average**
2.5% discount
rate, average**
3% discount rate,
95th percentile**
18.6 to 61.3 ........
30.5 to 100 .........
32.8 to 108 .........
34.4 to 113 .........
36.7 to 120 .........
50.0 to 164 .........
144 to 474 ..........
248 to 782 ..........
94.6 to 311 .........
155 to 509 ..........
166 to 546 ..........
175 to 574 ..........
188 to 617 ..........
256 to 840 ..........
739 to 2,429 .......
1,219 to 4,005 ....
160 to 526 ..........
262 to 861 ..........
281 to 923 ..........
295 to 971 ..........
318 to 1,045 .......
433 to 1,424 .......
1,253 to 4,117 ....
2,065 to 6,786 ....
289 to 948.
473 to 1,553.
507 to 1,666.
533 to 1,751.
573 to 1,881.
780 to 2,563.
2,254 to 7,407.
3,717 to 12,212.
* Domestic values are presented as a range between 7% and 23% of the global values.
** Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the
distribution. Values presented in the table are based on escalating 2007$ to 2009$ for consistency with other values presented in this notice, and
incorporate the escalation of the SCC with each year.
TABLE VI.48—ESTIMATES OF DOMESTIC PRESENT VALUE OF CO2 EMISSIONS REDUCTIONS FOR THE PERIOD 2013–2043
UNDER DIRECT HEATING EQUIPMENT TRIAL STANDARD LEVELS
Domestic value of CO2 emission reductions, million 2009$ *
jlentini on DSKJ8SOYB1PROD with RULES2
TSL
1
2
3
4
5
6
5% discount rate,
average**
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
3% discount rate,
average**
2.2 to 7.1 ............
2.3 to 7.6 ............
2.4 to 8.0 ............
4.7 to 15.4 ..........
5.3 to 17.4 ..........
13.1 to 43.0 ........
10.8
11.5
12.2
23.5
26.5
65.3
to
to
to
to
to
to
35.4 ........
37.9 ........
39.9 ........
77.1 ........
87.0 ........
214.7 ......
2.5% discount
rate, average**
18.2 to 59.6 ........
19.5 to 63.9 ........
20.5 to 67.3 ........
39.5 to 129.9 ......
44.6 to 146.6 ......
110.1 to 361.7 ....
* Domestic values are presented as a range between 7% and 23% of the global values.
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3% discount rate,
95th percentile**
32.9 to 108.0.
35.2 to 115.8.
37.1 to 121.9.
71.6 to 235.4.
80.8 to 265.5.
199.4 to 655.2.
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** Columns are labeled by the discount rate used to calculate SCC and whether it is an average value or drawn from a different part of the distribution. Values presented in the table are based on escalating 2007$ to 2009$ for consistency with other values presented in this notice, and
incorporate the escalation of the SCC with each year.
TABLE VI.49—ESTIMATES OF DOMESTIC PRESENT VALUE OF CO2 EMISSIONS REDUCTIONS FOR THE PERIOD 2013–2043
UNDER POOL HEATERS TRIAL STANDARD LEVELS
Domestic value of CO2 emission reductions, million 2009$ *
TSL
1
2
3
4
5
6
5% discount rate,
average**
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
....................................................................................................
3% discount rate,
average**
2.5% discount
rate, average**
0.1
0.2
0.5
0.6
1.0
2.3
0.5 to 1.8 ............
1.0 to 3.2 ............
2.3 to 7.4 ............
3.1 to 10.3 ..........
4.7 to 15.5 ..........
11.7 to 38.3 ........
0.9 to 3.0 ............
1.7 to 5.4 ............
3.8 to 12.5 ..........
5.3 to 17.3 ..........
8.0 to 26.2 ..........
19.6 to 64.6 ........
to
to
to
to
to
to
0.4
0.7
1.5
2.1
3.1
7.7
............
............
............
............
............
............
3% discount rate,
95th percentile**
1.7 to 5.5.
3.0 to 9.9.
6.9 to 22.7.
9.5 to 31.4.
14.4 to 47.5.
35.6 to 117.0.
* Domestic values are presented as a range between 7% and 23% of the global values.
** Columns are labeled by the discount rate used to calculate the SCC and whether it is an average value or drawn from a different part of the
distribution. Values presented in the table are based on escalating 2007$ to 2009$ for consistency with other values presented in this notice, and
incorporate the escalation of the SCC with each year.
DOE is well aware that scientific and
economic knowledge about the
contribution of CO2 and other 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 rule the most recent values and
analyses resulting from the ongoing
interagency review process.
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
heating products. The dollar-per-ton
values that DOE used are discussed in
section IV.M of this final rule. Table
VI.50 through Table VI.55 present the
estimates calculated using sevenpercent and three-percent discount
rates, respectively.
TABLE VI.50—ESTIMATES OF VALUE OF REDUCTIONS OF NOX EMISSIONS UNDER WATER HEATER TRIAL STANDARD
LEVELS AT A SEVEN-PERCENT DISCOUNT RATE
Cumulative NOX
emission
reductions, kt
TSL
1
2
3
4
5
6
7
8
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
57.5
94.3
101
106
116
159
456
755
Value of NOX
emission
reductions,
million 2009$
6.6 to 67.8.
10.8 to 111.
11.6 to 119.
12.1 to 125.
11.0 to 113.
15.2 to 157.
42.6 to 438.
71.4 to 734.
TABLE VI.51—ESTIMATES OF VALUE OF REDUCTIONS OF NOX EMISSIONS UNDER WATER HEATER TRIAL STANDARD
LEVELS AT A THREE-PERCENT DISCOUNT RATE
Cumulative NOX
emission
reductions, kt
jlentini on DSKJ8SOYB1PROD with RULES2
TSL
1
2
3
4
5
6
7
8
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
....................................................................................................................................................................
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57.5
94.3
101
106
116
159
456
755
16APR2
Value of NOX
emission
reductions,
million 2009$
13.7 to 141.
22.5 to 231.
24.0 to 247.
25.2 to 259.
25.4 to 261.
34.9 to 358.
99.1 to 1,018.
165 to 1,694.
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TABLE VI.52—ESTIMATES OF VALUE OF REDUCTIONS OF NOX EMISSIONS UNDER DIRECT HEATING EQUIPMENT TRIAL
STANDARD LEVELS AT A SEVEN-PERCENT DISCOUNT RATE
Cumulative NOX
emission
reductions, kt
TSL
1
2
3
4
5
6
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
7.5
8.1
8.5
16.4
18.6
46.0
Value of NOX
emission
reductions,
million 2009$
1.0
1.1
1.1
2.2
2.5
6.1
to
to
to
to
to
to
10.2.
10.9.
11.4.
22.3.
25.3.
62.5.
TABLE VI.53—ESTIMATES OF VALUE OF REDUCTIONS OF NOX EMISSIONS UNDER DIRECT HEATING EQUIPMENT TRIAL
STANDARD LEVELS AT A THREE-PERCENT DISCOUNT RATE
Cumulative NOX
emission
reductions, kt
TSL
1
2
3
4
5
6
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
7.5
8.1
8.5
16.4
18.6
46.0
Value of NOX
emission
reductions,
million 2009$
1.9 to 19.6.
2.0 to 21.0.
2.1 to 22.1.
4.2 to 42.9.
4.7 to 48.7.
11.7 to 120.2.
TABLE VI.54—ESTIMATES OF VALUE OF REDUCTIONS OF NOX EMISSIONS UNDER POOL HEATER TRIAL STANDARD
LEVELS AT A SEVEN-PERCENT DISCOUNT RATE
Cumulative NOX
emission
reductions, kt
TSL
1
2
3
4
5
6
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
0.4
0.7
1.5
2.1
3.2
7.8
Value of NOX
emission
reductions,
million 2009$
0.1
0.1
0.2
0.3
0.4
1.1
to
to
to
to
to
to
0.5.
0.9.
2.2.
2.9.
4.5.
11.0.
TABLE VI.55—ESTIMATES OF VALUE OF REDUCTIONS OF NOX EMISSIONS UNDER POOL HEATER TRIAL STANDARD
LEVELS AT A THREE-PERCENT DISCOUNT RATE
Cumulative NOX
emission
reductions, kt
TSL
jlentini on DSKJ8SOYB1PROD with RULES2
1
2
3
4
5
6
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
......................................................................................................................................................................
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 VI.57 through Table
VI.62 present the NPV values for heating
products that would result if DOE were
to add the estimates of the potential
economic benefits resulting from
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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, at
both a seven-percent and three-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 presented in
section IV.M. Table VI.56 shows an
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0.4
0.7
1.5
2.1
3.2
7.8
Value of NOX
emission
reductions,
million 2009$
0.1
0.2
0.4
0.5
0.8
2.0
to
to
to
to
to
to
1.0.
1.8.
4.1.
5.6.
8.4.
20.8.
example of the calculation of the NPV
including benefits from emissions
reductions for the case of TSL 5 for
water heaters.
Although adding the value of
consumer savings to the values of
emission reductions provides a valuable
perspective, the following should be
considered: (1) The national consumer
savings are domestic U.S. consumer
E:\FR\FM\16APR2.SGM
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
monetary savings found in market
transactions, while the values of
emissions reductions are based on
estimates of marginal social costs,
which, in the case of CO2, are based on
a global value; (2) The assessments of
consumer savings and emission-related
benefits are performed with different
computer models, leading to different
timeframes for analysis. For heating
products, the present value of national
consumer savings is measured for the
period in which units shipped (2015 to
2045 for water heaters, and 2013 to 2043
for DHE and pool heaters) continue to
operate. However, the time frames of the
benefits associated with the emission
reductions differ. For example, the
value of CO2 emissions reductions
reflects the present value of all future
climate-related impacts due to emitting
a ton of carbon dioxide in that year, out
to 2300.
TABLE VI.56—ESTIMATE OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS TO PRESENT VALUE OF MONETIZED
BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TSL 5 FOR WATER HEATERS
Present value
billion 2009$
Category
Discount rate
(percent)
Benefits
Operating Cost Savings ...............................................................................................................................
12.4
29.2
0.5
3
4.5
2.5
8.2
3
0.1
0.1
15.2
32.1
7
3
7
3
¥11.1
¥20.6
7
3
4.1
11.5
Total Monetary Benefits ** ...........................................................................................................................
5
2.7
CO2 Monetized Value ..................................................................................................................................
(at $4.7/Metric Ton)* ....................................................................................................................................
CO2 Monetized Value ..................................................................................................................................
(at $21.4/Metric Ton)* ..................................................................................................................................
CO2 Monetized Value ..................................................................................................................................
(at $35.1/Metric Ton)* ..................................................................................................................................
CO2 Monetized Value ..................................................................................................................................
(at $64.9/Metric Ton)* ..................................................................................................................................
NOX Monetized Value .................................................................................................................................
(at $2,437/Metric Ton) .................................................................................................................................
7
3
7
3
Costs
Total Monetary Costs ..................................................................................................................................
Net Benefits/Costs
Including CO2 and NOX** ............................................................................................................................
* These values represent global values (in 2007$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7,
$21.4, and $35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of
$64.9 per ton represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate (averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2007$).
TABLE VI.57—ESTIMATES OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS (AT 7% DISCOUNT RATE) TO NET
PRESENT VALUE OF LOW, CENTRAL, AND HIGH-END MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TRIAL STANDARD LEVELS FOR WATER HEATERS
Consumer NPV at 7% discount rate added with:
CO2 value of $4.7/
metric ton CO2*
and Low value for
NOX**
billion 2009$
jlentini on DSKJ8SOYB1PROD with RULES2
TSL
1
2
3
4
5
6
7
8
CO2 value of
$21.4/metric ton
CO2* and Medium
value for NOX***
billion 2009$
CO2 Value of
$35.1/metric ton
CO2* and Medium
value for NOX***
billion 2009$
CO2 value of
$64.9/metric ton
CO2* and high
value for NOX****
billion 2009$
1.24
1.33
1.63
1.54
1.92
1.74
1.89
(8.10)
2.35
3.16
3.59
3.60
4.13
4.75
10.59
6.24
3.29
4.69
5.23
5.32
5.99
7.29
17.92
18.34
5.15
7.74
8.52
8.77
9.68
12.31
32.43
42.26
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
* These label values per ton represent the global SCC of CO2 in 2010, in 2007$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a full discussion of the derivation of these values.
** Low values correspond to $447 per ton of NOX emissions.
*** Medium values correspond to $2,519 per ton of NOX emissions.
**** High values correspond to $4,591 per ton of NOX emissions.
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TABLE VI.58—ESTIMATES OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS (AT 3% DISCOUNT RATE) TO NET
PRESENT VALUE OF LOW, CENTRAL, AND HIGH-END MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TRIAL STANDARD LEVELS FOR WATER HEATERS
Consumer NPV at 3% Discount Rate added with:
CO2 value of $4.7/
metric ton CO2*
and Low value for
NOX**
billion 2009$
TSL
1
2
3
4
5
6
7
8
CO2 value of
$21.4/metric ton
CO2* and Medium
value for NOX***
billion 2009$
CO2 value of
$35.1/metric ton
CO2* and Medium
value for NOX***
billion 2009$
CO2 value of
$64.9/metric ton
CO2* and High
value for NOX****
billion 2009$
4.67
6.08
7.54
8.07
9.22
9.83
25.55
20.44
5.82
7.96
9.56
10.19
11.50
12.93
34.51
35.21
6.75
9.49
11.20
11.91
13.36
15.47
41.84
47.31
8.65
12.60
14.54
15.42
17.11
20.58
56.61
71.67
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
* These label values per ton represent the global SCC of CO2 in 2010, in 2007$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a full discussion of the derivation of these values.
** Low value corresponds to $447 per ton of NOX emissions.
*** Medium value corresponds to $2,519 per ton of NOX emissions.
**** High value corresponds to $4,591 per ton of NOX emissions.
TABLE VI.59—ESTIMATES OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS (AT 7% DISCOUNT RATE) TO NET
PRESENT VALUE OF LOW, CENTRAL, AND HIGH-END MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TRIAL STANDARD LEVELS FOR DIRECT HEATING EQUIPMENT
Consumer NPV at 7% discount rate added with:
CO2 value of $4.7/
metric ton CO2*
and low value for
NOX**
billion 2009$
TSL
1
2
3
4
5
6
CO2 value of
$21.4/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$35.1/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$64.9/metric ton
CO2* and high
value for NOX****
billion 2009$
0.58
0.61
0.60
(1.12)
(1.16)
(4.18)
0.70
0.74
0.74
(0.84)
(0.85)
(3.41)
0.81
0.86
0.86
(0.61)
(0.59)
(2.77)
1.02
1.09
1.10
(0.14)
(0.06)
(1.47)
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
* These label values per ton represent the global SCC of CO2 in 2010, in 2007$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a full discussion of the derivation of these values.
** Low value corresponds to $447 per ton of NOX emissions.
*** Medium value corresponds to $2,519 per ton of NOX emissions.
**** High value corresponds to $4,591 per ton of NOX emissions.
Parentheses indicate negative (¥) values.
TABLE VI.60—ESTIMATES OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS (AT 3% DISCOUNT RATE) TO NET
PRESENT VALUE OF LOW, CENTRAL, AND HIGH-END MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TRIAL STANDARD LEVELS FOR DIRECT HEATING EQUIPMENT
Consumer NPV at 3% discount rate added with:
CO2 value of $4.7/
metric ton CO2*
and low value for
NOX**
billion 2009$
jlentini on DSKJ8SOYB1PROD with RULES2
TSL
1
2
3
4
5
6
CO2 value of
$21.4/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$35.1/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$64.9/metric ton
CO2* and high
value for NOX****
billion 2009$
1.35
1.42
1.43
(1.18)
(1.14)
(4.77)
1.48
1.56
1.58
(0.90)
(0.81)
(3.97)
1.59
1.68
1.70
(0.67)
(0.55)
(3.33)
1.80
1.91
1.94
(0.19)
(0.02)
(2.00)
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
* These label values per ton represent the global SCC of CO2 in 2010, in 2007$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a full discussion of the derivation of these values.
** Low value corresponds to $447 per ton of NOX emissions.
*** Medium value corresponds to $2,519 per ton of NOX emissions.
**** High value corresponds to $4,591 per ton of NOX emissions.
Parentheses indicate negative (¥) values.
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TABLE VI.61—ESTIMATES OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS (AT 7% DISCOUNT RATE) TO NET
PRESENT VALUE OF LOW, CENTRAL, AND HIGH-END MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TRIAL STANDARD LEVELS FOR POOL HEATERS
Consumer NPV at 7% discount rate added with:
CO2 value of $4.7/
metric ton CO2*
and low value for
NOX**
billion 2009$
TSL
1
2
3
4
5
6
CO2 value of
$21.4/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$35.1/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$64.9/metric ton
CO2* and high
value for NOX****
billion 2009$
0.05
0.04
(0.05)
(0.15)
(1.38)
(2.84)
0.05
0.05
(0.03)
(0.11)
(1.32)
(2.70)
0.06
0.06
(0.00)
(0.08)
(1.28)
(2.59)
0.07
0.08
0.04
(0.02)
(1.18)
(2.35)
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
* These label values per ton represent the global SCC of CO2 in 2010, in 2007$. Their present values have been calculated with scenario-consistent discount rates. See section IV.M for a full discussion of the derivation of these values.
** Low value corresponds to $447 per ton of NOX emissions.
*** Medium value corresponds to $2,519 per ton of NOX emissions.
**** High value corresponds to $4,591 per ton of NOX emissions.
Parentheses indicate negative (¥) values.
TABLE VI.62—ESTIMATES OF ADDING NET PRESENT VALUE OF CONSUMER SAVINGS (AT 3% DISCOUNT RATE) TO NET
PRESENT VALUE OF LOW, CENTRAL, AND HIGH-END MONETIZED BENEFITS FROM CO2 AND NOX EMISSIONS REDUCTIONS AT TRIAL STANDARD LEVELS FOR POOL HEATERS
Consumer NPV at 3% discount rate added with:
CO2 value of $4.7/
metric ton CO2*
and low value for
NOX**
billion 2009$
TSL
1
2
3
4
5
6
CO2 value of
$21.4/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$35.1/metric ton
CO2* and medium
value for NOX***
billion 2009$
CO2 value of
$64.9/metric ton
CO2* and high
value for NOX****
billion 2009$
0.10
0.11
(0.01)
(0.14)
(2.31)
(4.53)
0.11
0.12
0.02
(0.10)
(2.26)
(4.39)
0.11
0.13
0.04
(0.07)
(2.21)
(4.28)
0.12
0.15
0.09
(0.01)
(2.11)
(4.04)
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
...............................................................................................
jlentini on DSKJ8SOYB1PROD with RULES2
* These label values per ton represent the SCC of CO2 in 2010, in 2007$. Their present values have been calculated with scenario-consistent
discount rates. See section IV.M for a full discussion of the derivation of these values.
** Low value corresponds to $447 per ton of NOX emissions.
*** Medium value corresponds to $2,519 per ton of NOX emissions.
**** High value corresponds to $4,591 per ton of NOX emissions.
Parentheses indicate negative (¥) values.
7. Other Factors
In determining whether a standard is
economically justified, the Secretary of
Energy may consider any other factors
that the Secretary deems to be relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(VII)) The
Secretary has decided that the LCC
impacts on identifiable groups of
consumers, such as senior citizens and
residents of multi-family housing who
may be disproportionately affected by
any national energy conservation
standard level, is a relevant factor. The
impacts on the identified consumer
subgroups are described in section
VI.C.1.b above. DOE also believes that
uncertainties associated with the heat
pump water heater market (e.g., product
availability, servicing, and
manufacturability) are relevant to
consider as described in section VI.D.2
below. Lastly, DOE believes that another
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relevant consideration is the potential
safety concerns surrounding gas-fired
storage water heaters that are
atmospherically vented with high
recovery efficiencies that potentially
may be installed with improper venting
in certain installations, which are also
discussed in section VI.D.2 below.
D. Conclusion
1. Overview
As discussed above, EPCA contains a
number of criteria and other provisions
which must be followed when
prescribing new or amended energy
conservation standards. Specifically, the
statute provides that any such standard
for any type (or class) of covered
product must be designed to achieve the
maximum improvement in energy
efficiency that the Secretary determines
is technologically feasible and
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economically justified. (42 U.S.C.
6295(o)(2)(A)) In determining whether a
standard is economically justified, the
Secretary must determine whether the
benefits of the standard exceed its
burdens. (42 U.S.C. 6295(o)(2)(B)(i))
DOE must do so after receiving public
comments on the proposed standard
and by considering, to the greatest
extent practicable, the following seven
factors:
1. The economic impact of the
standard on the manufacturers and
consumers of the products subject to
such standard;
2. The savings in operating costs
throughout the estimated average life of
the covered product in the type (or
class) compared to any increase in the
price of, initial charges for, or
maintenance expenses of the covered
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products likely to result from
imposition of the standard;
3. The total projected amount of
energy (or, as applicable, water) savings
likely to result directly from imposition
of the standard;
4. Any lessening of the utility or
performance of the covered products
likely to result from imposition of the
standard;
5. The impact of any lessening of
competition, as determined in writing
by the Attorney General, likely to result
from imposition of the standard;
6. The need for national energy and
water conservation; and
7. Other factors the Secretary
considers relevant.
(42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII))
A determination of whether a
standard level is economically justified
is not based on any one factor in
isolation. The Secretary must weigh
each of these seven factors in total. In
addition, the Secretary may not
establish any standard if such standard
would not result in ‘‘significant
conservation of energy’’ or ‘‘is not
technologically feasible or economically
justified.’’ (42 U.S.C. 6295(o)(3)(B))
Furthermore, EPCA’s ‘‘anti-backsliding’’
provision prohibits the Secretary from
prescribing any amended standard that
either increases the maximum allowable
energy use or decreases the minimum
required energy efficiency of a covered
product. (42 U.S.C. 6295(o)(1))
In selecting today’s energy
conservation standards for the three
heating products, DOE started by
examining whether the maximum
technologically feasible levels were
economically justified. Upon finding
that the maximum technologically
feasible levels were not economically
justified, DOE analyzed the next lower
TSL to determine whether that level was
economically justified. DOE follows this
procedure until it: (1) Identifies a TSL
that is both technologically feasible and
economically justified, and saves a
significant amount of energy; or (2)
determines that no TSL is economically
justified.
Tables in each section below for each
of the three types of heating products
summarize DOE’s quantitative
analytical results for each TSL it
considered for this final rule. These
tables will aid the reader in
understanding the costs and benefits of
each TSL that DOE considered in
adopting standards in this final rule.
2. Water Heaters
Table VI.63 summarizes the results of
DOE’s quantitative analysis for each
TSL it considered for this final rule for
water heaters.
TABLE VI.63—SUMMARY OF ANALYTICAL RESULTS FOR WATER HEATERS
Category
TSL 1
National Energy Savings (quads) ...........
TSL 2
1.07
TSL 3
1.66
TSL 4
2.05
TSL 5
2.35
TSL 6
2.58
TSL 7
TSL 8
3.06
10.16
16.73
8.67
1.39
9.08
1.01
23.39
(0.22)
16.87
(11.57)
NPV of Consumer Benefits (2009$ billion)
3% discount rate .......
7% discount rate .......
4.39
0.96
5.62
0.88
7.05
1.15
7.55
1.03
Industry Impacts
Gas-Fired and Electric Storage:
Industry NPV
(2009$ million)
Industry NPV (%
change) ...........
Oil-Fired Storage:
Industry NPV
(2009$ million)
Industry NPV (%
change) ...........
Gas-Fired Instantaneous:
Industry NPV
(2009$ million)
Industry NPV (%
change) ...........
(4.9)–(14.2)
(4.3)–(31.4)
(5.2)–(38.3)
(4.8)–(89.4)
(25.9)–(122.6)
(23.6)–(134.6)
(10.5)–(350.2)
79.2–(647.0)
(0.6)–(1.6)
(0.5)–(3.6)
(0.6)–(4.3)
(0.5)–(10.2)
(2.9)–(13.9)
(2.7)–(15.3)
(1.2)–(39.8)
9.0–(73.5)
(0.2)–(0.4)
(0.2)–(0.3)
(0.2)–(0.4)
(0.2)–(0.4)
(0.2)–(0.4)
(0.2)–(0.4)
(0.2)–(0.4)
(1.4)–(3.8)
(2.0)–(3.9)
(1.8)–(3.6)
(2.0)–(4.2)
(2.0)–(4.2)
(2.0)–(4.2)
(2.0)–(4.2)
(2.0)–(4.2)
(15.4)–(41.4)
2.3–(1.2)
2.3–(1.2)
2.3–(1.2)
2.3–(1.2)
2.3–(1.2)
2.3–(1.2)
2.3–(1.2)
91.4–(57.6)
0.4–(0.2)
0.4–(0.2)
0.4–(0.2)
0.4–(0.2)
0.4–(0.2)
0.4–(0.2)
0.4–(0.2)
14.1–(8.9)
209
159
0.704
609
456
2.32
1,001
755
3.59
Cumulative Emissions Reduction
CO2 (Mt) ....................
NOX (kt) .............
Hg (t) ..................
74.3
57.5
0.056
122
94.3
0.090
131
101
0.103
137
106
0.113
154
116
0.553
Value of Cumulative Emissions Reduction (2009$ million) ††
jlentini on DSKJ8SOYB1PROD with RULES2
CO2 ............................
NOX—3% discount
rate .........................
NOX—7% discount
rate .........................
266 to 4,122
436 to 6,750
468 to 7,242
492 to 7,614
524 to 8,179
714 to 11,142
2,060 to 32,204
3,399 to 53,098
13.7 to 141
22.5 to 231
24 to 247
25 to 259
25 to 261
35 to 358
99 to 1,019
165 to 1,694
6.6 to 67.9
10.8 to 111
11.6 to 119
12.2 to 125
11.0 to 113
15.2 to 157
42.6 to 438
71.5 to 734
Mean LCC Savings * (2009$)
Gas-Fired Storage .....
Electric Storage .........
Oil-Fired Storage .......
Gas-Fired Instantaneous .....................
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16
5
101
7
11
203
7
18
295
7
18
295
18
64
295
9
64
295
(218)
112
295
(195)
171
495
9
9
9
9
9
9
9
(259)
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20209
TABLE VI.63—SUMMARY OF ANALYTICAL RESULTS FOR WATER HEATERS—Continued
Category
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
TSL 7
TSL 8
Median PBP (years)
Gas-Fired Storage .....
Electric Storage .........
Oil-Fired Storage .......
Gas-Fired Instantaneous .....................
2.0
4.0
0.9
4.5
4.0
0.3
4.5
5.0
0.5
4.5
6.7
0.5
2.3
6.8
0.5
4.7
6.8
0.5
21.5
9.4
0.5
15.6
9.0
1.9
14.8
14.8
14.8
14.8
14.8
14.8
14.8
38.7
Distribution of Consumer LCC Impacts
Gas-Fired Storage:
Net Cost (%) ......
No Impact (%) ....
Net Benefit (%) ..
Electric Storage:
Net Cost (%) ......
No Impact (%) ....
Net Benefit (%) ..
Oil-Fired Storage:
Net Cost (%) ......
No Impact (%) ....
Net Benefit (%) ..
Gas-Fired Instantaneous:
Net Cost (%) ......
No Impact (%) ....
Net Benefit (%) ..
Generation Capacity Change
(GW in 2045) ..
25
36
39
32
22
45
32
22
45
32
22
45
27
33
40
34
21
46
70
6
23
70
1
28
11
44
45
12
39
48
21
17
62
32
10
59
33
9
58
33
9
58
50
5
45
50
1
49
0
76
24
0
54
46
0
47
53
0
47
53
0
47
53
0
47
53
0
47
53
0
17
83
5
91
4
5
91
4
5
91
4
5
91
4
5
91
4
5
91
4
5
91
4
77
12
11
(0.168)
(0.270)
(0.309)
(0.339)
(0.829)
(1.05)
(3.49)
(5.39)
(3,610)–439
(37)–1
(3,610)–500
(37)–1
(3,610)–3,253
(37)–1
(3,610)–6,313
(37)–18
10.6
43.5
56.3
Employment Impacts
Total Potential
Changes in Domestic Production
Workers in 2015:
Gas-Fired and
Electric Storage ..................
Oil-Fired storage
(3,610)–55
(37)–0
(3,610)–128
(37)–0
(3,610)–168
(37)–1
(3,610)–256
(37)–1
Gas-Fired Instantaneous ...........
Net Change in
National Indirect Employment in 2044
thousands) ††††
Not Applicable †††
2.1
2.8
4.6
6.0
10.4
jlentini on DSKJ8SOYB1PROD with RULES2
Parentheses indicate negative (¥) values.
* For LCCs, a negative value means an increase in LCC by the amount indicated.
†† Range of the economic value of CO reductions is based on estimates of the global benefit of reduced CO emissions.
2
2
††† The industry for gas-fired instantaneous water heaters is international.
†††† National Indirect Employment Impacts exclude direct impacts.
DOE first considered TSL 8, which
represents the max-tech efficiency levels
for all four product classes. TSL 8
includes a national standard effectively
requiring the use of condensing
technology for gas-fired storage and
instantaneous water heaters, a national
standard effectively requiring the use of
heat pump water heater technology for
electric storage water heaters, and a
national standard effectively requiring
the use of a multi-flue design for oilfired water heaters. TSL 8 would save
16.7 quads of energy, an amount DOE
considers significant. TSL 8 would
result in a NPV of consumer cost of
$11.6 billion, using a discount rate of 7
percent, and consumer benefit of $16.9
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billion, using a discount rate of 3
percent.
The cumulative emissions reductions
at TSL 8 are 1,001 Mt of CO2, 755 kt of
NOX, and 3.6 t of Hg. The estimated
monetary value of the cumulative CO2
emissions reductions at TSL 8 is $3,399
million to $53,098 million. Total
electricity generating capacity in 2045 is
estimated to decrease by 5.39 gigawatts
(GW) under TSL 8.
At TSL 8, DOE projects that the
average LCC impact for consumers is a
loss of $195 for gas-fired storage water
heaters, a gain of $171 for electric
storage water heaters, a gain of $495 for
oil-fired storage water heaters, and a
loss of $259 for gas-fired instantaneous
water heaters. The median payback
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period is 15.6 years for gas-fired storage
water heaters, 9.0 years for electric
storage water heaters, 1.9 years for oilfired storage water heaters, and 38.7
years for gas-fired instantaneous water
heaters (which is substantially longer
than the mean lifetime of the product).
At TSL 8, the fraction of consumers
experiencing an LCC benefit is 28
percent for gas-fired storage water
heaters, 49 percent for electric storage
water heaters, 83 percent for oil-fired
storage water heaters, and 11percent for
gas-fired instantaneous water heaters.
The fraction of consumers experiencing
an LCC cost is 70 percent for gas-fired
storage water heaters, 50 percent for
electric storage water heaters, 0 percent
for oil-fired storage water heaters, and
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77 percent for gas-fired instantaneous
water heaters.
At TSL 8, the average LCC savings are
negative for all of the considered
consumer subgroups for gas-fired
storage water heaters, and a majority of
the households in each subgroup
experience a net cost. In the case of
electric storage water heaters, the
average LCC savings are negative for
senior-only and multi-family
households, but positive for low-income
and manufactured home households. In
all cases, however, a majority of the
households in each subgroup
experience a net cost.
At TSL 8, the projected change in the
INPV is estimated to decrease up to
$647 million for gas-fired and electric
storage water heaters, a decrease of up
to $3.8 million for residential oil-fired
storage water heaters, and a decrease of
up to $58 million for gas-fired
instantaneous water waters, in 2009$.
For gas-fired and electric storage water
heaters, the impacts are driven
primarily by the assumptions regarding
the ability for manufacturers to produce
products at these efficiency levels in the
volumes necessary to serve the entire
market. Manufacturers would need to
redesign almost all of their products at
TSL 8, which would force
manufacturers to incur significant
product and capital conversion costs.
Some loss in product utility may also
occur for units that are presently
installed in space-constrained
applications because condensing and
heat pump technologies would typically
cause water heaters to have a larger
footprint. At TSL 8, DOE recognizes the
risk of very large negative impacts if
manufacturers’ expectations about
reduced profit margins are realized. In
particular, if the high end of the range
of impacts is reached as DOE expects,
TSL 8 could result in a net loss of 73.5
percent in INPV for gas-fired and
electric storage water heaters, a net loss
of 41.4 percent in INPV for oil-fired
storage water heaters, and a net loss of
8.9 percent in INPV for gas-fired
instantaneous water heaters.
For gas-fired storage and
instantaneous water heaters at TSL 8,
condensing operation would be
required. As further described in the
December 2009 NOPR, DOE outlined
several concerns related to the
condensing gas-fired storage water
heater market. 74 FR 65852, 65963–64
(Dec. 11, 2009). The main concerns
included the ability for the industry to
produce condensing gas-fired storage
water heaters and provide installation
and servicing on a scale necessary to
serve the entire volume of the market
(i.e., approximately, 4.6 million units
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annually). TSL 8 also includes an
efficiency level for electric storage water
heaters that would require the use of
heat pump technology. The substantial
average savings for customers estimated
by DOE’s analysis for TSL 8 are
primarily driven by the results for heat
pump water heaters. However, DOE
outlined a handful of concerns in the
December 2009 NOPR with the current
heat pump water heater market that may
prevent heat pump technology from
being ready for full-scale
implementation for all consumers. 74
FR 65852, 65965 (Dec. 11, 2009). These
included manufacturability,
serviceability, the ability to retrofit
existing installations, and potential
impacts on the space conditioning loads
in the house. All four major storage
water heater manufacturers within the
industry echoed these concerns
regarding the max-tech efficiency level
products.
Therefore, the Secretary has
concluded that at TSL 8, the benefits of
energy savings, positive NPV of
consumer benefits (at 3-percent
discount rate), generating capacity
reductions, and emission reductions are
outweighed by the economic burden on
a significant fraction of consumers due
to the large increases in first costs
associated with electric heat pump
water heaters and gas-fired condensing
water heaters, the disproportionate
impacts to consumers in multi-family
housing, the large capital conversion
costs that could result in a large
reduction in INPV for the
manufacturers, as well as the
uncertainty associated with providing
products at the max-tech level on a scale
necessary to serve the entire market.
Consequently, the Secretary has
concluded that TSL 8 is not
economically justified.
Next, DOE considered TSL 7. The
efficiency levels in TSL 7 include the
ENERGY STAR program level for
electric storage water heaters, which
effectively requires the use of heat
pump water heating technologies.
However, TSL 7 allows the use of
atmospherically-vented gas-fired storage
water heaters. TSL 7 would save 10.16
quads of energy, an amount DOE
considers significant. TSL 7 would
result in a negative consumer NPV of
$0.22 billion, using a discount rate of 7
percent, and a consumer NPV benefit of
$23.4 billion, using a discount rate of 3
percent.
The cumulative emissions reductions
at TSL 7 are 609 Mt of CO2, 456 kt of
NOX, and 2.32 t of Hg. The estimated
monetary value of the cumulative CO2
emissions reductions at TSL 7 is $2,060
million to $32,204 million. Total
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generating capacity in 2045 is estimated
to decrease by 3.49 GW under TSL 7.
At TSL 7, DOE projects that the
average LCC impact is a loss of $218 for
gas-fired storage water heaters, a gain of
$112 for electric storage water heaters,
a gain of $295 for oil-fired storage water
heaters, and a gain of $9 for gas-fired
instantaneous water heaters. The
median payback period is 21.5 years for
gas-fired storage water heaters, 9.4 years
for electric storage water heaters, 0.5
years for oil-fired storage water heaters,
and 14.8 years for gas-fired
instantaneous water heaters. At TSL 7,
the fraction of consumers experiencing
an LCC benefit is 23 percent for gasfired storage water heaters, 45 percent
for electric storage water heaters, 53
percent for oil-fired storage water
heaters, and 4 percent for gas-fired
instantaneous water heaters. The
fraction of consumers experiencing an
LCC cost is 70 percent for gas-fired
storage water heaters, 50 percent for
electric storage water heaters, 0 percent
for oil-fired storage water heaters, and 5
percent for gas-fired instantaneous
water heaters.
At TSL 7, the estimated average LCC
savings are negative for all of the
considered consumer subgroups for gasfired storage water heaters, and a
majority of the households in each
subgroup experience a net cost. In the
case of electric storage water heaters, the
average LCC savings are negative for
senior-only and multi-family
households, but positive for low-income
and manufactured home households. In
all cases, however, a majority of the
households in each subgroup
experience a net cost.
At TSL 7, the projected change in
INPV ranges from a decrease of up to
$350.2 million for gas-fired and electric
storage water heaters, a decrease of up
to $0.4 million for oil-fired storage water
heaters, and a decrease of up to $1.2
million for gas-fired instantaneous water
heaters, in 2009$. The negative impacts
on INPV are driven largely by the
required efficiencies for electric storage
water heaters which effectively require
heat pump technology. The oil-fired
storage water heater and gas-fired
instantaneous water heater efficiencies
do not require substantial changes to the
existing operations for some
manufacturers. The significant changes
for electric storage water heaters help to
drive the INPVs negative, especially if
profitability is impacted after the
compliance date of the amended energy
conservation standard. In particular, if
the high end of the range of impacts is
reached as DOE expects, TSL 7 could
result in a net loss of 39.8 percent in
INPV for gas-fired and electric storage
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water heaters, a net loss of 4.2 percent
in INPV for oil-fired storage water
heaters, and a net loss of 0.2 percent in
INPV for gas-fired instantaneous water
heaters.
TSL 7 includes efficiency levels for
the entire market of electric storage
water heaters that are currently only
achievable through the use of advanced
heat pump technologies. DOE’s analysis
indicates that dramatic reductions in
energy use and substantial economic
savings are possible for electric water
heaters with the use of these
technologies. As with TSL 8, the average
savings for electric water heater
customers estimated by DOE’s analysis
for TSL 7 are primarily driven by the
results for heat pump water heaters.
While DOE finds the potential energy
savings resulting from a national heat
pump water heater standard very
favorable, DOE outlined a number of
concerns regarding the
manufacturability and the market for
heat pump water heaters in the
December 2009 NOPR. 74 FR 65852,
65965 (Dec. 11, 2009). These included
manufacturability, serviceability, the
ability to retrofit existing installations,
and potential impacts on the space
conditioning loads in the house.
DOE further researched the heat
pump water heater market for the final
rule. Since the analysis was conducted
for the December 2009 NOPR, several
heat pump water heater models have
been introduced into the market by
major manufacturers. DOE’s engineering
analysis for the final rule confirmed that
the use of heat pump water heaters adds
dramatically to the MSP estimates,
increasing the MSP more than $588 over
the baseline electric storage water
heater. In part due to this change, the
total installed cost to the consumer
increases by an average of $915 for heat
pump water heaters compared to
traditional electric storage water heaters
that use electric resistance heating
elements.
In the December 2009 NOPR, DOE
posed a series of questions for interested
parties regarding the manufacturability
of heat pump water heaters to meet the
demands of the entire market (i.e.,
approximately 5.8 million units). Even
though DOE acknowledged in the
December 2009 NOPR that most
manufacturers are in the process of
developing a heat pump water heater to
offer to consumers in response to the
ENERGY STAR program or have
recently begun to offer a heat pump
water heater model for sale, DOE
questioned whether it was possible for
manufacturers to convert all of their
existing product lines over to produce
heat pump water heaters within 5 years.
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74 FR 65852, 65965 (Dec. 11, 2009). In
response to DOE’s question in the
December 2009 NOPR, A.O. Smith,
Rheem, and Bradford White all agreed
that producing heat pump water heaters
in the volumes necessary to service the
market would be quite a transformation
and investment for manufacturers. DOE
estimates that it would take a total of
$76 million in capital conversion costs
and an additional $55 million in
product conversion costs for the
industry to offer exclusively HPWHs. In
addition, the significantly higher
production costs would require an
additional $273 million in working
capital to purchase more expensive
components, carry more-costly
inventory, and handle higher accounts
receivable. DOE estimates that the
working capital requirement and
conversion costs would cause electric
storage water heater manufacturers to
incur a total one-time investment of at
least $404 million in an electric storage
market valued at approximately $301
million. Furthermore, manufacturers
would find it extremely difficult to
create a service structure for over five
million electric storage water heaters
that use a relatively new technology by
the compliance date of the final rule.
Finally, DOE believes it is unlikely that
manufacturers could earn the same
return on these extremely large
investments, so profitability would be
expected to decrease after the
compliance date of the amended energy
conservation standards. Even with the
ENERGY STAR incentive program,
DOE’s only projects the market
penetration of heat pump water heaters
will be 5 percent in 2015.
In the December 2009 NOPR, DOE
questioned whether the service industry
would be capable of providing the same
level of service for heat pump water
heaters that consumers are accustomed
to receiving from a typical installer or
repair person. 74 FR 65852, 65965 (Dec.
11, 2009). DOE sought input from
commenters about whether reliable
installation and servicing could be
achieved on the scale needed by the
compliance date of the amended
standard. Id. As further detailed in
section IV.B.2.b, DOE received
comments supporting both sides of the
arguments. Some manufacturers believe
the training of service technicians and
infrastructure needed to provide service
to the heat pump water heating industry
is not adequate and would not be
available by the compliance date of the
standard to serve the needs of the entire
market. Others, including a
manufacturer of heat pump water
heaters, asserted that a nationwide
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network for heat pump water heater
product service currently exists to
service the limited heat pump water
heater market today. Also, this
manufacturer is currently developing a
nationwide installation base to ensure
that its consumers can readily purchase,
install, and repair their heat pump water
heaters. Other commenters pointed out
that the skills needed to service heat
pump water heaters are similar to the
skill set of technicians in the residential
refrigerator industry, which has an
extensive servicing base.
While DOE believes that heat pump
water heaters could require different
servicing needs compared to traditional
electric resistance storage water heaters,
DOE also believes that the service
industry will adapt to provide reliable
installation, repair, and maintenance for
heat pump water heaters by the
compliance date of amended energy
conservation standards for a subset of
the entire market. Heat pump water
heaters will require additional servicing
needs for the sealed system portion of
the unit. This includes handling a
working refrigerant in addition to the
typical plumbing type issues associated
with residential water heaters. Even
though DOE believes this additional
servicing requirement can be adequately
handled by a national servicing network
of appliance technicians, DOE questions
whether this can be done in the nearterm at a level necessary to service the
entire market.
In the December 2009 NOPR, DOE
also questioned whether heat pump
water heaters were capable of being
installed in all types of installations
currently serviced by the residential
electric storage water heating market. 74
FR 65852, 65965 (Dec. 11, 2009). DOE
found that in certain situations
(especially indoor locations),
installations could be very costly for
consumers, requiring them to alter their
existing space to accommodate a heat
pump water heater. In some indoor
installations, the consumer needs to
address space constraints issues, a
requirement for sufficient air volume to
maintain adequate operation of the
water heater, and the impact of the
water heater cooling off the space
during the heating season. Id. DOE
stated in the December 2009 NOPR that
according to DOE’s estimates, 12
percent of electric storage water heater
consumers would experience an
increase of more than $500 in their LCC
compared to the base case. 74 FR 65852,
65965 (Dec. 11, 2009).
DOE strongly considered TSL 7 as the
standard level for residential water
heaters. Even though the commenters
provided useful insight regarding the
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potential manufacturability,
serviceability, and capabilities of these
units to be installed in similar types of
installations where current electric
storage water heaters are located, DOE is
still concerned about some of the issues
identified in the December 2009 NOPR
and outlined above regarding a national
heat pump water heater standard.
Specifically, DOE is still concerned
about the ability for manufacturers to
ramp up production in time to meet the
demand by the compliance date of
amended standards, the potentially
large increases in total installed cost to
certain consumers, the potential impacts
on multi-family households, and the
potential impacts on the heating and
cooling load of the residence.
Consequently, for today’s final rule, the
Secretary has concluded that at TSL 7,
the benefits of energy savings, positive
consumer NPV (at 3-percent discount
rate), generating capacity reductions,
and emission reductions would be
outweighed by the negative economic
impacts on those consumers that would
have to make structural changes to
accommodate the larger footprint of the
heat pump water heaters, the economic
burden on a significant fraction of
consumers due to the large increases in
total installed costs associated with heat
pump water heaters, the
disproportionate impacts to consumers
in multi-family housing and others with
comparatively low usage rates, the large
capital conversion costs that could
result in a large reduction in INPV for
the manufacturers, and the uncertainties
associated with the heat pump water
heater market.
Next, DOE considered TSL 6, in
which DOE paired efficiency levels that
would effectively require different
technologies for large-volume and
small-volume gas-fired and electric
storage water heaters in an effort to
promote advance technology
penetration into the market and to
potentially save additional energy.
Specifically, TSL 6 would effectively
require heat pump technology for
electric storage water heaters with a
rated storage volume greater than 55
gallons and condensing technology for
gas-fired storage water heaters with a
rated storage volume greater than 55
gallons. For electric storage water
heaters at TSL 6, DOE considered
efficiency level 6 (i.e., the lowest
efficiency level DOE analyzed
effectively requiring heat pump
technology), instead of the max-tech
efficiency level 7 for large water heaters,
because at the time of the analysis, only
one manufacturer had demonstrated the
capability of reaching the efficiencies
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required by the max-tech energy
efficiency equation for electric storage
water heaters. Under this slightly lower
efficiency level, manufacturers can
better maintain design flexibility, and it
encourages competition in the heat
pump water heater market. DOE
believes this level represents an
efficiency level that is likely to result in
efficient heat pump technologies, yet
also maintains maximum flexibility
regarding specific heat pump water
heater designs. For electric storage water
heaters with a rated storage volume of
55 gallons or less, TSL 6 also includes
requirements which continue to allow
the use of electric resistance elements.
TSL 6 also includes requirements
allowing atmospherically-vented gasfired storage water heaters with a rated
storage volume at or below 55 gallons.
As an example, a gas-fired water heater
with a rated storage volume of 40
gallons would be required to meet a 0.63
EF under TSL 6. As described above and
further detailed below, this efficiency
level, which is pushing the limits of
atmospherically-vented gas-fired storage
water heaters is where DOE has
concerns over consumer safety for units
with high recovery efficiencies in
certain installations. These concerns are
further described below.
TSL 6 would save 3.06 quads of
energy, an amount DOE considers
significant. Under TSL 6, the NPV of
consumer benefit would be $1.01
billion, using a discount rate of 7
percent, and $9.08 billion, using a
discount rate of 3 percent.
The cumulative emissions reductions
at TSL 6 are 209 Mt of CO2, 159 kt of
NOX, and 0.704 t of Hg. The estimated
monetary value of the cumulative CO2
emissions reductions at TSL 6 is $714
million to $11,142 million. Total
generating capacity in 2045 is estimated
to decrease by 1.05 GW under TSL 6.
At TSL 6, DOE projects that the
average LCC impact is a gain (consumer
cost savings) of $9 for gas-fired storage
water heaters, a gain of $64 for electric
storage water heaters, a gain of $295 for
oil-fired storage water heaters, and a
gain of $9 for gas-fired instantaneous
water heaters. The median payback
period is 4.7 years for gas-fired storage
water heaters, 6.8 years for electric
storage water heaters, 0.5 years for oilfired storage water heaters, and 14.8
years for gas-fired instantaneous water
heaters. At TSL 6, the fraction of
consumers experiencing an LCC benefit
is 46 percent for gas-fired storage water
heaters, 58 percent for electric storage
water heaters, 53 percent for oil-fired
storage water heaters, and 4 percent for
gas-fired instantaneous water heaters.
The fraction of consumers experiencing
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an LCC cost is 34 percent for gas-fired
storage water heaters, 33 percent for
electric storage water heaters, 0 percent
for oil-fired storage water heaters, and 5
percent for gas-fired instantaneous
water heaters.
At TSL 6, the estimated average LCC
savings for gas-fired storage water
heaters are negative for multi-family
households and manufactured home
households, slightly negative for lowincome households, and slightly
positive for senior-only households. In
the case of electric storage water heaters,
the average LCC savings are positive for
senior-only and low-income
households, slightly negative for multifamily households, and negative for
manufactured home households. In all
cases except manufactured home
households, a majority of the
households in each subgroup
experience a net benefit.
At TSL 6, the projected change in
INPV ranges from a decrease of up to
$134.6 million for gas-fired and electric
storage water heaters, a decrease of up
to $0.4 million for oil-fired storage water
heaters, and a decrease of up to $1.2
million for gas-fired instantaneous water
heaters, in 2009$. The negative impacts
on INPV are driven largely by the
required efficiencies for gas-fired and
electric storage water heaters with rated
storage volumes above 55 gallons. TSL
6 would effectively require heat pump
technology and condensing technology
for the electric and gas-fired storage
water heaters at these volume sizes. The
efficiency requirements at TSL 6 for
electric storage water heater with a rated
volume less than 55 also result in
negative impacts because such large
increases in insulation also require
manufacturers to implement changes to
their existing equipment. The oil-fired
storage water heater and gas-fired
instantaneous water heater efficiencies
at TSL 6 do not require substantial
changes to the existing operations for
some manufacturers. The significant
changes to gas-fired and electric storage
water heaters with rated storage
volumes greater than 55 gallons help to
drive the INPVs negative, especially if
profitability is impacted after the
compliance date of the amended energy
conservation standard. In particular, if
the high end of the range of impacts is
reached as DOE expects, TSL 6 could
result in a net loss of 15.3 percent in
INPV for gas-fired and electric storage
water heaters, a net loss of 4.2 percent
in INPV for oil-fired storage water
heaters, and a net loss of 0.2 percent in
INPV for gas-fired instantaneous water
heaters.
DOE believes TSL 6 would provide an
effective mechanism for increasing the
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market penetration for advancedtechnology water heaters. Given DOE’s
concerns with TSL 7 (which includes a
national heat pump water heater
standard for electric storage water
heaters across the entire range of rated
storage volumes) as described above,
DOE also strongly considered adopting
TSL 6. TSL 6 results in positive NPV of
consumer benefit for both electric and
gas-fired storage water heaters, while
also providing considerable energy and
carbon savings.
Using DOE’s shipments model and
market assessment, DOE estimated
approximately 4 percent of gas-fired
storage water heater shipments and 11
percent of models would fall into the
large-volume water heater category
using the TSL 6 division (i.e., large
water heaters with storage volumes
above 55 gallons). Similarly, DOE
estimated approximately 9 percent of
electric storage water heater shipments
and 27 percent of models would fall
into the large-volume water heater
category using the TSL 6 division.
Compared to TSL 7, TSL 6 effectively
requires heat pump technology for a
relatively small fraction of the electric
storage water heater market, reduces the
number of installations that would
necessitate significant structural
modifications due to the size of heat
pump water heaters, reduces the
number of installations that have space
conditioning impacts from cool air
produced by the heat pump water heater
operation, results in higher average LCC
savings and shorter median payback
periods, and reduces the negative
impacts on consumer subgroups. For
gas-fired storage water heaters,
compared to a national condensing
standard level (TSL 8), TSL 6 requires
condensing technology for a relatively
small fraction of the gas-fired storage
water heater market, reduces the
number of installations that require
significant building modifications due
to the size of condensing gas-fired water
heaters, and results in higher average
LCC savings and shorter median
payback period.
Although DOE has identified a
number of benefits associated with TSL
6, DOE is aware that there are multiple
issues associated with promulgating an
amended energy conservation standard
at this level. Potential issues with TSL
6 affecting both heat pump water
heaters and condensing gas-fired water
heaters include: (1) Consumer
acceptance; (2) training; (3) product
substitution; (4) engineering resource
constraints; (5) product discontinuation;
and (6) manufacturing issues. DOE fully
discusses each of these in great detail in
the December 2009 NOPR. 74 FR 65852,
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65966–67 (Dec. 11, 2009). The lack of
clarity on many of these issues
contributed to DOE’s tentative
conclusion at the NOPR stage that a
determination could not be made that
NOPR TSL 5 (which contained different
standards based upon the 55-gallon
capacity division) is economically
justified. However, comments and other
information on these issues in response
to the NOPR allowed DOE to make a
more informed decision for the final
rule.
As far as consumer acceptance, DOE
questioned whether consumers may
elect not to buy the larger-volume water
heaters for a number of reasons (e.g.,
including increases in first costs,
unfamiliarity with the product, or
space-constraint issues) and instead buy
multiple water heaters that are under
the capacity limit in the December 2009
NOPR. 74 FR 65852, 65967 (Dec. 11,
2009). In the final rule, DOE has now
accounted for the equipment switching
to lower rated storage volume water
heaters in its analysis. DOE believes it
has captured any potential impacts from
that fraction of consumers who might
elect to install one or two smaller water
heaters. DOE derived the fraction of
households which could switch from a
large water heater to two smaller water
heaters by comparing the total installed
costs. DOE also considered the
feasibility of switching a large water
heater to a smaller water heater based
on hot water needs of the household.
DOE also took into consideration other
factors such as whether some
households would account for the
operating cost advantages, need for
emergency replacement, and avoiding
costly venting system modifications
when also installing a condensing gas
furnace. See section IV.G.2.d for
additional details.
As far as the reliable installation,
servicing, and repair network that
would be needed to service the market,
DOE believes TSL 6 mitigates these
problems for the reasons that follow.
Because TSL 6 only impacts at most 9
percent of the electric storage water
heater market, DOE believes the service
industry will be able to provide
adequate service to this subset of
consumers. In addition, DOE believes
that with the ENERGY STAR program
and major water heater manufacturers
continuing to introduce products into
the market, the service industry will
also continue to evolve. Given that this
standard level does not impact the
entire market and with the 5-year lead
time, DOE believes the service industry
will be able to properly train
technicians and provide a nationwide
network, which includes plumbers and
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refrigeration technicians to properly
service heat pump water heaters by
2015.
As far as manufacturability, DOE
estimates that it would take a total of
$14.2 million and $26.1 million in
capital conversion costs and product
conversion costs for the industry to offer
condensing products and heat pump
water heaters for units with rated
storage volumes above 55-gallons,
respectively. While the total required
investments (including working capital)
to manufacture exclusively HPWHs
greatly exceed the total industry value,
the total conversion costs for converting
only products with rated storage
volumes above 55-gallons represent just
2.4 percent and 8.7 percent of the total
value of the gas-fired and electric
storage markets, respectively.
Additionally, TSL 6 requires far less
investment in working capital than TSL
7. Specifically, as compared to the $273
million required by TSL 7 for electric
storage water heaters, TSL 6 would
necessitate an investment of $45
million. Similarly, for gas-fired storage
water heaters, TSL 8 requires an
increase of $177 million in working
capital needs, while TSL 6 requires an
increase of $20 million. These much
higher investments at TSL 7 and TSL 8,
relative to TSL 6, are reflected in the
mitigated INPV impacts shown in the
MIA results.
DOE also believes that manufacturers
would be better able to make the
technological changes required at TSL 6
than TSL 7 before the compliance date,
due, in part, to the experience of all
three major manufacturers in producing
large-volume condensing products for
the commercial sector. DOE believes
manufacturers can rely on this
experience to adapt to TSL 6 to an
extent they could not at TSL 8, at which
smaller-volume products would also
have to be converted. Furthermore, two
of the three major manufacturers have
some experience in manufacturing heat
pump water heaters for the residential
sector. The efficiency requirements for
products only above 55-gallons rated
storage volume would not require
manufacturers to greatly alter most of
their existing production lines. DOE
believes that manufactures would create
separate production lines for these
products, which would be less
disruptive to current facilities. In
addition, five years should offer enough
lead time for the product development
and capital changes for these largerrated-volume products. Lastly, DOE
believes that manufacturers would be
more likely to maintain an historic level
of return on investment on large-volume
products, relative to small-volume
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products, because that market contains
a greater mix of high-end consumers.
DOE strongly considered TSL 6 and
believes it would provide additional
energy and carbon savings, while
mitigating some of the issues associated
with a national heat pump water heater
standard. However, TSL 6 also includes
a level for gas-fired storage water heaters
with rated storage volumes at or below
55 gallons that has caused DOE some
reservations related to consumer safety.
These concerns came to light during the
course of DOE’s consideration of public
comments on the NOPR. Specifically,
TSL 6 for smaller-volume gas-fired
storage water heaters effectively
continues to allow the use of
atmospherically-vented technology.
DOE reviewed the current market at 40
gallons rated storage volume and two
current designs offered at a 0.63 EF: (1)
An atmospherically-vented unit and (2)
a fan-assisted unit. Over 50 percent of
these models have corresponding
recovery efficiencies at or above 78
percent.
The efficiency of a gas-fired water
heater is characterized by a number of
factors, including the energy factor, the
first hour rating, and the recovery
efficiency. For atmospherically-vented
gas-fired storage water heaters,
manufacturers primarily modify either
the insulation thickness to increase the
energy factor or the baffling to increase
the recovery efficiency. The recovery
efficiency characterizes how efficiently
the heat from the energy source is
transferred to the water. For each design
and energy factor analyzed by DOE,
manufacturers offer units in a range of
recovery efficiencies. As the recovery
efficiency increases, the risk for
condensation to occur in the vent
increases. Recovery efficiencies at or
above 78 percent present a potential
safety risk if condensation occurs in
certain installations and the proper
venting has not been installed in the
residence, thereby potentially allowing
carbon monoxide to enter and build up
in the living space.
As explained in section IV.F.2.a
above, DOE’s analysis assumed that
installations with water heaters with
recovery efficiency of 78 percent or
higher (which accounted for 57 percent
of installations at TSL 6) would use
stainless steel vent connectors. Without
such vent connectors, there is a
potential for corrosion of the vent due
to condensation of flue gases. At
present, however, the National Fuel Gas
Code venting tables that are used as
guidelines for installation are based on
assumed recovery efficiencies of 76
percent, and they do not mention use of
stainless steel vent connectors.
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Therefore, there is a possibility that
some installations could occur without
use of stainless steel vent connectors.
DOE found that there are several 40gallon gas-fired water heater models
corresponding to TSL 6 efficiency levels
that are currently available to
consumers and that do not utilize power
venting. These models do not have any
venting or installation instructions
directing installers to use special
venting (other than what is already
required by the National Fuel Gas Code
and/or local codes) for these products,
and it is unclear why the concerns
raised have not been an issue for these
products currently available on the
market.
However, in considering the adoption
of a minimum standard for gas-fired
water heaters at TSL 6 with rated
storage volumes at or below 55 gallons,
DOE believes there may be an increased
risk of potential safety concerns due to
improper installation of units with high
recovery efficiencies. While DOE
realizes there are units with recovery
efficiencies offered in a range of energy
factors, DOE also believes this risks
increases as the limits of
atmospherically-vented technology are
reached.
Ideally, DOE believes the National
Fuel Gas Code venting tables should be
modified to properly address
condensation-related issues for the units
on the market with recovery efficiencies
at or above 76 percent. This would
include a recommendation to use
stainless steel vent connectors at these
recovery efficiencies regardless of
energy factor and in order to mitigate
most of the safety concerns for
atmospherically-vented units. However,
DOE cannot be certain whether such
changes would occur before the
compliance date of amended energy
conservation standards for water
heaters. Thus, in practice, there remains
the possibility that some installations of
TSL 6 gas-fired water heaters with
recovery efficiencies at or above 78
percent would not use stainless steel
vent connectors, which could result in
safety problems in a likely small, but
uncertain, number of cases.
Therefore, for today’s final rule, the
Secretary tentatively concludes that at
TSL 6, the benefits of energy savings,
positive consumer NPV, generating
capacity reductions, economic savings
for most consumers, and emission
reductions would be outweighed the
large capital conversion costs that could
result in a large reduction in INPV for
the manufacturers, the negative impacts
on some consumer groups, and the
safety concerns due to the corrosive
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condensate forming in the venting
system of specific installations.
Next, DOE considered TSL 5, which
is very similar to TSL 6 except that it
considers a lower efficiency level for
gas-fired storage water heaters with
rated storage volumes less than or equal
to 55 gallons. TSL 5 still pairs efficiency
levels that would effectively require
different technologies for large-volume
and small-volume gas-fired and electric
storage water heaters in an effort to
promote advance technology
penetration into the market and to
potentially save additional energy.
Specifically, TSL 5 would effectively
require heat pump technology for
electric storage water heaters with rated
storage volumes greater than 55 gallons
and condensing technology for gas-fired
storage water heaters with rated storage
volumes greater than 55 gallons. For
gas-fired water heaters at TSL 5, DOE
analyzed energy efficiency level 1 for
small-volume units due to the potential
safety concerns with corrosive
condensate formation.
TSL 5 would save 2.58 quads of
energy, an amount DOE considers
significant. Under TSL 5, the NPV of
consumer benefit would be $1.39
billion, using a discount rate of 7
percent, and $8.67 billion, using a
discount rate of 3 percent.
The cumulative emissions reductions
at TSL 5 are 154 Mt of CO2, 116 kt of
NOX, and 0.553 t of Hg. The estimated
monetary value of the cumulative CO2
emissions reductions at TSL 5 is $524
million to $8,179 million. Total
generating capacity in 2045 is estimated
to decrease by 0.83 GW under TSL 5.
At TSL 5, DOE projects that the
average LCC impact is a gain (consumer
cost savings) of $18 for gas-fired storage
water heaters, a gain of $64 for electric
storage water heaters, a gain of $295 for
oil-fired storage water heaters, and a
gain of $9 for gas-fired instantaneous
water heaters. The median payback
period is 2.3 years for gas-fired storage
water heaters, 6.8 years for electric
storage water heaters, 0.5 years for oilfired storage water heaters, and 14.8
years for gas-fired instantaneous water
heaters. At TSL 5, the fraction of
consumers experiencing an LCC benefit
is 40 percent for gas-fired storage water
heaters, 58 percent for electric storage
water heaters, 53 percent for oil-fired
storage water heaters, and 4 percent for
gas-fired instantaneous water heaters.
The fraction of consumers experiencing
an LCC cost is 27 percent for gas-fired
storage water heaters, 33 percent for
electric storage water heaters, 0 percent
for oil-fired storage water heaters, and 5
percent for gas-fired instantaneous
water heaters.
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At TSL 5, the estimated average LCC
savings for gas-fired storage water
heaters are slightly negative for multifamily households and manufactured
home households, and slightly positive
for senior-only households and lowincome households. For all of the
subgroups, a higher share of households
have a net benefit than have a net cost.
In the case of electric storage water
heaters, the average LCC savings are
positive for senior-only and low-income
households, slightly negative for multifamily households, and negative for
manufactured home households. In all
cases except manufactured home
households, a majority of the
households in each subgroup
experience a net benefit.
At TSL 5, the projected change in
INPV ranges from a decrease of up to
$122.6 million for gas-fired and electric
storage water heaters, a decrease of up
to $0.4 million for oil-fired storage water
heaters, and a decrease of up to $1.2
million for gas-fired instantaneous water
heaters, in 2009$. The negative impacts
on INPV are driven largely by the
required efficiencies for gas-fired and
electric storage water heaters with rated
storage volumes above 55 gallons. TSL
5 would effectively require heat pump
technology and condensing technology
for the electric and gas-fired storage
water heaters at these volume sizes. The
efficiency requirements at TSL 5 for
electric storage water heater with a rated
volume less than 55 gallons also result
provides substantial energy and carbon
savings, while mitigating some of the
issues associated with a national heat
pump water heater standard (TSL 7).
Moreover, TSL 5 also reduces the risk of
safety concerns for small-volume gasfired storage water heaters by providing
manufacturers with additional
flexibility in reaching TSL 5 efficiency
levels.
Therefore, for today’s final rule, the
Secretary has concluded that at TSL 5,
the benefits of energy savings, positive
consumer NPV, generating capacity
reductions, economic savings for most
consumers, and emission reductions
(both in physical quantities and the
monetized value of those emissions)
outweigh the large capital conversion
costs that could result in a large
reduction in INPV for the manufacturers
and the negative impacts on some
consumer subgroups. Further, global
benefits from carbon dioxide reductions
(at a central value of $21.4 per ton for
emissions in 2010) would have a
present value of $2.7 billion. These
benefits from carbon dioxide emission
reductions, when considered in
conjunction with the consumer savings
NPV and other factors described above,
support DOE’s conclusion that TSL 5 is
economically justified. Consequently,
DOE is adopting TSL 5 for residential
water heaters. Table VI.64 shows the
standard levels DOE is adopting today
for residential water heaters.
in negative impacts because such large
increases in insulation also require
manufacturers to implement changes to
their existing equipment. The oil-fired
storage water heater and gas-fired
instantaneous water heater efficiencies
at TSL 5 do not require substantial
changes to the existing operations for
some manufacturers. The significant
changes to gas-fired and electric storage
water heaters with rated storage
volumes greater than 55 gallons help to
drive the INPVs negative, especially if
profitability is impacted after the
compliance date of the amended energy
conservation standard. In particular, if
the high end of the range of impacts is
reached as DOE expects, TSL 5 could
result in a net loss of 13.9 percent in
INPV for gas-fired and electric storage
water heaters, a net loss of 4.2 percent
in INPV for oil-fired storage water
heaters, and a net loss of 0.2 percent in
INPV for gas-fired instantaneous water
heaters.
DOE believes TSL 5 would provide an
effective mechanism for increasing the
market penetration for advancedtechnology water heaters. Given DOE’s
concerns with TSL 7 (which includes a
national heat pump water heater
standard for electric storage water
heaters across the entire range of rated
storage volumes) as described above,
DOE also strongly considered adopting
TSL 5. TSL 5 results in positive NPV of
consumer benefit for both electric and
gas-fired storage water heaters, and
TABLE VI.64—AMENDED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL WATER HEATERS
Residential Water Heaters
Product Class
Standard Level
Gas-fired Storage .................
Electric Storage ....................
For tanks with a Rated Storage Volume at or below 55
gallons: EF = 0.675¥(0.0015 × Rated Storage Volume in gallons).
For tanks with a Rated Storage Volume at or below 55
gallons: EF = 0.960¥(0.0003 × Rated Storage Volume in gallons).
For tanks with a Rated Storage Volume above 55 gallons: EF = 0.8012¥(0.00078 × Rated Storage Volume in gallons)
For tanks with a Rated Storage Volume above 55 gallons: EF = 2.057¥(0.00113 × Rated Storage Volume
in gallons)
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons)
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons)
Oil-fired Storage ...................
Gas-fired Instantaneous .......
3. Direct Heating Equipment
Table VI.65 summarizes the results of
DOE’s quantitative analysis for each
TSL it considered for this final rule for
direct heating equipment.
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TABLE VI.65—SUMMARY OF ANALYTICAL RESULTS FOR DIRECT HEATING EQUIPMENT
Category
TSL 1
National Energy Savings (quads) ....................................
0.20
TSL 2
TSL 3
0.21
TSL 4
TSL 5
TSL 6
0.23
0.43
0.48
1.26
1.39
(1.26)
(1.22)
(4.97)
NPV of Consumer Benefits (2009$ billion)
3% discount rate ..............................................................
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TABLE VI.65—SUMMARY OF ANALYTICAL RESULTS FOR DIRECT HEATING EQUIPMENT—Continued
Category
TSL 1
7% discount rate ..............................................................
TSL 2
0.54
TSL 3
0.55
TSL 4
TSL 5
TSL 6
0.56
(1.19)
(1.24)
(4.38)
Industry Impacts:
Traditional Direct Heating Equipment:.
Industry NPV (2009$ million) ....................................
Industry NPV (% change) .........................................
(0.9)–(2.5)
(5.2)–(14.9)
(1.2)–(3.9)
(7.2)–(23.6)
(1.9)–(7.0)
(11.3)–
(42.4)
(1.9)–(8.8)
(11.6)–
(53.1)
(3.8)–(10.4)
(22.7)–
(64.2)
(3.9)–(13.4)
(23.6)–
(80.8)
Gas Hearth Direct Heating Equipment:.
Industry NPV (2009$ million) ....................................
Industry NPV (% change) .........................................
(0.2)–(0.9)
(0.3)–(1.2)
(0.2)–(0.9)
(0.3)–(1.2)
(0.2)–(0.9)
(0.3)–(1.2)
1.6–(13.2)
2.0–(17.1)
1.6–(13.2)
2.0–(17.1)
8.6–(53.6)
11.1–(69.5)
17.9
16.4
20.2
18.6
49.9
46.0
35–530
2.1–22.1
1.1–11.4
67–1,023
4.2–42.9
2.2–22.3
76–1,154
4.7–48.7
2.5–25.3
187–2,849
11.7–120
6.1–62.5
114
64
13
143
96
43
64
13
143
(70)
83
(56)
13
646
(70)
43
(56)
13
646
(253)
5.0
11.0
10.7
4.8
0
12.2
11.0
10.7
4.8
17.1
2.7
16.5
10.7
6.9
17.1
12.2
16.5
10.7
6.9
26.8
Cumulative Emissions Reduction*:
CO2 (Mt) ....................................................................
NOX (kt) ....................................................................
8.2
7.5
8.8
8.1
9.3
8.5
Value of Cumulative Emissions Reduction (2009$ million) ††:
CO2 ...........................................................................
NOX–3% discount rate .............................................
NOX–7% discount rate .............................................
31–470
1.9–19.6
0.99–10.2
33–503
2.0–21.0
1.06–10.9
Mean LCC Savings ** (2009$):
Gas
Gas
Gas
Gas
Gas
Wall Fan ............................................................
Wall Gravity .......................................................
Floor ..................................................................
Room .................................................................
Hearth ...............................................................
83
21
13
42
96
102
21
13
96
96
Median PBP (years):
Gas
Gas
Gas
Gas
Gas
Wall Fan ............................................................
Wall Gravity .......................................................
Floor ..................................................................
Room .................................................................
Hearth ...............................................................
2.7
7.5
10.7
6.7
0
3.2
7.5
10.7
4.5
0
Distribution of Consumer LCC Impacts:
Gas Wall Fan:.
Net Cost (%) .............................................................
No Impact (%) ...........................................................
Net Benefit (%) .........................................................
Gas Wall Gravity:
Net Cost (%) .............................................................
No Impact (%) ...........................................................
Net Benefit (%) .........................................................
Gas Floor:
Net Cost (%) .............................................................
No Impact (%) ...........................................................
Net Benefit (%) .........................................................
Gas Room:
Net Cost (%) .............................................................
No Impact (%) ...........................................................
Net Benefit (%) .........................................................
Gas Hearth:
Net Cost (%) .............................................................
No Impact (%) ...........................................................
Net Benefit (%) .........................................................
Generation Capacity Change (GW in 2042) ...................
0
60
40
3
53
44
19
26
55
53
7
40
0
60
40
53
7
40
10
75
15
10
75
15
33
37
30
33
37
30
70
0
30
70
0
30
25
18
57
25
18
57
25
18
57
25
18
57
25
18
57
25
18
57
19
31
50
19
56
25
20
55
25
20
55
25
26
49
25
26
49
25
9
40
51
0.024
9
40
51
0.026
9
40
51
0.028
69
17
13
0.036
69
17
13
0.041
81
19
0
0.103
jlentini on DSKJ8SOYB1PROD with RULES2
Employment Impacts:
Total Potential Changes in Domestic Production Workers in 2013:.
Traditional Direct Heating Equipment .......................
Gas Hearth Direct Heating Equipment .....................
Net Change in National Indirect Employment in 2042
(thousands) ††† ..............................................................
(275)–4
(1,280)–6
(275)–6
(1,280)–6
(275)–33
(1,280)–6
(275)–37
(1,280)–448
(275)–35
(1,280)–448
(275)–44
(1,280)–770
0.21
0.22
0.23
0.16
0.19
0.51
Parentheses indicate negative (¥) values.
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* The impacts for Hg emissions are negligible (less than 0.01 ton).
** For LCCs, a negative value means an increase in LCC by the amount indicated.
†† Range of the economic value of CO reductions is based on estimates of the global benefit of reduced CO emissions.
2
2
††† National Indirect Employment Impacts exclude direct impacts.
DOE first considered TSL 6, the maxtech level. TSL 6 would save 1.26 quads
of energy, an amount DOE considers
significant. TSL 6 would decrease
consumer NPV by $4.38 billion, using a
discount rate of 7 percent, and by $4.97
billion, using a discount rate of 3
percent.
The emissions reductions at TSL 6 are
49.9 Mt of CO2 and 46.0 kt of NOX. The
estimated monetary value of the
cumulative CO2 emissions reductions at
TSL 6 is $187 million to $2,849 million.
Total generating capacity in 2042 is
estimated to increase slightly under TSL
6.
At TSL 6, DOE projects that the
average LCC impact for consumers is a
gain of $43 for gas wall fan DHE, a loss
of $56 for gas wall gravity DHE, a gain
of $13 for gas floor DHE, a gain of $646
for gas room DHE, and a loss of $253 for
gas hearth DHE. The median payback
period is 12.2 years for gas wall fan
DHE, 16.5 years for gas wall gravity
DHE, 10.7 years for gas floor DHE, 6.9
years for gas room DHE, and 26.8 years
for gas hearth DHE (which is
significantly longer than the mean
lifetime of the product). At TSL 6, the
fraction of consumers experiencing an
LCC benefit is 40 percent for gas wall
fan DHE, 30 percent for gas wall gravity
DHE, 57 percent for gas floor DHE, 25
percent for gas room DHE, and 0 percent
for gas hearth DHE. The fraction of
consumers experiencing an LCC cost is
53 percent for gas wall fan DHE, 70
percent for gas wall gravity DHE, 25
percent for gas floor DHE, 26 percent for
gas room DHE, and 81 percent for gas
hearth DHE.
With respect to consumer subgroups,
DOE estimated that the impacts of TSL
6 would be approximately the same for
the senior-only and low-income
subgroups as they are for the full
household sample.
At TSL 6, the projected change in
INPV ranges from a decrease of up to
$13.4 million for traditional DHE and a
decrease of up to $53.6 million for gas
hearth DHE, in 2009$. Very few
manufacturers offer products at the
max-tech level for both traditional and
gas hearth DHE. At TSL 6, almost every
manufacturer would face substantial
product and capital conversion costs to
completely redesign most of their
current products and existing
production facilities. In addition, higher
component costs could significantly
harm profitability. If the high end of the
range of impacts is reached as DOE
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expects, TSL 6 could result in a net loss
of 80.8 percent in INPV for traditional
DHE and a net loss of 69.5 percent in
INPV for gas hearth DHE. In addition to
the large, negative impacts on INPV at
TSL 6, the required capital and product
conversion costs could cause material
harm to a significant number of small
business manufacturers in both the
traditional and gas hearth DHE market.
The conversion costs could cause many
of these small business manufacturers to
exit the market.
Therefore, the Secretary concludes
that at TSL 6, the benefits of energy
savings and emission reductions would
be outweighed by the negative impacts
on consumer NPV, the economic burden
on some consumers, the large capital
conversion costs that could result in a
large reduction in INPV for the
manufacturers, and the potential
impacts on a significant number of
small business manufacturers.
Consequently, the Secretary has
concluded that TSL 6 is not
economically justified.
Next, DOE considered TSL 5. TSL 5
would save 0.48 quads of energy, an
amount DOE considers significant. TSL
5 would decrease consumer NPV by
$1.24 billion, using a discount rate of 7
percent, and by $1.22 billion, using a
discount rate of 3 percent.
The emissions reductions at TSL 5 are
20.2 Mt of CO2 and 18.6 kt of NOX. The
estimated monetary value of the
cumulative CO2 emissions reductions at
TSL 5 is $76 million to $1,154 million.
Total generating capacity in 2042 is
estimated to increase slightly under TSL
5.
At TSL 5, DOE projects that the
average LCC impact for consumers is a
gain of $83 for gas wall fan DHE, a loss
of $56 for gas wall gravity DHE, a gain
of $13 for gas floor DHE, a gain of $646
for gas room DHE, and a loss of $70 for
gas hearth DHE. The median payback
period is 2.7 years for gas wall fan DHE,
16.5 years for gas wall gravity DHE, 10.7
years for gas floor DHE, 6.9 years for gas
room DHE, and 17.1 years for gas hearth
DHE. At TSL 5, the fraction of
consumers experiencing an LCC benefit
is 40 percent for gas wall fan DHE, 30
percent for gas wall gravity DHE, 57
percent for gas floor DHE, 25 percent for
gas room DHE, and 13 percent for gas
hearth DHE. The fraction of consumers
experiencing an LCC cost is 0 percent
for gas wall fan DHE, 70 percent for gas
wall gravity DHE, 25 percent for gas
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floor DHE, 26 percent for gas room DHE,
and 69 percent for gas hearth DHE.
With respect to consumer subgroups,
DOE estimated that the impacts of TSL
5 would be approximately the same for
the senior-only and low-income
subgroups as they are for the full
household sample.
At TSL 5, the projected change in
INPV ranges from a decrease of up to
$10.4 million for traditional DHE and a
decrease of up to $13.2 million for gas
hearth DHE, in 2009$. While some
manufacturers offer a limited number of
products at TSL 5, most of the current
products would have to be redesigned to
meet the required efficiencies at TSL 5.
In addition, higher component costs for
both traditional and gas hearth DHE
could significantly harm profitability. If
the high end of the range of impacts is
reached as DOE expects, TSL 5 could
result in a net loss of 62.4 percent in
INPV for traditional DHE and a net loss
of 17.1 percent in INPV for gas hearth
DHE. In addition to the large, negative
impacts on INPV at TSL 5, the required
capital and product conversion costs
could cause material harm to a
significant number of small business
manufacturers in both the traditional
and gas hearth DHE market. These
manufacturers could be forced to
discontinue many of their existing
product lines and, possibly, exit the
market altogether.
Therefore, the Secretary concludes
that at trial standard level 5, the benefits
of energy savings and emission
reductions would be outweighed by the
negative impacts on consumer NPV, the
economic burden on some consumers,
the large capital conversion costs that
could result in a large reduction in INPV
for the manufacturers, and the potential
for small business manufacturers to
have to reduce or discontinue a
significant number of their product
lines. Consequently, the Secretary has
concluded that trial standard level 5 is
not economically justified.
Next, DOE considered TSL 4. TSL 4
would save 0.43 quads of energy, an
amount DOE considers significant. TSL
4 would decrease consumer NPV by
$1.19 billion, using a discount rate of 7
percent, and $1.26 billion, using a
discount rate of 3 percent.
The emissions reductions at TSL 4 are
17.9 Mt of CO2 and 16.4 kt of NOX. The
estimated monetary value of the
cumulative CO2 emissions reductions at
TSL 4 is $67 million to $1,023 million.
Total generating capacity in 2042 is
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estimated to increase slightly under TSL
4.
At TSL 4, DOE projects that the
average LCC impact for consumers is a
gain of $43 for gas wall fan DHE, a gain
of $64 for gas wall gravity DHE, a gain
of $13 for gas floor DHE, a gain of $143
for gas room DHE, and a loss of $70 for
gas hearth DHE. The median payback
period is 12.2 years for gas wall fan
DHE, 11.0 years for gas wall gravity
DHE, 10.7 years for gas floor DHE, 4.8
years for gas room DHE, and 17.1 years
for gas hearth DHE. At TSL 4, the
fraction of consumers experiencing an
LCC benefit is 40 percent for gas wall
fan DHE, 30 percent for gas wall gravity
DHE, 57 percent for gas floor DHE, 57
percent for gas room DHE, and 13
percent for gas hearth DHE. The fraction
of consumers experiencing an LCC cost
is 53 percent for gas wall fan DHE, 33
percent for gas wall gravity DHE, 25
percent for gas floor DHE, 20 percent for
gas room DHE, and 69 percent for gas
hearth DHE.
With respect to consumer subgroups,
DOE estimated that the impacts of TSL
4 would be approximately the same for
the senior-only and low-income
subgroups as they are for the full
household sample.
At TSL 4, the projected change in
INPV ranges from a decrease of up to
$8.8 million for traditional DHE and
decrease of up to $13.2 million for gas
hearth DHE. While some manufacturers
offer a limited number of products at
TSL 4, most of the current products
would have to be redesigned to meet the
required efficiencies at TSL 4. In
addition, higher component costs for
both traditional and gas hearth DHE
could significantly harm profitability. If
the high end of the range of impacts is
reached as DOE expects, TSL 4 could
result in a net loss of 53.1 percent in
INPV for traditional DHE and a net loss
of 17.1 percent in INPV for gas hearth
DHE. In addition to the large, negative
impacts on INPV at TSL 4, the required
capital and product conversion costs
could cause material harm to a
significant number of small business
manufacturers in both the traditional
and gas hearth DHE market. These
manufacturers could be forced to reduce
their product offerings to remain
competitive.
Therefore, the Secretary concludes
that at trial standard level 4, the benefits
of energy savings and emission
reductions would be outweighed by the
negative impacts on consumer NPV, the
economic burden on some consumers,
the large capital conversion costs that
could result in a large reduction in INPV
for the manufacturers, and the potential
for small business manufacturers of
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DHE to have to reduce their product
offerings. Consequently, the Secretary
has concluded that trial standard level
4 is not economically justified.
Next, DOE considered TSL 3. TSL 3
would save 0.23 quads of energy, an
amount DOE considers significant. TSL
3 would provide an NPV of consumer
benefit of $0.56 billion, using a discount
rate of 7 percent, and $1.39 billion,
using a discount rate of 3 percent.
The emissions reductions at TSL 3 are
9.3 Mt of CO2 and 8.5 kt of NOX. The
estimated monetary value of the
cumulative CO2 emissions reductions at
TSL 3 is $35 million to $530 million.
Total electric generating capacity in
2042 is estimated to increase slightly
under TSL 3.
At TSL 3, DOE projects that the
average LCC impact for consumers is a
gain of $114 for gas wall fan DHE, a gain
of $64 for gas wall gravity DHE, a gain
of $13 for gas floor DHE, a gain of $143
for gas room DHE, and a gain of $96 for
gas hearth DHE. The median payback
period is 5.0 years for gas wall fan DHE,
11.0 years for gas wall gravity DHE, 10.7
years for gas floor DHE, 4.8 years for gas
room DHE, and 0.0 years for gas hearth
DHE. At TSL 3, the fraction of
consumers experiencing an LCC benefit
is 55 percent for gas wall fan DHE, 30
percent for gas wall gravity DHE, 57
percent for gas floor DHE, 25 percent for
gas room DHE, and 51 percent for gas
hearth DHE. The fraction of consumers
experiencing an LCC cost is 19 percent
for gas wall fan DHE, 33 percent for gas
wall gravity DHE, 25 percent for gas
floor DHE, 20 percent for gas room DHE,
and 9 percent for gas hearth DHE.
With respect to consumer subgroups,
DOE estimated that the impacts of TSL
3 would be approximately the same for
the senior-only and low-income
subgroups as they are for the full
household sample.
At TSL 3, the projected change in
INPV ranges from a decrease of up to $7
million for traditional DHE and decrease
of up to $0.9 million for gas hearth DHE.
If the high end of the range of impacts
is reached, TSL 3 could result in a net
loss of 42.4 percent in INPV for
traditional DHE and a net loss of 1.2
percent in INPV for gas hearth DHE. The
impacts on gas hearth DHE
manufacturers are less significant at TSL
3 because manufacturers offer a wide
range of product lines that meet the
required efficiencies at TSL 3 and most
products that do not meet TSL 3 could
be upgraded with inexpensive
purchased parts and fairly small
conversion costs.
For traditional direct heating
equipment, however, not all
manufacturers have a substantial
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number of existing products that meet
the efficiencies required at TSL 3. The
industry has consolidated significantly
over the last decade due to a steady
decline in shipments. The three
competitors that account for nearly 100
percent of the market have survived by
consolidating a variety of legacy brands
and products and providing them in
replacement situations. Thus, each of
the three competitors, two of which are
small business manufacturers, would
face the prospect of significantly
upgrading several low-volume product
lines. For the most part, manufacturers
do not have significant volume over
which to spread the capital conversion
costs required by TSL 3, meaning that
margins will likely be pressured unless
consumers accept large increases in
product price. As a whole, DOE expects
the industry would be required to invest
$8.0 million to convert its product lines
to meet TSL 3, or roughly half of the
industry value. Because shipments are
expected to remain flat or continue to
decline, there may be limited
opportunity for all manufacturers to
recoup the investment necessary at TSL
3 to upgrade their product lines.
At TSL 3, the impacts on small
business manufacturers are even more
harmful than to the industry as a whole.
For example, the typical small business
manufacturer in the industry would
require investment equal to 426 percent
of its annual earnings before interest
and taxes. With these prospects, it is
likely manufacturers would drop a
number of product lines or exit the
market entirely. The small business
manufacturers would likely be
disproportionately affected by TSL 3
because they would need to spread the
product development costs, including
R&D, over lower volumes. Finally, in
the important gas wall gravity category,
small business manufacturers have a
limited number of products that meet
the required efficiencies. The two small
business manufacturers with significant
market shares have a total of 6 models
that meet the required efficiencies out of
a total of 29 models for gas wall gravity
DHE. Based on the public comments of
these small manufacturers, these
products also represent a small
percentage of total sales. To offer a full
range of the most popular replacements,
a typical small manufacturer would
have to convert over 70 percent of its
gas wall gravity product lines, including
multiple modifications to their most
popular products.
Therefore, the Secretary concludes
that at TSL 3, the benefits of energy
savings, emission reductions, and
consumer NPV benefits would be
outweighed by the economic burden on
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some consumers, the large capital
conversion costs that could result in a
large reduction in INPV for the
manufacturers of traditional DHE, and
the potential for small business
manufacturers of DHE to reduce their
product offerings or to be forced to exit
the market completely, thereby reducing
competition in the traditional DHE
market. Consequently, the Secretary has
concluded that TSL 3 is not
economically justified.
Next, DOE considered TSL 2. TSL 2
would save 0.21 quads of energy, an
amount DOE considers significant. TSL
2 would provide a NPV of consumer
benefit of $0.55 billion, using a discount
rate of 7 percent, and $1.34 billion,
using a discount rate of 3 percent.
The emissions reductions at TSL 2 are
8.8 Mt of CO2 and 8.1 kt of NOX. The
estimated monetary value of the
cumulative CO2 emissions reductions at
TSL 2 is $33 million to $503 million.
Total electric generating capacity in
2042 is estimated to increase slightly
under TSL 2.
At TSL 2, DOE projects that the
average LCC impact for consumers is a
gain of $102 for gas wall fan DHE, a gain
of $21 for gas wall gravity DHE, a gain
of $13 for gas floor DHE, a gain of $96
for gas room DHE, and a gain of $96 for
gas hearth DHE. The median payback
period is 3.2 years for gas wall fan DHE,
7.5 years for gas wall gravity DHE, 10.7
years for gas floor DHE, 4.5 years for gas
room DHE, and 0.0 years for gas hearth
DHE. At TSL 2, the fraction of
consumers experiencing an LCC benefit
is 44 percent for gas wall fan DHE, 15
percent for gas wall gravity DHE, 57
percent for gas floor DHE, 25 percent for
gas room DHE, and 51 percent for gas
hearth DHE. The fraction of consumers
experiencing an LCC cost is 3 percent
for gas wall fan DHE, 10 percent for gas
wall gravity DHE, 25 percent for gas
floor DHE, 19 percent for gas room DHE,
and 9 percent for gas hearth DHE.
With respect to consumer subgroups,
DOE estimated that the impacts of TSL
2 would be approximately the same for
the senior-only and low-income
subgroups as they are for the full
household sample.
At TSL 2, the projected change in
INPV ranges from a decrease of up to
$3.9 million for traditional DHE and
decrease of up to $0.9 million for gas
hearth DHE. The impacts on gas hearth
DHE manufacturers are less significant
at TSL 2 because manufacturers offer a
wide range of product lines that meet
the required efficiencies at TSL 2, and
most products that do not meet TSL 2
could be upgraded with inexpensive
purchased parts at fairly small
conversion costs. If the high end of the
range of impacts is reached, TSL 2 could
result in a net loss of 23.6 percent in
INPV for traditional DHE and a net loss
of 1.2 percent in INPV for gas hearth
DHE. In addition, the required capital
and product conversion costs faced by
small business manufacturers at this
level decrease substantially, thereby
mitigating the potential harm to a
significant number of small business
manufacturers.
In total, DOE estimates that it will
take approximately $4.6 million for the
industry to upgrade all of it products to
meet the amended energy conservation
standards. Despite including the
conversion costs for the additional
product lines that were released since
the NOPR analysis was completed, the
total conversion costs estimated by the
industry to upgrade all products that do
not meet the amended energy
conservation standards is down $1.8
million from the $6.4 million total
estimated for the proposed standards in
the December 2009 NOPR, given the
change in the standard level DOE has
ultimately decided to adopt. For the
amended energy conservation
standards, one major manufacturer has
a total of 3 product lines (7 models) that
do not meet the amended energy
conservation standards in the two
smallest categories (gas floor and gas
room DHE) but has a majority of product
lines and models that meet the amended
standards in the two largest product
categories (gas wall fan and gas wall
gravity). The other two major
manufacturers have existing product
lines that meet the amended energy
conservation standards in all 4 product
categories. Therefore, without spending
any conversion costs, at least two
manufacturers already have existing
products in all four product categories.
In the most important gas wall gravity
category, 57 percent of the existing
models and 71 percent of the existing
product lines identified by DOE meet
the amended energy conservation
standards. One manufacturer indicated
in written comments that the important
gas wall gravity products that meet the
amended energy conversation standard
represent a small portion of total sales.
However, DOE believes it has addressed
the concerns of this manufacturer by
setting an amended energy conservation
standard that would require much less
substantial changes than those proposed
in the NOPR (a two percentage point
improvement in AFUE versus the six
percentage point improvement proposed
in the NOPR). While the $4.6 million in
total conversion costs to upgrade all
product lines that do not meet the
amended energy conservation standards
is substantial, DOE believes that a
combination of products that meet the
amended energy conservation standards
and selectively upgrading popular
product lines that fall below the
standards will allow all three traditional
DHE manufacturers to maintain a viable
production volume.
After considering the analysis,
comments on the December 2009 NOPR,
and the benefits and burdens of TSL 2,
the Secretary concludes that this trial
standard level will offer the maximum
improvement in efficiency that is
technologically feasible and
economically justified, and will result
in significant conservation of energy.
Further, global benefits from carbon
dioxide reductions (at a central value of
$21.4 for emissions in 2010) would have
a present value of $165 million. These
benefits from carbon dioxide emission
reductions (both in physical reductions
and the monetized value of those
reductions), when considered in
conjunction with the consumer savings
NPV and other factors described above,
outweigh the potential reduction in
INPV for manufacturers and support
DOE’s conclusion that trial standard
level 2 is economically justified.
Therefore, the Department today adopts
the energy conservation standards for
direct heating equipment at TSL 2, as
shown in Table VI.66.
TABLE VI.66—AMENDED ENERGY CONSERVATION STANDARDS FOR DIRECT HEATING EQUIPMENT
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Direct heating equipment
Product class
Gas
Gas
Gas
Gas
Gas
wall
wall
wall
wall
wall
Standard level
fan type up to 42,000 Btu/h .................................................................................................
fan type over 42,000 Btu/h ..................................................................................................
gravity type up to 27,000 Btu/h ...........................................................................................
gravity type over 27,000 Btu/h up to 46,000 Btu/h .............................................................
gravity type over 46,000 Btu/h ............................................................................................
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AFUE
AFUE
AFUE
AFUE
AFUE
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=
=
=
=
=
75%.
76%.
65%.
66%.
67%.
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
TABLE VI.66—AMENDED ENERGY CONSERVATION STANDARDS FOR DIRECT HEATING EQUIPMENT—Continued
Direct heating equipment
Product class
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Gas
Standard level
floor up to 37,000 Btu/h ..............................................................................................................
floor over 37,000 Btu/h ...............................................................................................................
room up to 20,000 Btu/h .............................................................................................................
room over 20,000 Btu/h up to 27,000 Btu/h ...............................................................................
room over 27,000 Btu/h up to 46,000 Btu/h ...............................................................................
room over 46,000 Btu/h ..............................................................................................................
hearth up to 20,000 Btu/h ...........................................................................................................
hearth over 20,000 Btu/h and up to 27,000 Btu/h ......................................................................
hearth over 27,000 Btu/h and up to 46,000 Btu/h ......................................................................
hearth over 46,000 Btu/h ............................................................................................................
4. Pool Heaters
Table VI.67 summarizes the results of
DOE’s quantitative analysis for each
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
AFUE
=
=
=
=
=
=
=
=
=
=
57%.
58%.
61%.
66%.
67%.
68%.
61%.
66%.
67%.
68%.
TSL it considered for this final rule for
pool heaters.
TABLE VI.67—SUMMARY OF ANALYTICAL RESULTS FOR POOL HEATERS
Category
TSL 1
TSL 2
TSL 3
TSL 4
TSL 5
TSL 6
National Energy Savings (quads)
0.01 ..................
0.02 ..................
0.04 ..................
0.06 ..................
0.09 ..................
0.22
(0.15) ...............
(0.16) ...............
(2.32) ...............
(1.39) ...............
(4.56)
(2.87)
(0.3)–(6.6) ........
(0.6)–(13.5) ......
0.8–(17.2) ........
1.6–(35.0) ........
7.3–(38.3)
14.9–(78.0)
2.38 ..................
2.10 ..................
3.61 ..................
3.18 ..................
8.89
7.84
NPV of Consumer Benefits (2009$ billion)
3% discount rate ..................
7% discount rate ..................
0.10 ..................
0.04 ..................
0.10 ..................
0.04 ..................
(0.01) ...............
(0.06) ...............
Industry Impacts
Industry NPV (2009$ million)
Industry NPV (% change) ....
0.0–(0.1) ..........
0.1–(0.2) ..........
0.3–(0.8) ..........
0.5–(1.7) ..........
(0.8)–(5.0) ........
(1.7)–(10.2) ......
Cumulative Emissions Reduction *
CO2 (Mt) ...............................
NOX (kt) ................................
0.41 ..................
0.37 ..................
0.75 ..................
0.67 ..................
1.72 ..................
1.53 ..................
Value of Cumulative Emissions Reduction (2009$ million) ††
CO2 .......................................
NOX—3% discount rate .......
NOX—7% discount rate .......
Mean
LCC
Savings **
(2009$).
Median PBP (years) .............
2 to 24 .............
0.1 to 1.0 .........
0.1 to 0.5 .........
25 .....................
3 to 43 .............
0. 2 to 1.8 ........
0.1 to 0.9 .........
22 .....................
6 to 99 .............
0.4 to 4.1 .........
0.2 to 2.2 .........
(6) ....................
9 to 136 ...........
0.5 to 5.6 .........
0.29 to 2.9 .......
(52) ..................
14 to 206 .........
0.8 to 8.4 .........
0.4 to 4.5 .........
(632) ................
33 to 509
2.0 to 20.77
1.1 to 11.0
(1,361)
2.7 ....................
8.6 ....................
18.2 ..................
19.2 ..................
38.1 ..................
33.2
64 .....................
21 .....................
15 .....................
+0.01 ...............
88 .....................
9 .......................
3 .......................
+0.01 ...............
95
1
4
+0.03
Distribution of Consumer LCC Impacts
Net Cost (%) ........................
No Impact (%) ......................
Net Benefit (%) .....................
Generation Capacity Change
(GW in 2042).
5 .......................
72 .....................
23 .....................
0.00 ..................
27 .....................
51 .....................
22 .....................
0.00 ..................
60 .....................
23 .....................
17 .....................
0.00 ..................
jlentini on DSKJ8SOYB1PROD with RULES2
Employment Impacts
Total Potential Changes in
Domestic
Production
Workers in 2013.
Net Change in National Indirect
Employment in 2042 (thousands) †††.
(512)–7 ............
(512)–19 ..........
(512)–58 ..........
(512)–81 ..........
(512)–135 ........
(512)–268
0.01 ..................
0.02 ..................
0.02 ..................
0.02 ..................
0.04 ..................
(0.07)
Parentheses indicate negative (¥) values.
* The impacts for Hg emissions are negligible.
** For LCCs, a negative value means an increase in LCC by the amount indicated.
†† Range of the economic value of CO reductions is based on estimates of the global benefit of reduced CO emissions.
2
2
††† National Indirect Employment Impacts exclude direct impacts.
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DOE first considered TSL 6, the maxtech level. TSL 6 would save 0.22 quads
of energy, an amount DOE considers
significant. TSL 6 would decrease
consumer NPV by $2.87 billion, using a
discount rate of 7 percent, and by $4.56
billion, using a discount rate of 3
percent.
The emissions reductions at TSL 6 are
8.89 Mt of CO2 and 7.84 kt of NOX. The
estimated monetary value of the
cumulative CO2 emissions reductions at
TSL 6 is $33 million to $509 million,
using a discount rate of 7 percent. Total
generating capacity in 2042 is estimated
to increase slightly under TSL 6.
At TSL 6, DOE projects that the
average LCC impact for consumers is a
loss of $1,361. The median payback
period is 33.2 years (which is
substantially longer than the mean
lifetime of the product). At TSL 6, the
fraction of consumers experiencing an
LCC benefit is 4 percent. The fraction of
consumers experiencing an LCC cost is
95 percent.
At TSL 6, the INPV is projected to
decrease by up to $38.3 million for gasfired pool heaters. Currently, gas-fired
pool heaters that meet the efficiencies
required by TSL 6 are manufactured in
extremely low volumes by a limited
number of manufacturers. The
significant impacts on manufacturers
arise from the large costs to develop or
increase the production of fully
condensing products. In addition,
manufacturers are significantly harmed
if profitability is negatively impacted to
keep consumers in the market for a
luxury item that is significantly more
expensive than most products currently
sold. If the high end of the range of
impacts is reached as DOE expects, TSL
6 could result in a net loss of 78 percent
in INPV for gas-fired pool heaters.
Therefore, the Secretary has
concluded that at TSL 6, the benefits of
energy savings and emission reductions
would be outweighed by the negative
impacts on consumer NPV, the
economic burden on some consumers
(as indicated by the large increase in
total installed cost), and the large capital
conversion costs that could result in a
large reduction in INPV for the
manufacturers. Consequently, the
Secretary has concluded that TSL 6 is
not economically justified.
Next, DOE considered TSL 5. TSL 5
would save 0.09 quads of energy, an
amount DOE considers significant. TSL
5 would decrease consumer NPV by
$1.39 billion, using a discount rate of 7
percent, and by $2.32 billion, using a
discount rate of 3 percent.
The emissions reductions at TSL 5 are
3.6 Mt of CO2 and 3.2 kt of NOX. The
estimated monetary value of the
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cumulative CO2 emissions reductions at
TSL 5 is $14 million to $206 million.
Total generating capacity in 2042 is
estimated to increase slightly under TSL
5.
At TSL 5, DOE projects that the
average LCC impact for consumers is a
loss of $632. The median payback
period is 38.1 years (which is
substantially longer than the mean
lifetime of the product). At TSL 5, the
fraction of consumers experiencing an
LCC benefit is 3 percent. The fraction of
consumers experiencing an LCC cost is
88 percent.
At TSL 5, the projected change in
INPV is a decrease of up to $17.2
million for gas-fired pool heaters.
Currently, gas-fired pool heaters that
meet the efficiencies required by TSL 5
are manufactured in extremely low
volumes by a limited number of
manufacturers, as with TSL 6. The
significant adverse impacts on
manufacturers arise from the large costs
to develop or increase the production of
products with multiple efficiency
improvements. In addition, the potential
for manufacturers to be significantly
harmed increases if consumers’
purchasing decisions are impacted and
shipments decline due to the large
increases in first cost for a luxury item.
If the high end of the range of impacts
is reached as DOE expects, TSL 5 could
result in a net loss of 35 percent in INPV
for gas-fired pool heaters.
Therefore, the Secretary has
concluded that at TSL 5, the benefits of
energy savings and emission reductions
would be outweighed by the negative
impacts on consumer NPV, the
economic burden on some consumers,
and the large capital conversion costs
that could result in a large reduction in
INPV for the manufacturers.
Consequently, the Secretary has
concluded that TSL 5 is not
economically justified.
Next, DOE considered TSL 4. TSL 4
would save 0.06 quads of energy, an
amount DOE considers significant. TSL
4 would decrease consumer NPV by
$0.16 billion, using a discount rate of 7
percent, and by $0.15 billion, using a
discount rate of 3 percent.
The cumulative emissions reductions
at TSL 4 are 2.38 Mt of CO2 and 2.10
kt of NOX. The estimated monetary
value of the cumulative CO2 emissions
reductions at TSL 4 is $9 million to
$136 million. Total generating capacity
in 2042 is estimated to increase slightly
under TSL 4.
At TSL 4, DOE projects that the
average LCC impact for consumers is a
loss of $52. The median payback period
is 19.2 years (which is substantially
longer than the mean lifetime of the
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20221
product). At TSL 4, the fraction of
consumers experiencing an LCC benefit
is 15 percent. The fraction of consumers
experiencing an LCC cost is 64 percent.
At TSL 4, DOE projects that INPV
decreases by up to $6.6 million for gasfired pool heaters. At TSL 4,
manufacturers believe that profitability
could be harmed in order to keep
consumers in the market for a luxury
item that is more expensive than the
most common products currently sold.
If the high end of the range of impacts
is reached as DOE expects, TSL 4 could
result in a net loss of 13.5 percent in
INPV for gas-fired pool heaters.
Therefore, the Secretary has
concluded that at TSL 4, the benefits of
energy savings and emission reductions
would be outweighed by the negative
impacts on consumer NPV, the
economic burden on some consumers,
and the large capital conversion costs
that could result in a large reduction in
INPV for the manufacturers.
Consequently, the Secretary has
concluded that TSL 4 is not
economically justified.
Next, DOE considered TSL 3. TSL 3
would save 0.04 quads of energy, an
amount DOE considers significant. TSL
3 would decrease consumer NPV by
$0.06 billion, using a discount rate of 7
percent, and by $0.01 billion, using a
discount rate of 3 percent.
The cumulative emissions reductions
at TSL 3 are 1.72 Mt of CO2 and 1.53
kt of NOX. The estimated monetary
value of the cumulative CO2 emissions
reductions at TSL 3 is $6 million to $99
million. Total generating capacity in
2042 is estimated to stay the same under
TSL 3.
At TSL 3, DOE projects that the
average LCC impact for consumers is a
loss of $6. The median payback period
is 18.2 years (which is substantially
longer than the mean lifetime of the
product). At TSL 3, the fraction of
consumers experiencing an LCC benefit
is 17 percent. The fraction of consumers
experiencing an LCC cost is 60 percent.
At TSL 3, DOE projects that INPV
decreases by up to $5 million for gasfired pool heaters. At TSL 3,
manufacturers believe that profitability
could be harmed in order to keep
consumers in the market for a luxury
item that is more expensive than the
most common products currently sold,
as with TSL 4. If the high end of the
range of impacts is reached as DOE
expects, TSL 3 could result in a net loss
of 10 percent in INPV for gas-fired pool
heaters.
Therefore, the Secretary has
concluded that at TSL 3, the benefits of
energy savings and emission reductions
would be outweighed by the negative
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impacts on consumer NPV, the
economic burden on some consumers,
and the large capital conversion costs
that could result in a large reduction in
INPV for the manufacturers.
Consequently, the Secretary has
concluded that TSL 3 is not
economically justified.
Next, DOE considered TSL 2. TSL 2
would save 0.02 quads of energy, an
amount DOE considers significant. TSL
2 would increase consumer NPV by
$0.04 billion, using a discount rate of 7
percent, and by $0.10 billion, using a
discount rate of 3 percent.
The cumulative emissions reductions
at TSL 2 are 0.75 Mt of CO2 and 0.67
kt of NOX. The estimated monetary
value of the cumulative CO2 emissions
reductions at TSL 2 is $3 million to $43
million. Total generating capacity in
2042 is estimated to stay the same under
TSL 2.
At TSL 2, DOE projects that the
average LCC impact for consumers is a
savings of $22. The median payback
period is 8.6 years. At TSL 2, the
fraction of consumers experiencing an
LCC benefit is 22 percent. The fraction
of consumers experiencing an LCC cost
is 27 percent.
At TSL 2, DOE projects that INPV
decreases by up to $0.8 million for gasfired pool heaters. At TSL 2,
manufacturers believe that profitability
could be harmed in order to keep
consumers in the market for a luxury
item that is more expensive than the
most common products currently sold,
as with TSL 3 and 4. If the high end of
the range of impacts is reached as DOE
expects, TSL 2 could result in a net loss
of 2 percent in INPV for gas-fired pool
heaters.
After considering the analysis and the
benefits and burdens of TSL 2, the
Secretary has concluded that this trial
standard level will offer the maximum
improvement in efficiency that is
technologically feasible and
economically justified, and will result
in significant conservation of energy.
Further, global benefits from carbon
dioxide reductions (at a central value of
$21.4 for emissions in 2010) have a
present value of $14 million. These
benefits from carbon dioxide emission
reductions (in both physical reductions
and the monetized value of those
reductions), when considered in
conjunction with the consumer savings
NPV and other factors described above,
outweigh the potential reduction in
INPV for manufacturers and support
DOE’s conclusion that trial standard
level 2 is economically justified.
Therefore, the Department today adopts
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rulemaking, including the RIA, and has
included these documents in the
rulemaking record. They are available
for public review in the Resource Room
of DOE’s Building Technologies
Program, 950 L’Enfant Plaza, SW., Suite
600, Washington, DC 20024, (202) 586–
TABLE VI.68—AMENDED ENERGY
CONSERVATION
STANDARD
FOR 2945, between 9 a.m. and 4 p.m.,
Monday through Friday, except Federal
POOL HEATERS
holidays.
The RIA is contained in the TSD
Minimum therProduct class
mal efficiency prepared for the rulemaking. The RIA
%
consists of: (1) A statement of the
Gas-fired Pool Heaters .........
82 problem addressed by this regulation,
and the mandate for government action;
(2) a description and analysis of the
VII. Procedural Issues and Regulatory
feasible policy alternatives to this
Review
regulation; (3) a quantitative comparison
A. Review Under Executive Order 12866 of the impacts of the alternatives; and
(4) specific national impacts of the
Section 1(b)(1) of Executive Order
standards.
12866, ‘‘Regulatory Planning and
The RIA calculates the effects of
Review,’’ 58 FR 51735 (Oct. 4, 1993),
feasible policy alternatives to mandatory
requires each agency to identify in
standards for heating products, and
writing the market failure or other
provides a quantitative comparison of
problem that it intends to address, and
the impacts of the alternatives. DOE
that warrants agency action (including
evaluated each alternative in terms of its
where applicable, the failure of private
ability to achieve significant energy
markets or public institutions), as well
savings at reasonable costs, and
as assess the significance of that
compared it to the effectiveness of the
problem, to enable assessment of
standards in today’s rule. DOE analyzed
whether any new regulation is
these alternatives using a series of
warranted. The problems that today’s
regulatory scenarios for the three types
standards address are as follows:
of heating products. It modified the
(1) There is a lack of consumer
heating product NIA models to allow
information and/or information
inputs for these policy alternatives. Of
processing capability about energy
the four product classes of residential
efficiency opportunities in the home
water heaters subject to standards, this
appliance market.
RIA concerns only gas-fired storage and
(2) There is asymmetric information
(one party to a transaction has more and electric storage water heaters, which
together represent the majority of
better information than the other) and/
shipments. Of the five product classes of
or high transactions costs (costs of
DHE, this RIA concerns only gas wall
gathering information and effecting
fan DHE and gas hearth DHE, which
exchanges of goods and services).
together represent the majority of DHE
(3) There are external benefits
shipments.
resulting from improved energy
DOE identified the following major
efficiency of heating products that are
policy alternatives for achieving
not captured by the users of such
increased energy efficiency in the three
equipment. These benefits include
types of heating products:
externalities related to environmental
• No new regulatory action;
protection and energy security that are
• Consumer rebates;
not reflected in energy prices, such as
• Consumer tax credits;
reduced emissions of greenhouse gases.
• Manufacturer tax credits;
In addition, DOE has determined that
• Voluntary energy efficiency targets;
today’s regulatory action is a ‘‘significant
• Bulk government purchases;
regulatory action’’ under section 3(f)(1)
• Early replacement programs; and
of Executive Order 12866. Accordingly,
section 6(a)(3) of the Executive Order
• The regulatory action (energy
requires that DOE prepare a regulatory
conservation standards).
impact analysis (RIA) on today’s rule
DOE evaluated each alternative in
and that the Office of Information and
terms of its ability to achieve significant
Regulatory Affairs (OIRA) in the Office
energy savings at reasonable costs and
of Management and Budget (OMB)
compared it to the effectiveness of
review this rule. DOE presented to OIRA today’s rule. Table VII.1 through Table
for review the draft rule and other
VII.5 show the results for energy savings
documents prepared for this
and consumer NPV.
the energy conservation standards for
pool heaters at TSL 2, which requires a
thermal efficiency of 82 percent for gasfired pool heaters as shown in Table
VI.68.
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TABLE VII.1—IMPACTS OF NON-REGULATORY ALTERNATIVES FOR GAS-FIRED STORAGE WATER HEATERS THAT MEET THE
STANDARD (TSL 5)
Net present value* billion 2009$
Primary energy
savings quads
Policy alternative
No New Regulatory Action ..............................................................................................
Consumer Rebates ..........................................................................................................
Consumer Tax Credits .....................................................................................................
Manufacturer Tax Credits ................................................................................................
Voluntary Energy Efficiency Targets ...............................................................................
Early Replacement ..........................................................................................................
Bulk Government Purchases ...........................................................................................
Energy Conservation Standard .......................................................................................
7% discount rate
3% discount rate
0.00
0.05
0.03
0.01
0.05
¥0.03
0.004
0.27
0.00
0.55
0.33
0.17
0.38
¥0.05
0.01
2.37
0.00
0.21
0.12
0.06
0.12
0.001
0.003
0.81
* DOE determined the NPV of consumer benefit for product shipments from 2015 to 2045.
TABLE VII.2—IMPACTS OF NON-REGULATORY ALTERNATIVES FOR ELECTRIC STORAGE WATER HEATERS THAT MEET THE
STANDARD (TSL 5)
Net present value* billion 2009$
Primary energy
savings quads
Policy alternative
No New Regulatory Action ..............................................................................................
Consumer Rebates ..........................................................................................................
Consumer Tax Credits .....................................................................................................
Manufacturer Tax Credits ................................................................................................
Voluntary Energy Efficiency Targets ...............................................................................
Early Replacement ..........................................................................................................
Bulk Government Purchases ...........................................................................................
Energy Conservation Standard .......................................................................................
7% discount rate
3% discount rate
0.00
0.19
0.12
0.06
0.29
¥0.05
0.004
1.03
0.00
1.50
0.90
0.45
0.99
¥0.08
0.01
5.84
0.00
0.53
0.32
0.16
0.17
0.003
0.003
1.67
* DOE determined the NPV of consumer benefit for product shipments from 2015 to 2045.
TABLE VII.3—IMPACTS OF NON-REGULATORY ALTERNATIVES FOR GAS WALL FAN DHE THAT MEET THE STANDARD
(TSL 2)
Net present value* billion 2009$
Primary energy
savings quads
Policy alternative
No New Regulatory Action ..............................................................................................
Consumer Rebates ..........................................................................................................
Consumer Tax Credits .....................................................................................................
Manufacturer Tax Credits ................................................................................................
Voluntary Energy Efficiency Targets ...............................................................................
Early Replacement ..........................................................................................................
Bulk Government Purchases † ........................................................................................
Energy Conservation Standard .......................................................................................
7% discount rate
3% discount rate
0.00
0.007
0.004
0.002
0.003
0.000
NA
0.03
0.00
0.018
0.011
0.005
0.007
0.000
NA
0.07
0.00
0.004
0.002
0.001
0.001
<0.0001
NA
0.01
* DOE determined the NPV of consumer benefit for product shipments from 2013 to 2043.
† DOE did not evaluate the bulk government purchase alternative for gas wall fan DHE because the market share associated with publiclyowned housing is minimal.
TABLE VII.4—IMPACTS OF NON-REGULATORY ALTERNATIVES FOR GAS HEARTH DHE THAT MEET THE STANDARD (TSL 2)
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Net present value* billion 2009$
Primary energy
savings quads
Policy alternative
No New Regulatory Action ..............................................................................................
Consumer Rebates ..........................................................................................................
Consumer Tax Credits .....................................................................................................
Manufacturer Tax Credits ................................................................................................
Voluntary Energy Efficiency Targets ...............................................................................
Early Replacement ..........................................................................................................
Bulk Government Purchases† .........................................................................................
Energy Conservation Standard .......................................................................................
7% discount rate
3% discount rate
0.00
0.10
0.06
0.03
0.05
0.000
NA
0.50
0.00
0.23
0.14
0.07
0.14
0.000
NA
1.21
0.00
0.04
0.02
0.01
0.02
<0.001
NA
0.19
* DOE determined the NPV of consumer benefit for product shipments from 2013 to 2043.
† DOE did not evaluate the bulk government purchase alternative for gas hearth DHE because the market share associated with publiclyowned housing is minimal.
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TABLE VII.5—IMPACTS OF NON-REGULATORY ALTERNATIVES FOR POOL HEATERS THAT MEET THE STANDARD (TSL 2)
Net present value* billion 2009$
Primary energy
savings quads
Policy alternative
No New Regulatory Action ..............................................................................................
Consumer Rebates ..........................................................................................................
Consumer Tax Credits .....................................................................................................
Manufacturer Tax Credits ................................................................................................
Voluntary Energy Efficiency Targets ...............................................................................
Early Replacement ..........................................................................................................
Bulk Government Purchases † ........................................................................................
Energy Conservation Standard .......................................................................................
7% discount rate
3% discount rate
0.00
0.01
0.006
0.003
0.004
0.000
NA
0.04
0.00
0.03
0.02
0.01
0.01
0.000
NA
0.11
0.00
0.006
0.003
0.002
0.002
<0.001
NA
0.02
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* DOE determined the NPV of consumer benefit for product shipments from 2013 to 2043.
† DOE did not evaluate the bulk government purchase alternative for pool heaters because there is no market share associated with publiclyowned housing.
The NPV amounts shown in Table
VII.1 through Table VII.5 refer to the
NPV of consumer benefits. The costs to
the government of each policy (such as
rebates or tax credits) are not included
in the costs for the NPV since, on
balance, consumers in the aggregate
both pay for rebates and tax credits
through taxes and receive their benefits.
The following paragraphs discuss the
cumulative effect of each policy
alternative listed in Table VII.1 through
Table VII.5. (See the regulatory impact
analysis in the final rule TSD for
details.) For comparison with the results
reported below for the non-regulatory
policies, the combined impacts of the
standards for all product classes
considered in this rulemaking are
projected to result in 2.81 quads of
national energy savings and an NPV of
consumer benefit of $1.98 billion (at a
7-percent discount rate).
No new regulatory action. The case in
which no regulatory action is taken
constitutes the ‘‘base case’’ (or ‘‘no
action’’) scenario. Since this is the base
case, energy savings and NPV are zero
by definition.
Consumer Rebates. If consumers were
offered a rebate that covered a portion
of the incremental price difference
between products meeting baseline
efficiency levels and those meeting the
energy efficiency levels in the
standards, the number of consumers
buying a more-efficient water heater,
pool heater, or DHE would increase
relative to the base case. For example,
as a result of the consumer rebates,
DOE’s analysis suggests that the market
share of water heaters meeting the
standard level would increase from 35
percent (in the base case) to 62 percent
for gas-fired storage products, and from
9 percent (in the base case) to 48 percent
for electric storage products. DOE
assumed this policy would permanently
transform the market so that the
increased percentage of consumers
purchasing more-efficient products seen
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in the first year of the program would
be maintained throughout the forecast
period. At the estimated participation
rates, the rebates would provide 0.79
quads of national energy savings and an
NPV of consumer benefit of $0.36
billion (at a 7-percent discount rate) for
the five considered product classes.
Although DOE estimated that rebates
would provide national benefits, they
would be much smaller than the
benefits resulting from the national
standards.
Consumer Tax Credits. If consumers
were offered a tax credit that covered a
portion of the incremental price
difference between products meeting
baseline efficiency levels and those
meeting the energy efficiency levels in
the standards, DOE’s analysis suggests
that the number of consumers buying a
water heater, pool heater, or DHE that
would take advantage of the tax credit
would be approximately 60 percent of
the number that would take advantage
of rebates. For example, as a result of
the consumer tax credit, the market
share of water heaters meeting the
standard level would increase from 35
percent (in the base case) to 51 percent
for gas-fired storage products and from
9 percent (in the base case) to 31 percent
for electric storage products. DOE
assumed this policy would permanently
transform the market so that the
increased percentage of consumers
purchasing more-efficient products seen
in the first year of the program would
be maintained throughout the forecast
period. At the estimated participation
rates, consumer tax credits would
provide 0.47 quads of national energy
savings and an NPV of consumer benefit
of $0.22 billion (at a seven-percent
discount rate) for the five considered
products. Hence, DOE estimated that
consumer tax credits would yield a
fraction of the benefits that consumer
rebates would provide.
Manufacturer Tax Credits. DOE
estimates that even smaller benefits
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would result from a manufacturer tax
credit program that would effectively
result in a lower price to the consumer
by an amount that covers part of the
incremental price difference between
products meeting baseline efficiency
levels and those meeting the standards.
Because these tax credits would go to
manufacturers instead of consumers,
DOE assumed that fewer consumers
would be aware of this program than
would be aware of a consumer tax credit
program. DOE assumes that 50 percent
of the consumers who would take
advantage of consumer tax credits
would buy more-efficient products
offered through a manufacturer tax
credit program. For example, as a result
of the manufacturer tax credit, the
market share of water heaters meeting
the standard would increase from 35
percent (in the base case) to 43 percent
for gas-fired storage products and from
9 percent (in the base case) to 20 percent
for electric storage products. DOE
assumed this policy would permanently
transform the market so that the
increased percentage of consumers
purchasing more-efficient products seen
in the first year of the program would
be maintained throughout the forecast
period. At the estimated participation
rates, the rebates would provide 0.23
quads of national energy savings and an
NPV of consumer benefit of $0.1 billion
(at a seven-percent discount rate) for the
five considered products. Thus, DOE
estimated that manufacturer tax credits
would yield a fraction of the benefits
that consumer tax credits and rebates
would provide.
Voluntary Energy Efficiency Targets.
The Federal government’s ENERGY
STAR program has voluntary energy
efficiency targets for gas-fired and
electric storage water heaters. Some
equipment purchases that result from
the ENERGY STAR program already are
reflected in DOE’s base-case scenario for
gas-fired and electric storage water
heaters. DOE evaluated the potential
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impacts of increased marketing efforts
by ENERGY STAR that would
encourage the purchase of water heaters
meeting the standard. For direct heating
equipment and pool heaters, DOE
evaluated a hypothetical ENERGY STAR
program for these products with market
impacts comparable to the impacts of
existing ENERGY STAR programs for
similar products. DOE modeled the
voluntary efficiency program based on
these scenarios. DOE estimated that the
enhanced effectiveness of voluntary
energy efficiency targets would provide
0.31 quads of national energy savings
and an NPV of consumer benefit of
$0.40 billion (at a 7-percent discount
rate) for the five considered products.
Although this would provide national
benefits, they would be much smaller
than the benefits resulting from the
national standards.
Early Replacement Incentives. This
policy alternative envisions a program
to replace old, inefficient water heaters,
DHE, and pool heaters with models
meeting the efficiency levels in the
standards. DOE projected a 4-percent
increase in the annual retirement rate of
the existing stock in the first year of the
program. It assumed the program would
last as long as it took to completely
replace all of the eligible existing stock
in the year that the program begins
(2013 or 2015). DOE estimated that for
such an early replacement program, the
national energy savings benefits would
be negligible in comparison with the
benefits resulting from the national
standards, and the NPV would actually
be negative.
Bulk Government Purchases. Under
this policy alternative, the government
would be encouraged to purchase
increased amounts of equipment that
meet the efficiency levels in the
standards. Federal, State, and local
government agencies could administer
such a program. At the Federal level,
this would be an enhancement to the
existing Federal Energy Management
Program (FEMP). DOE modeled this
program by assuming an increase in
installation of water heaters meeting the
efficiency levels of the standards among
those households for whom government
agencies purchase or influence the
purchase of water heaters. (Because the
market share of DHE units in publiclyowned housing is minimal and the
market share of pool heaters in publiclyowned housing is zero, the Department
did not consider bulk government
purchases for those products.) DOE
estimated that bulk government
purchases would provide negligible
national energy savings and NPV for the
considered products, benefits that
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would be much smaller than those
estimated for the national standards.
Energy Conservation Standards. DOE
is adopting the energy conservation
standards listed in section VI.D. As
indicated in the paragraphs above, none
of the alternatives DOE examined would
save as much energy as today’s
standards. Also, several of the
alternatives would require new enabling
legislation because authority to carry
out those alternatives may not exist.
Additional Policy Evaluation. In
addition to the above non-regulatory
policy alternatives, DOE evaluated the
potential impacts of a policy that would
allow States to require that some water
heaters installed in new homes have an
efficiency level higher than the Federal
standard. At present, States are
prohibited from requiring efficiency
levels higher than the Federal standard;
the considered policy would remove
this prohibition in the case of
residential water heaters. DOE notes
that removing the prohibition would
require either legislative authority or
DOE approval, after a case-by-case basis
consideration on the merits, of waivers
submitted by States. For the present
rulemaking, DOE evaluated the impacts
that such a policy would have for
electric storage water heaters.
Specifically, DOE estimated the
impacts for a policy case in which
several States adopted provisions in
their building codes that would require
electric storage water heaters to meet
efficiency level 6 (2.0 EF, heat pump
with two-inch insulation). DOE
assumed that such codes would affect
25 percent of water heaters in all new
homes built in the United States in 2015
and that the percentage would increase
linearly to 75 percent by 2045. (DOE did
not attempt to define the specific
geographic areas that would be
affected.) In this policy case, all other
water heaters (those bought for
replacement in existing homes) would
meet the proposed standard level of 0.95
(efficiency level 5). DOE’s analysis
accounts for the estimate that some new
homes would have a water heater with
EF greater than or equal to 2.0 (e.g., heat
pump technology) in the absence of any
amended standards (the base case).
DOE estimated that a policy that
would allow States to require that some
electric storage water heaters installed
in new homes have an efficiency level
higher than the Federal standard would
provide 2.18 quads of national energy
savings and an NPV of consumer benefit
of $1.23 billion (at a 7-percent discount
rate). The energy savings from this State
building code requirement for new
homes would be greater than the savings
from today’s energy conservation
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20225
standard for electric storage water
heaters. This contrasts with the nonregulatory policy alternatives discussed
above, whose savings are lower than
those of the considered standards.
B. 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,
and a final regulatory flexibility analysis
(FRFA) for any such rule that an agency
adopts as a final rule, 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 (https://
www.gc.energy.gov/). DOE reviewed the
December 2009 NOPR and today’s final
rule under the provisions of the
Regulatory Flexibility Act and the
procedure and policies published on
February 19, 2003.
For the manufacturers of the three
types of heating products, 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,
30850 (May 15, 2000), as amended at 65
FR 53533, 53545 (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 https://www.sba.gov/idc/
groups/public/documents/
sba_homepage/serv_sstd_tablepdf.pdf.
Residential water heater manufacturing
is classified under NAICS 335228—
‘‘Other Major Household Appliance
Manufacturing.’’ DHE and pool heater
manufacturing are classified under NAICS
333414—‘‘Heating Equipment (Except
Warm Air Furnaces) Manufacturing.’’
The SBA sets a threshold of 500
employees or less for an entity to be
considered as a small business for both
of these categories as shown in Table
VII.6.
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TABLE VII.6—SBA AND NAICS CLASSIFICATION OF SMALL BUSINESS MANUFACTURERS POTENTIALLY AFFECTED BY THIS
RULE 26
Industry description
Revenue limit
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Residential Water Heater Manufacturing ..................................................................
Direct Heating Manufacturing ....................................................................................
Pool Heater Manufacturing ........................................................................................
In the December 2009 NOPR, DOE
looked at each type of heating product
(water heaters, pool heaters, and direct
heating) separately for purposes of
determining whether certification was
appropriate or an initial regulatory
flexibility analysis was needed. DOE
identified five small residential water
heater manufacturers, 12 small DHE
manufacturers, and one small pool
heater manufacturer that produce
covered products and can be considered
small businesses manufacturers. 74 FR
65852, 65984–86 (Dec. 11, 2009). DOE
concluded that the proposed standards
for residential water heaters and gasfired pool heaters set forth in the
proposed rule, if promulgated, would
not have a significant economic impact
on a substantial number of small
entities. DOE also sought comment on
the impacts of the proposed amended
energy conservation standards on small
business manufacturers of residential
water heaters and the impacts of the
proposed amended energy conservation
standards on small business
manufacturers of gas-fired residential
pool heaters. DOE received no
comments on the certification or its
additional requests for comment on
small business impacts in response to
the December 2009 NOPR for residential
water heaters and gas-fired pool heaters.
Comments related to the economic
impacts of the proposed rule generally
are discussed elsewhere in the
preamble, and no changes were made to
the certification as a result of these
comments. Thus, DOE reaffirms the
certification and has not prepared a
FRFA for this final rule for those
products.
DOE determined, however, that it
could not certify that the proposed
standards, if promulgated, would not
have significant impact on a substantial
number of small entities in the direct
heating equipment industry. DOE made
the determination that small business
manufacturers of both traditional and
gas hearth DHE could be negatively
impacted by the standards proposed in
26 In the December 2009 NOPR, DOE mistakenly
listed gas-fired pool heater manufacturing under
NAICS code 335228. 74 FR 65852, 65984 (Dec. 11,
2009). The correct classification for pool heater
manufacturing is 333414. Both NAICS categories
have the same 500 employee limit.
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N/A
N/A
N/A
the December 2009 NOPR. 74 FR 65852,
65985–86 (Dec. 11, 2009). Because of
the potential impacts on small DHE
manufacturers, DOE prepared an IRFA
for DHE during the NOPR stage of this
rulemaking. DOE provided the IRFA in
its entirety in the December 2009 NOPR.
74 FR 65852, 65984–92 (Dec. 11, 2009).
Chapter 12 of the TSD contains more
information about the impact of this
rulemaking on manufacturers. DOE
presents the FRFA conducted for this
rulemaking in the following discussion.
Comments received in response to the
IRFA are also presented below.
DOE’s determination that the rule
may have a significant economic impact
on a substantial number of small entities
results from the large number of small
DHE manufacturers and the expected
impact of the standards on these small
businesses. As presented and discussed
below, the FRFA describes potential
impacts on small business DHE
manufacturers associated with the
required capital and product conversion
costs at each TSL and discusses
alternatives that could minimize these
impacts.
Succinct Statement of the Need for, and
Objectives of, the Rule
The statement of the need for and
objectives of the rule is set forth
elsewhere in the preamble and is not
repeated here.
Description and Estimated Number of
Small Entities Regulated
After examining structure of the DHE
industry, DOE determined it was
necessary to divide potential impacts on
small DHE manufacturers into two
broad categories: (1) Impacts on small
manufacturers of traditional DHE (i.e.,
manufacturers of gas wall fan, gas wall
gravity, gas floor, and gas room DHE);
and (2) impacts on small manufacturers
of gas hearth products. The FRFA
presents the results for traditional DHE
and gas hearth DHE separately to be
consistent with the MIA results in
section VI.C.2 which also separate DHE
in this manner. Traditional DHE and gas
hearth DHE are made by different
manufacturers (i.e., all manufacturers of
gas hearth products do not manufacture
traditional DHE, and vice versa, with
one exception).
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Employee limit
500
500
500
NAICS
335228
333414
333414
Traditional Direct Heating Equipment
Three major manufacturers control
almost 100 percent of the traditional
DHE market. Two of the three major
manufacturers of traditional DHE are
small business manufacturers. One of
the small business manufacturers
produces only traditional DHE and has
products in all four traditional DHE
product classes (i.e., gas wall fan, gas
wall gravity, gas floor, and gas room
DHE). The second small business
manufacturer produces all five products
classes of DHE, including gas hearth
DHE. DOE identified a third small
business manufacturer with less than a
one-percent share of the traditional DHE
market. This company offers two gas
wall gravity models, but is mainly
focused on specialty hearth products
not covered by this rulemaking.
Gas Hearth Direct Heating Equipment
DOE identified 10 small business
manufacturers of gas hearth DHE. Both
small business manufacturers and large
manufacturers indicated that the
number of competitors in the market has
been declining in recent years due to
industry consolidation and smaller
companies exiting the market. Three
major domestic manufacturers now
supply a majority of the marketplace.
None of the three major manufacturers
is considered a small business. The
remainder of the market is either
imported (mostly by Canadian
companies) or produced by one of 12
domestic manufacturers that hold
varying market shares.
Significant Issues Raised by Public
Comments
A number of interested parties
commented on the appropriateness of
the proposed standard level for
traditional DHE, given the impacts DOE
calculated in the MIA, and urged DOE
to reconsider the traditional DHE
standards for the final rule. See section
V.A.2 for a summary of these comments,
and see section VI.D.3 for a discussion
of DOE’s conclusion about the final
amended energy conservation standard
for traditional DHE in light of these and
other comments.
DOE also received a number of
comments from industry groups and
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manufacturers, including two small
business manufacturers, about the
potential of the proposed standards to
have a tremendous impact on direct
employment in the traditional DHE
market. See section IV.I.4 for a
discussion of these comments.
Interested parties also commented on
the MIA scenarios and profitability in
the traditional DHE market after the
compliance date of the amended energy
conservation standards (section IV.I.2).
Another issue raised by interested
parties that could impact small business
manufacturers and the industry in
general is securing the funding for the
conversion costs estimated by DOE (see
section IV.I.5).
Several comments argued that TSL 3,
as presented in the December 2009
NOPR, presented a very negative
business case for traditional DHE
manufacturers, especially small
business manufacturers. In general,
AHRI and the small business
manufacturers argued that the market
for traditional DHE would not support
the sales volume necessary to recoup
the investments in R&D and capital
equipment required by TSL 3.
Essentially, two factors drive this
argument: (1) The costs required by
amended standards; and (2) revenues
that follow the standards. On the cost
side, AHRI stated that manufacturers
cannot afford the necessary investment
for product development and redesign
for nearly all of their models; the
retooling and changing of their
production lines; and the testing of
those redesigned models to certify
compliance with the applicable safety
standards. On the revenue side, AHRI
and manufacturers attributed the lack of
volume necessary to recoup these costs
to three factors: (1) The market has
already been in steady decline in the
base case; (2) there would be fewer
retrofits—the products’ primary
market—because of space constraints
and the increased size associated with
higher-efficiency products; and (3)
higher first costs, including higher
installation costs, would further reduce
demand. (Williams, No. 96 at p. 1;
Empire, Public Meeting Transcript, No.
57.4 at pp. 298–300; AHRI, No. 91 at p.
10) AHRI and the manufacturers argued
that the prospect of declining sales and
the aforementioned costs would force
those manufacturers to either drop
product lines or exit the market entirely.
(AHRI, No. 91 at p. 10; LTS, Public
Meeting Transcript, No. 57.4 at p. 25) As
a result, some segments of the
traditional DHE market may shrink to
only one or two manufacturers. (AHRI,
No. 91 at p. 10) As mentioned in section
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VI.C.5, DOJ expressed concern that the
proposed standards could adversely
affect competition in the traditional
DHE product categories. (DOJ, No. 99 at
p. 2)
DOE also received comments specific
to the small business analysis presented
in the IRFA section of the December
2009 NOPR. LTS agreed that most
manufacturers have existing products
that meet the required efficiencies in
three out of the four product types of
traditional DHE, but said that that
statement is misleading because only 15
percent of LTS’ total sales come from
products that meet the proposed
standards. LTS stated its belief that its
competitors similarly derive only a
small portion of total revenue from
products that would meet the proposed
standards. (LTS, No. 56.7 at p. 2; Public
Meeting Transcript, No. 57.4 at p. 22)
LTS also disagreed with DOE’s
statement in the December 2009 NOPR
that small business manufacturers
would be left with a viable number of
product lines that meet the new
standards, particularly for the gravity
wall category which represents 60
percent of their business. Because only
one manufacturer has two gas wall
gravity models that would meet the
proposed standard (which represent 5
percent of sales and only have lower
input ratings less than 25,000 BTU),
LTS stated that these few products do
not lead to maintaining a viable number
of product offerings. (LTS, No. 56.7 at p.
3; LTS, Public Meeting Transcript, No.
57.4 at pp. 23–24; 286–287) Therefore,
LTS did not agree with DOE’s
conclusion that manufacturers would
have a viable number of product lines
at TSL 3 to maintain a sufficient
production volume and remain in the
market. (LTS, No. 56.7 at p. 2)
DOE acknowledges that, according to
the AHRI database, LTS produces only
a few gas wall gravity DHE models that
would meet the standards being adopted
in this final rule. According to the AHRI
directory, LTS has certified four models
that meet the proposed gas wall gravity
standard in the 2009 NOPR. These four
models are two basic products that are
listed twice in the directory (once for
using natural gas as a fuel source and
once for using propane gas as a fuel
source). DOE also understands that
these products currently reflect a small
share of the market and that few of
LTS’s current products in other
categories would meet the standards
proposed in the December 2009 NOPR.
To clarify, in the December 2009 NOPR,
DOE concluded that a combination of
existing product lines that currently
meet the standard and other select
product lines—which would have to be
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20227
upgraded—would allow manufacturers
to offer a viable number of product lines
after the compliance date of the
amended energy conservation standard.
DOE did and does not assume that only
products that meet the current standard
will be sufficient to support
manufacturers after compliance with the
amended standards is required.
For these reasons, in the IRFA, DOE
accounted for the costs the industry
would incur to upgrade all of its other
gas wall gravity product lines at the
proposed standard. For the final rule,
DOE used the AHRI database to update
the number of product lines
manufacturers currently have, and
continued to use this methodology to
estimate its capital conversion costs.
DOE recognizes that its conversion costs
may, therefore, be conservative because
manufacturers may choose not to
upgrade all of their current product
lines. However, DOE assumed
manufacturers would have to invest to
maintain the shipment volumes
forecasted in the NIA. See chapter 12 of
the TSD for more details on DOE’s
product line analysis.
AHRI stated that because
manufacturers in the traditional DHE
market provide products of every type,
the total shipments of traditional DHE
must be considered since that is the true
base of manufacturers’ business.
According to the commenter, DOE must
reconsider its analysis for traditional
DHE, both relative to the impacts on
manufacturers and on national energy
savings, given that total future
shipments are expected to continue to
decrease. (AHRI, No. 91 at p. 11) AHRI
stated that, to date, the traditional DHE
manufacturers have survived by offering
replacements. Dropping product lines or
dropping categories would hurt
manufacturers because they would no
longer be able to offer all replacements
for all products, which could cause a
complete exit from the market rather
than upgrading some product lines.
(AHRI, Public Meeting Transcript, No.
57.4 at pp. 297–298) Williams stated
that offering a range of products is
critical to traditional DHE
manufacturers, arguing that in a small,
niche category, part of viability is being
able to offer a breadth of products.
Williams commented that it needs to be
able to be able to offer like
replacements, including units without
electricity. (Williams, Public Meeting
Transcript, No. 57.4 at pp. 301–302)
DOE agrees with AHRI and Williams
that total sales and offering a broad
range of products are critical to
traditional DHE manufacturers. In the
December 2009 NOPR, DOE noted that
the wide range of product offerings by
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manufacturers is a legacy of a once
higher-volume market that now
typically supplies replacement units.
The remaining manufacturers have
stayed in business by consolidating
brands and the legacy products of
companies that are no longer in
business to take increasing shares of a
smaller total market. Because
maintaining a sufficiently broad product
line is so critical to traditional DHE
manufacturers, DOE conducted its small
business impact analysis by examining
how the conversion costs to convert all
product lines would impact small
business manufacturers. Because each
product line is manufactured in
relatively low volumes, the discrepancy
between unit shipments and the number
of product lines requiring significant
product and capital conversion costs
results in negative impacts for all
manufacturers. 74 FR 65852, 65986
(Dec. 11, 2009).
DOE notes that the comments it
received on the IRFA pertain to the
conclusion DOE drew from the results,
rather than the methodology or results
themselves. As such, DOE has
maintained its methodology from the
December 2009 NOPR (discussed in
more detail in section IV.I) and believes
it has appropriately captured the costs
to traditional DHE manufacturers of
upgrading all of their product lines to
the TSLs. The cash flow impacts
presented in section VI.C.2.b are
reflective of this assumption. However,
DOE recognizes the significant costs
small business manufacturers could face
in converting product lines. In light of
these costs and the need to maintain a
viable number of products to offer in the
marketplace, DOE is adopting a different
TSL for traditional DHE in today’s final
rule. Particularly in light of this change,
DOE continues to believe that
manufacturers, including the small
business manufacturers, will be able to
maintain a viable number of products
after the compliance date of the
amended energy conservation
standards.
DOE did not receive any specific
comments on the MIA for gas hearth
DHE manufacturers. DOE also did not
receive any comments on its request for
comment on the characterization of a
typical large and small business
manufacturer of gas hearth DHE nor its
request for comment on the potential
impacts on small business
manufacturers of gas hearth DHE.
Description and Estimate of Compliance
Requirements
Traditional DHE
While DOE explicitly analyzed one
representative input capacity range for
the gas wall gravity, gas wall fan, gas
floor, and gas room types of DHE,
manufacturers offer product lines that
typically span multiple BTU ranges
with many different features. This can
result in many individual models
offered by each manufacturer per
product line. Again, the wide range of
product offerings by manufacturers is a
legacy of a once higher-volume market
that now typically supplies replacement
units. The remaining manufacturers
have stayed in business by
consolidating brands and the legacy
products of companies that are no
longer in business to take increasing
shares of a smaller total market. Because
each product line is manufactured in
low volumes, the discrepancy between
unit shipments and the number of
product lines requiring significant
product and capital conversion costs
results in negative impacts for all
manufacturers. Many product
development costs (e.g., testing,
certification, and marketing) are
somewhat fixed, so achieving
manufacturing scale is an important
consideration in determining whether
the product conversion costs are
economically justified. Similarly, even
though any capital conversion costs can
be capitalized over a number of years,
these costs must be paid up front, and
there must be a large enough volume to
justify an added per-unit cost.
DOE calculated capital and product
conversion costs for traditional DHE by
estimating a per-product-line cost and
assuming that every manufacturer
would face the same per-product-line
cost within each product class. DOE
also assumed that any product line that
does not meet the efficiency level being
analyzed would be upgraded, thereby
requiring product conversion and
capital conversion costs. DOE used
public data to calculate the number of
product lines that would need to be
upgraded at each TSL for each product
class. To show how the small business
manufacturers could be differentially
harmed, DOE compared the conversion
costs for a typical large manufacturer
and a typical small business
manufacturer within the industry. To
calculate the conversion costs for a
typical small business manufacturer and
a typical large manufacturer, DOE used
publicly-available information to
determine the average number of
product lines that meet each efficiency
level in each product category for a
typical small business manufacturer and
a typical large manufacturer of
traditional DHE. DOE updated this
information for the final rule, adding
products that had been released since
the December 2009 NOPR analysis. For
both small business and large
manufacturers, DOE multiplied the
number of product lines that fell below
the required efficiency level by its
estimate of the per-line capital and
product conversion cost. Table VII.7 and
Table VII.8 show DOE’s estimates of the
average number of product lines
requiring conversion at each TSL for a
typical small business manufacturer and
a typical large manufacturer of
traditional DHE, respectively.
TABLE VII.7—NUMBER OF PRODUCT LINES REQUIRING CONVERSION FOR A TYPICAL SMALL BUSINESS MANUFACTURER OF
TRADITIONAL DIRECT HEATING EQUIPMENT*
jlentini on DSKJ8SOYB1PROD with RULES2
Number of
gas wall fan
product lines
requiring conversion
Number of
gas wall
gravity product lines requiring conversion
Number of
gas floor
product lines
requiring conversion
Number of
gas room
product lines
requiring conversion
Total number
of product
lines requiring conversion
Total product
lines that
meet each or
exceed each
TSL
0
2
2
3
3.5
2
3.5
0
2.5
2.5
4
4
4
4
0
0.5
0.5
0.5
0.5
0.5
0.5
0
1
1.5
2
2
2
2
0
6
6.5
9.5
10
8.5
10
13
7
6.5
3.5
3
4.5
3
Baseline ...............................................................
TSL 1 ...................................................................
TSL 2 ...................................................................
TSL 3 ...................................................................
TSL 4 ...................................................................
TSL 5 ...................................................................
TSL 6 ...................................................................
* Fractions of product lines result from taking the average number of product lines from publicly-available information.
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TABLE VII.8—NUMBER OF PRODUCT LINES REQUIRING CONVERSION FOR A TYPICAL LARGE MANUFACTURER OF
TRADITIONAL DIRECT HEATING EQUIPMENT
Number of
gas wall fan
product
lines requiring conversion
Number of
gas wall
gravity product lines requiring conversion
Number of
gas floor
product
lines requiring conversion
Number of
gas room
product
lines requiring conversion
Total number of product lines requiring conversion
Total product lines
that meet
each or exceed each
TSL
0
1
2
4
7
1
7
0
0
0
3
3
6
6
0
1
1
1
1
1
1
0
1
1
2
2
3
3
0
3
4
10
13
11
17
18
15
14
8
5
7
1
Baseline ...........................................................................
TSL 1 ...............................................................................
TSL 2 ...............................................................................
TSL 3 ...............................................................................
TSL 4 ...............................................................................
TSL 5 ...............................................................................
TSL 6 ...............................................................................
Amended energy conservation
standards have the potential to
differentially affect the small business
manufacturers, because they generally
lack the large-scale resources to alter
their existing products and production
facilities for those TSLs requiring major
redesigns. While all manufacturers
would be expected to be negatively
impacted by amended energy
conservation standards to varying
degrees, the small business
manufacturers would face higher
product conversion costs at lower TSLs
than their large competitor. Both large
and small business manufacturers have
several product offerings in each
product class, sometimes at varying
efficiency levels, but the larger
manufacturer produces products with
higher efficiencies in larger volumes. As
a result, to produce a sufficiently large
volume, the small business
manufacturers would have to upgrade
more product lines at lower TSLs than
the large manufacturer at lower TSLs.
As shown in Table VII.9 and Table
VII.10, modifying facilities and
developing new, more-efficient products
would cause a typical small business
manufacturer to incur higher conversion
costs than a typical larger manufacturer
for TSL 1 through TSL 3.
TABLE VII.9—TOTAL CONVERSION COSTS FOR A TYPICAL SMALL BUSINESS MANUFACTURER OF TRADITIONAL DIRECT
HEATING EQUIPMENT
Capital conversion costs for a
typical small
business manufacturer (2009$
millions)
Baseline .................................................................................................................................
TSL 1 .....................................................................................................................................
TSL 2 .....................................................................................................................................
TSL 3 .....................................................................................................................................
TSL 4 .....................................................................................................................................
TSL 5 .....................................................................................................................................
TSL 6 .....................................................................................................................................
Product conversion costs for a
typical small
business manufacturer (2009$
millions)
Total conversion costs for a
typical small
business manufacturer (2009$
millions)
..........................
0.86
1.35
1.89
2.18
1.93
2.52
..........................
0.41
0.57
0.81
0.92
1.44
1.65
..........................
1.27
1.92
2.70
3.10
3.37
4.17
TABLE VII.10—TOTAL CONVERSION COSTS FOR A TYPICAL LARGE MANUFACTURER OF TRADITIONAL DIRECT HEATING
EQUIPMENT
Capital conversion costs for a
typical large
manufacturer
(2009$ millions)
jlentini on DSKJ8SOYB1PROD with RULES2
Baseline ...........................................................................................................................
TSL 1 ...............................................................................................................................
TSL 2 ...............................................................................................................................
TSL 3 ...............................................................................................................................
TSL 4 ...............................................................................................................................
TSL 5 ...............................................................................................................................
TSL 6 ...............................................................................................................................
Because the larger manufacturer offers
more products at higher efficiencies, a
typical small business manufacturer
faces disproportionate costs at the lower
TSLs in absolute terms at TSL 1 through
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Product conversion costs for a
typical large
manufacturer
(2009$ millions)
Total conversion
costs for a typical large manufacturer (2009$
millions)
............................
0.23
0.54
1.81
2.59
2.90
4.08
............................
0.14
0.25
0.79
1.11
2.13
2.61
............................
0.38
0.79
2.60
3.70
5.03
6.69
TSL 3. Despite being similar in absolute
terms, at these TSLs, the small business
manufacturers would be more likely to
be disproportionately harmed at any
TSL because they have a much lower
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volume across which to spread similar
costs. To show how a smaller scale
would harm a typical small business
manufacturer, DOE used estimates of
the market shares within the industry
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for each product class to estimate the
typical annual revenue, operating profit,
research and development expense, and
capital expenditures for a typical large
manufacturer and a typical small
business manufacturer using the
financial parameters in the DHE GRIM.
Comparing the conversion costs of a
typical small business manufacturer to a
typical large manufacturer with
operating profit provides a rough
estimate of how quickly the investments
could be recouped. Table VII.11 and
Table VII.12 show these comparisons.
TABLE VII.11—COMPARISON OF A TYPICAL SMALL BUSINESS MANUFACTURER’S CONVERSION COSTS TO ANNUAL
EXPENSES, REVENUE, AND OPERATING PROFIT
Capital conversion cost as a
percentage of
annual capital
expenditures
Baseline ...........................................................................................
TSL 1 ...............................................................................................
TSL 2 ...............................................................................................
TSL 3 ...............................................................................................
TSL 4 ...............................................................................................
TSL 5 ...............................................................................................
TSL 6 ...............................................................................................
Product conversion cost as a
percentage of
annual R&D expense
Total conversion
cost as a percentage of annual revenue
Total conversion
cost as a percentage of annual EBIT
............................
267
332
466
537
474
619
............................
190
210
299
341
535
612
............................
9
11
15
17
19
23
............................
252
302
426
489
531
657
TABLE VII.12—COMPARISON OF A TYPICAL LARGE MANUFACTURER’S CONVERSION COSTS TO ANNUAL EXPENSES,
REVENUE, AND OPERATING PROFIT
Capital conversion cost as a
percentage of
annual capital
expenditures
jlentini on DSKJ8SOYB1PROD with RULES2
Baseline ...........................................................................................
TSL 1 ...............................................................................................
TSL 2 ...............................................................................................
TSL 3 ...............................................................................................
TSL 4 ...............................................................................................
TSL 5 ...............................................................................................
TSL 6 ...............................................................................................
Table VII.11 and Table VII.12
illustrate that, although the investments
required at each TSL can be considered
substantial for all companies, the
impacts could be relatively greater for a
typical small business manufacturer,
because of much lower production
volumes and a comparable number of
product offerings. At higher TSLs, it is
more likely that manufacturers of
traditional DHE would reduce the
number of product lines they offer to
keep their conversion costs at
manageable levels. At higher TSLs,
small business manufacturers would
face increasingly difficult decisions on
whether to: (1) Invest the capital
required to be able to continue offering
a full range of products; (2) cut product
lines; (3) consolidate to maintain a large
enough combined scale to spread the
required conversion costs and operating
expenses; or (4) exit the market
altogether. Because of the high
conversion costs at higher TSLs,
manufacturers would likely eliminate
their lower-volume product lines. Small
business manufacturers might only be
able to afford to selectively upgrade
their most popular products and be
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Product conversion cost as a
percentage of
annual R&D expense
Total conversion
cost as a percentage of annual revenue
Total conversion
cost as a percentage of annual EBIT
............................
33
77
257
368
412
580
............................
30
53
169
237
456
559
............................
1
3
8
12
16
22
............................
34
72
237
337
458
610
forced to discontinue lower-volume
products, because the product
development costs that would be
required to upgrade all of their existing
product lines would be too high.
DOE’s product line analysis revealed
the potential for small businesses
manufacturers to be disproportionately
harmed by the proposed standard levels
and higher TSLs. Additionally, DOE
agrees with comments that small
business traditional DHE manufacturers
have less access to capital than their
larger competitor. Larger manufacturers
profit from offering a variety of products
and have the ability to fund required
capital and product conversion costs
using cash generated from all products.
Unlike large manufacturers, the small
business manufacturers cannot leverage
resources from other departments. With
these considerations, it is more likely
that the small businesses would have to
spend an even greater proportion of
their annual R&D and capital
expenditures than shown in the
industry-wide figures.
In addition, small business
manufacturers have less buying power
than their larger competitor. Traditional
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DHE is a low-volume industry, which
can make it difficult for any
manufacturer to take advantage of bulk
purchasing power or economies of scale.
The two small business manufacturers
have approximately half the market
share of their large competitor, which
puts them at a disadvantage when
purchasing components and raw
materials. In addition, the large
manufacturer has a parent company that
manufactures products and equipment
other than traditional DHE. This
manufacturer’s larger scale and
additional manufacturing capacity
(required for products and equipment
other than DHE) also give the company
more leverage with its suppliers as it
purchases greater volumes of
components and raw materials. During
the manufacturer interviews, the small
businesses manufacturers commented
that to comply with amended energy
conservation standards, they would
likely need to buy more purchased parts
instead of producing most of the final
product in-house. Because the large
manufacturer has an advantage in
purchasing power that would likely
allow it to buy purchased parts at lower
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jlentini on DSKJ8SOYB1PROD with RULES2
costs, an amended energy conservation
standard that requires more purchased
parts may differentially harm the
profitability of the small business
manufacturers.
Even though there is a potential for
the small business manufacturers to be
negatively impacted by today’s final
rule, DOE believes that manufacturers,
including the small businesses, would
be able to maintain a viable number of
product offerings at TSL 2, the adopted
standard level. A typical small business
manufacturer of traditional DHE offers
product families in the four product
types that would meet or exceed the
standard levels adopted in today’s final
rule. For example, over two-thirds of the
product lines identified by DOE as
currently on the market meet the
standard established by today’s final
rule for gas wall gravity DHE, which
comprise over 60 percent of the
traditional DHE market. While
recognizing that the product lines that
currently meet the standard represent a
minority of current revenue, the
standard levels do not require
manufacturers, including those that are
small businesses, to completely redesign
all their product lines. For those
product lines that would need to be
redesigned, DOE believes that small
business manufacturers would offer
fewer product lines in response to the
amended energy conservation
standards. However, DOE believes that
the standards adopted in today’s final
rule will allow the small business
manufacturers to selectively upgrade
their existing product lines and
maintain viable production volumes
after the compliance date of the
amended energy conservation
standards.
Gas Hearth DHE
For gas hearth DHE in the IRFA, DOE
used publicly-available information to
estimate the conversion costs for a
typical large and a typical small
business manufacturer of gas hearth
DHE as shown in the December 2009
NOPR. 74 FR 65852, 65984–92 (Dec. 11,
2009). DOE tentatively concluded that a
typical small business manufacturer
could be differentially impacted by
amended energy conservation standards
because of their smaller scale. However,
DOE believed that a typical small
business manufacturer would not face
prohibitively large conversion costs and
that the required changes would not
require significant investments in
product development. DOE tentatively
concluded that because a typical
manufacturer of gas hearth DHE already
offers multiple product lines that meet
and exceed the required efficiencies and
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because most product lines that did not
meet the proposed standard could be
upgraded with relatively minor changes,
manufacturers, including the small
business manufacturers, would be able
to maintain a viable number of product
offerings. 74 FR 65852, 65991 (Dec. 11,
2009). In this final rule, while DOE is
adopting a different TSL for direct
heating equipment (i.e., TSL 2), the
efficiency requirements are identical to
the proposed amended energy
conservation standard for gas hearth
DHE. Additionally, because DOE did
not receive any comments on the IRFA
or the potential impacts on small
business manufacturers of gas hearth
DHE, DOE continues to believe that the
analysis developed for the IRFA and
presented in the December 2009 NOPR
accurately presents the potential
impacts on small business
manufacturers of gas hearth DHE. (See
74 FR 65852, 65989–91 (Dec. 11, 2009)
for additional details.) Therefore, for the
FRFA detailed in today’s final rule, DOE
continues to believe that gas hearth DHE
manufacturers, including the small
business manufacturers, will be able to
maintain a viable number of product
offerings following the compliance date
of the amended energy conservation
standard.
Description of the Steps DOE Has Taken
To Minimize the Significant Economic
Impact on Small Entities Consistent
With the Stated Objectives of
Applicable Statutes
DOE acknowledges all the potential
impacts highlighted by manufacturers
and industry and updated its small
business analysis for the impacts on
traditional DHE manufacturers in light
of these comments and additional
information and analysis. The impacts
on small business manufacturers of
traditional DHE, as illustrated in public
comments, contributed to DOE’s
ultimate determination that the TSL
proposed in the December 2009 NOPR
for traditional DHE (TSL 3) was not
economically justified.
DOE discusses how it has considered
the new information about the impacts
on traditional DHE in section VI.D.3.
Even though there is a potential for the
small business manufacturers to be
negatively impacted by today’s final
rule, DOE believes that manufacturers,
including the small businesses, would
be able to maintain a viable number of
product offerings at TSL 2, the adopted
standard level. For today’s final rule, the
small business manufacturers of
traditional DHE have an average of 6.5
product lines out of 13 that already meet
the required efficiencies. In total, 61
percent of the models offered by a
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20231
typical small business manufacturer
meet the amended energy conservation
standards. DOE also reviewed the
conversion costs required for each of the
small business manufacturers to
upgrade an average of approximately
seven product lines for a capital cost
totaling $1.35 million to offer
replacements for all models that do not
meet the standard. At the proposed
standards in the December 2009 NOPR,
DOE estimated small business
manufacturers would be required to
spend approximately 3.5 years worth of
operating profit to convert every
product line. For todays final rule, that
estimate has fallen to 3.0 years despite
changes to the analysis that lowered
annual shipments and updates to the
product line analysis to include new
product lines. While DOE believes that
this would still be a substantial
undertaking, DOE has carefully
reviewed the impact of the conversion
costs on small business manufacturers
and has carefully considered what
would be required for these
manufacturers to continue to offer a
viable number of replacement models
that are critical to their ability to remain
in the market. In sum, DOE has
concluded that adoption of a standard
level at TSL 2 in this final rule (as
compared to TSL 3 proposed in the
NOPR) minimizes the impact on small
business manufacturers to the extent
possible, given EPCA’s requirements for
setting energy conservation standards.
Although the TSL lower than the
adopted TSL would be expected to
further reduce the impacts on small
entities, DOE is required by EPCA to
establish standards that achieve the
maximum improvement in energy
efficiency that are technically feasible
and economically justified, and result in
a significant conservation of energy,
after considering a variety of factors. As
explained earlier in the preamble, DOE
rejected the lower TSL based on its
analysis conducted pursuant to these
EPCA requirements.
In addition to the other TSLs being
considered, the December 2009 NOPR
TSD included a regulatory impact
analysis. For DHE, this report discusses
the following policy alternatives: (1) No
new regulatory action; (2) consumer
rebates; (3) consumer tax credits; (4)
manufacturer tax credits; (5) voluntary
energy efficiency targets; (6) early
replacement incentives; and (7) bulk
government purchases. While these
alternatives may mitigate the economic
impacts on small entities compared to
the adopted standards, the energy
savings of these regulatory alternatives
are significantly smaller than those
expected to result from the adopted
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standard levels. Thus, DOE rejected
these alternatives and is adopting the
standards set forth in this rulemaking.
C. Review Under the Paperwork
Reduction Act of 1995
This rule contains a collection-ofinformation requirement subject to the
Paperwork Reduction Act of 1995 (PRA)
which has been approved by OMB
under control number 1910–1400. As
described in the December 2009 NOPR,
public reporting burden for compliance
reporting for energy and water
conservation standards is estimated to
average 30 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.
74 FR 65852, 65992 (Dec. 11, 2009).
DOE did not receive any comments
regarding this burden estimate, or any
other aspect of this data collection in
response to its proposals. DOE believes
that the collection of information
required by this final rule is the least
burdensome method of meeting the
statutory requirements.
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.
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D. Review Under the National
Environmental Policy Act of 1969
DOE prepared an environmental
assessment (EA) of the impacts of
today’s final rule, pursuant to the
National Environmental Policy Act of
1969 (NEPA) (42 U.S.C. 4321 et seq.),
the regulations of the Council on
Environmental Quality (40 CFR parts
1500–1508), and DOE’s regulations for
compliance with NEPA (10 CFR part
1021). This assessment includes an
examination of the potential effects of
emission reductions likely to result from
the rule in the context of global climate
change, as well as other types of
environmental impacts. The final EA
has been incorporated into the final rule
TSD at chapter 16. DOE found the
environmental effects associated with
today’s standard levels for water
heaters, direct heating equipment, and
pool heaters to be insignificant.
Therefore, DOE is issuing a finding of
no significant impact (FONSI) as part of
the final EA. The FONSI is available in
the docket for this rulemaking.
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E. Review Under Executive Order 13132
DOE reviewed this rule pursuant to
Executive Order 13132, ‘‘Federalism,’’ 64
FR 43255 (August 4, 1999), which
imposes certain requirements on
agencies formulating and implementing
policies or regulations that preempt
State law or that have Federalism
implications. 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
it will follow in the development of
such regulations. 65 FR 13735. DOE has
examined today’s final rule and has
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
today’s final 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(d)) Therefore, no further action is
required by Executive Order 13132.
F. 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’’ (61 FR 4729 (Feb. 7, 1996))
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; and
(3) provide a clear legal standard for
affected conduct rather than a general
standard and promote simplification
and burden reduction. 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
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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 final
rule meets the relevant standards of
Executive Order 12988.
G. Review Under the Unfunded
Mandates Reform Act of 1995
As indicated in the December 2009
NOPR, DOE reviewed the proposed rule
under Title II of the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104–4)
(UMRA), which requires each Federal
agency to assess the effects of their
Federal regulatory actions on State,
local, and Tribal governments and the
private sector. See 74 FR 65852, 65992–
93 (Dec. 11, 2009). 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 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 of the rule 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 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 small
governments. On March 18, 1997, DOE
published a statement of policy on its
process for intergovernmental
consultation under UMRA (62 FR
12820) (also available at https://
www.gc.doe.gov). Although today’s final
rule does not contain a Federal
intergovernmental mandate, it may
impose expenditures of $100 million or
more on the private sector.
DOE has concluded that this final rule
would likely result in a final rule that
could impose expenditures of $100
million or more between 2013 and 2045
in the private sector. For the final rule,
DOE estimated annualized impacts for
the final standards using the results of
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the national impacts analysis. The
national impact analysis results,
expressed as annualized values, range
from $1.55–$2.03 billion (at a 7-percent
discount rate) and $1.90–$2.38 billion
(at a 3-percent discount rate) in total
annualized benefits from the final rule.
The NIA also reports $1.28 billion (at a
7-percent discount rate) and $1.25
billion (at a 3-percent discount rate) in
annualized costs, and $0.27–$0.75
billion (at a 7-percent discount rate) and
$0.65–$1.13 billion (at a 3-percent
discount rate) in annualized net
benefits. Details are provided in chapter
10 of the TSD. Therefore, DOE must
publish a written statement assessing
the costs, benefits, and other effects of
the rule on the national economy.
Section 205 of UMRA also requires
DOE to identify and consider a
reasonable number of regulatory
alternatives before promulgating a rule
for which UMRA requires such a
written statement. DOE must select from
those alternatives the most cost-effective
and least burdensome alternative that
achieves the objectives of the rule,
unless DOE publishes an explanation
for doing otherwise or the selection of
such an alternative is inconsistent with
law.
As required by EPCA (42 U.S.C.
6295(o)), today’s energy conservation
standards for residential water heaters,
direct heating equipment, and pool
heaters would achieve the maximum
improvement in energy efficiency that
DOE has determined to be both
technologically feasible and
economically justified. DOE may not
select a regulatory alternative that does
not meet this statutory standard. A
discussion of the alternatives
considered by DOE is presented in the
‘‘Regulatory Impact Analysis’’ section of
the TSD for this final rule. Also, section
202(c) of UMRA authorizes an agency to
prepare the written statement required
by UMRA in conjunction with or as part
of any other statement or analysis that
accompanies the proposed rule. (2
U.S.C. 1532(c)) The TSD, preamble, and
regulatory impact analysis for today’s
final rule contain a full discussion of the
rule’s costs, benefits, and other effects
on the national economy, and, therefore,
satisfy UMRA’s written statement
requirement.
H. 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. In the
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December 2009 NOPR, DOE tentatively
determined that this rulemaking would
not have any impact on the autonomy
or integrity of the family as an
institution, and, accordingly, that it is
not necessary to prepare a Family
Policymaking Assessment. See 74 FR
65852, 65993 (Dec. 11, 2009). DOE
received no comments concerning
Section 654 in response to the December
2009 NOPR, and, therefore, has
concluded that no further action is
necessary in today’s final rule with
respect to this provision.
I. Review Under Executive Order 12630
DOE tentatively determined under
Executive Order 12630, ‘‘Governmental
Actions and Interference with
Constitutionally Protected Property
Rights,’’ 53 FR 8859 (March 18, 1988),
that this rule would not result in any
takings that might require compensation
under the Fifth Amendment to the U.S.
Constitution. 74 FR 65852, 65993 (Dec.
11, 2009). DOE received no comments
concerning Executive Order 12630 in
response to the December 2009 NOPR,
and, therefore, has concluded that no
further action is necessary in today’s
final rule with respect to this Executive
Order.
J. 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 agencies to review most
disseminations of information to the
public under 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
today’s final rule under the OMB and
DOE guidelines and has concluded that
it is consistent with applicable policies
in those guidelines.
K. 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 the Office of
Information and Regulatory Affairs
(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
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20233
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 determined that today’s rule,
which sets energy conservation
standards for residential water heaters,
direct heating equipment, and pool
heaters, is not a ‘‘significant energy
action’’ within the meaning of Executive
Order 13211, because the 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 of OIRA.
Accordingly, DOE has not prepared a
Statement of Energy Effects.
L. Review Under the Information
Quality Bulletin for Peer Review
In consultation with the Office of
Science and Technology Policy (OSTP),
OMB issued on December 16, 2004, 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 that agency reasonably can
determine will have or does have a clear
and substantial impact on important
public policies or private sector
decisions.’’ 70 FR 2664, 2667 (Jan. 14,
2005).
In response to OMB’s Bulletin, DOE
conducted formal in-progress peer
reviews of the energy conservation
standards development process and
analyses, and has prepared a Peer
Review Report on 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
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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: https://www1.eere.
energy.gov/buildings/appliance_
standards/peer_review.htm.
M. Congressional Notification
As required by 5 U.S.C. 801, DOE will
submit to Congress a report regarding
the issuance of today’s final rule prior
to the effective date set forth at the
outset of this notice. The report will
state that it has been determined that
the rule is a ‘‘major rule’’ as defined by
5 U.S.C. 804(2). DOE also will submit
the supporting analyses to the
Comptroller General in the U.S.
Government Accountability Office
(GAO) and make them available to each
House of Congress.
VIII. Approval of the Office of the
Secretary
Issued in Washington, DC, on March 22,
2010.
Cathy Zoi,
Assistant Secretary, Energy Efficiency and
Renewable Energy.
For the reasons set forth in the
preamble, DOE amends part 430 of
chapter II, subchapter D, of title 10 of
the Code of Federal Regulations, to read
as set forth below:
■
PART 430—ENERGY CONSERVATION
PROGRAM FOR CONSUMER
PRODUCTS
1. The authority citation for part 430
continues to read as follows:
■
Authority: 42 U.S.C. 6291–6309; 28 U.S.C.
2461 note.
2. In § 430.2, add the definitions
‘‘Direct heating equipment’’ and ‘‘Vented
hearth heater,’’ in alphabetical order and
revise the definition ‘‘Vented home
heating equipment,’’ to read as follows:
■
§ 430.2
The Secretary of Energy has approved
publication of today’s final rule.
List of Subjects in 10 CFR Part 430
Administrative practice and
procedure, Confidential business
information, Energy conservation,
Household appliances, Imports,
Intergovernmental relations, Reporting
and recordkeeping requirements, and
Small businesses.
Definitions.
*
*
*
*
*
Direct heating equipment means
vented home heating equipment and
unvented home heating equipment.
*
*
*
*
*
Vented hearth heater means a vented
appliance which simulates a solid fuel
fireplace and is designed to furnish
warm air, with or without duct
connections, to the space in which it is
installed. The circulation of heated
room air may be by gravity or
mechanical means. A vented hearth
heater may be freestanding, recessed,
zero clearance, or a gas fireplace insert
or stove. Those heaters with a maximum
input capacity less than or equal to
9,000 British thermal units per hour
(Btu/h), as measured using DOE’s test
procedure for vented home heating
equipment (10 CFR part 430, subpart B,
appendix O), are considered purely
decorative and are excluded from DOE’s
regulations.
Vented home heating equipment or
vented heater means a class of home
heating equipment, not including
furnaces, designed to furnish warmed
air to the living space of a residence,
directly from the device, without duct
connections (except that boots not to
exceed 10 inches beyond the casing may
be permitted and except for vented
hearth heaters, which may be with or
without duct connections) and includes:
vented wall furnace, vented floor
furnace, vented room heater, and vented
hearth heater.
*
*
*
*
*
3. In § 430.32, revise paragraphs (d),
(i), (k) to read as follows:
■
§ 430.32 Energy and water conservation
standards and their effective dates.
*
*
*
*
*
(d) Water heaters. The energy factor of
water heaters shall not be less than the
following for products manufactured on
or after the indicated dates.
Product class
Energy factor as of January 20,
2004
Energy factor as of April 16, 2015
Gas-fired Water Heater ...................
0.67¥(0.0019 × Rated Storage
Volume in gallons).
Oil-fired Water Heater .....................
0.59¥(0.0019 × Rated Storage
Volume in gallons).
0.97¥(0.00132 × Rated Storage
Volume in gallons).
For tanks with a Rated Storage Volume at or below 55 gallons: EF =
0.675¥(0.0015 × Rated Storage Volume in gallons).
For tanks with a Rated Storage Volume above 55 gallons:
EF = 0.8012¥(0.00078 × Rated Storage Volume in gallons).
EF = 0.68¥(0.0019 × Rated Storage Volume in gallons).
Electric Water Heater ......................
Tabletop Water Heater ....................
Instantaneous
Gas-fired
Water
Heater.
Instantaneous Electric Water Heater.
0.93¥(0.00132 × Rated Storage
Volume in gallons).
0.62¥(0.0019 × Rated Storage
Volume in gallons).
0.93¥(0.00132 × Rated Storage
Volume in gallons).
For tanks with a Rated Storage Volume at or below 55 gallons: EF =
0.960¥(0.0003 × Rated Storage Volume in gallons).
For tanks with a Rated Storage Volume above 55 gallons:
EF = 2.057¥(0.00113 × Rated Storage Volume in gallons).
EF = 0.93¥(0.00132 × Rated Storage Volume in gallons).
EF = 0.82¥(0.0019 × Rated Storage Volume in gallons).
EF = 0.93¥(0.00132 × Rated Storage Volume in gallons).
Note: The Rated Storage Volume equals the water storage capacity of a water heater, in gallons, as specified by the manufacturer.
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*
*
*
*
*
(i) Direct heating equipment. (1)
Vented home heating equipment
manufactured on or after January 1,
1990 and before April 16, 2013, shall
have an annual fuel utilization
efficiency no less than:
Annual fuel utilization efficiency, Jan. 1, 1990
(percent)
Product class
1. Gas wall fan type up to 42,000 Btu/h .............................................................................................................................
2. Gas wall fan type over 42,000 Btu/h ...............................................................................................................................
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Annual fuel utilization efficiency, Jan. 1, 1990
(percent)
Product class
3. Gas wall gravity type up to 10,000 Btu/h ........................................................................................................................
4. Gas wall gravity type over 10,000 Btu/h up to 12, 000 Btu/h .........................................................................................
5. Gas wall gravity type over 12,000 Btu/h up to 15,000 Btu/h ..........................................................................................
6. Gas wall gravity type over 15,000 Btu/h up to 19,000 Btu/h ..........................................................................................
7. Gas wall gravity type over 19,000 Btu/h and up to 27,000 Btu/h ...................................................................................
8. Gas wall gravity type over 27,000 Btu/h and up to 46,000 Btu/h ...................................................................................
9. Gas wall gravity type over 46,000 Btu/h .........................................................................................................................
10. Gas floor up to 37,000 Btu/h .........................................................................................................................................
11. Gas floor over 37,000 Btu/h ..........................................................................................................................................
12. Gas room up to 18,000 Btu/h ........................................................................................................................................
13. Gas room over 18,000 Btu/h up to 20,000 Btu/h ..........................................................................................................
14. Gas room over 20,000 Btu/h up to 27,000 Btu/h ..........................................................................................................
15. Gas room over 27,000 Btu/h up to 46,000 Btu/h ..........................................................................................................
16. Gas room over 46,000 Btu/h .........................................................................................................................................
(2) Vented home heating equipment
manufactured on or after April 16, 2013,
Annual fuel utilization efficiency, April 16, 2013
(percent)
1. Gas wall fan type up to 42,000 Btu/h .............................................................................................................................
2. Gas wall fan type over 42,000 Btu/h ...............................................................................................................................
3. Gas wall gravity type up to 27,000 Btu/h ........................................................................................................................
4. Gas wall gravity type over 27,000 Btu/h up to 46,000 Btu/h ..........................................................................................
5. Gas wall gravity type over 46,000 Btu/h .........................................................................................................................
6. Gas floor up to 37,000 Btu/h ...........................................................................................................................................
7. Gas floor over 37,000 Btu/h ............................................................................................................................................
8. Gas room up to 20,000 Btu/h ..........................................................................................................................................
9. Gas room over 20,000 Btu/h up to 27,000 Btu/h ............................................................................................................
10. Gas room over 27,000 Btu/h up to 46,000 Btu/h ..........................................................................................................
11. Gas room over 46,000 Btu/h .........................................................................................................................................
12. Gas hearth up to 20,000 Btu/h ......................................................................................................................................
13. Gas hearth over 20,000 Btu/h and up to 27,000 Btu/h ................................................................................................
14. Gas hearth over 27,000 Btu/h and up to 46,000 Btu/h ................................................................................................
15. Gas hearth over 46,000 Btu/h .......................................................................................................................................
*
*
*
*
(k) Pool heaters. (1) Gas-fired pool
heaters manufactured on or after
January 1, 1990 and before April 16,
2013, shall have a thermal efficiency not
less than 78%.
(2) Gas-fired pool heaters
manufactured on or after April 16, 2013,
shall have a thermal efficiency not less
than 82%.
*
*
*
*
*
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Appendix
[The following letter from the Department
of Justice will not appear in the Code of
Federal Regulations.]
DEPARTMENT OF JUSTICE, Antitrust
Division
CHRISTINE A. VARNEY, Assistant Attorney
General, Main Justice Building, 950
Pennsylvania Avenue, N.W., Washington,
D.C 20530–0001, (202) 514–2401/(202)
616–2645 (Fax) E-mail:
antItrust.atr@usdoj.gov, Web site: https://
www.usdoj.gov/atr
February 12, 2010
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60
61
62
63
64
65
56
57
57
58
63
64
65
shall have an annual fuel utilization
efficiency no less than:
Product class
*
20235
Robert H. Edwards, Jr., Deputy General
Counsel for Energy Policy, Department of
Energy, Washington, DC 20585
Dear Deputy General Counsel Edwards:
I am responding to your letter seeking the
views of the Attorney General about the
potential impact on competition of proposed
energy conservation standards for residential
water heaters, direct heating equipment and
pool heaters (collectively, residential heating
products). Your request was submitted
pursuant to Section 325(0)(2)(B)(i)(V) of the
Energy Policy and Conservation Act, as
amended, (‘‘EPCA’’), 42 U.S.C.
§ 6295(0)(B)(i)(V), which requires the
Attorney General to make a determination of
the impact of any lessening of competition
that is likely to result from the imposition of
proposed energy conservation standards. The
Attorney General’s responsibility for
responding to requests from other
departments about the effect of a program on
competition has been delegated to the
Assistant Attorney General for the Antitrust
Division in 28 CFR § 0.40(g).
In conducting its analysis, the Antitrust
Division examines whether a proposed
standard may lessen competition, for
example, by substantially limiting consumer
choice, leaving consumers with fewer
competitive alternatives, placing certain
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76
65
66
67
57
58
61
66
67
68
61
66
67
68
manufacturers of a product at an unjustified
competitive disadvantage compared to other
manufacturers, or by inducing avoidable
inefficiencies in production or distribution of
particular products.
We have reviewed the proposed standards
contained in the Notice of Proposed
Rulemaking (‘‘NOPR’’) (74 Fed. Reg. 65852,
December 11, 2009) and the supplementary
information submitted to the Attorney
General, and attended the January 7, 2010
public hearing on the proposed standards.
Based on this review, the Department of
Justice does not believe that the proposed
standard for residential hot water heaters or
pool heaters would likely lead to a lessening
of competition. Our review has focused upon
the standards DOE has proposed adopting;
we have not determined the impact on
competition of more stringent standards than
those proposed in the NOPR.
With respect to direct heating equipment
(DHE), the Department does not see any
competitive issue with gas hearth-heaters.
The Department, however, is concerned that
the proposed efficiency standards could
adversely affect competition in the
traditional DHE product categories: (1)
gravity wall furnaces; (2) fan-forced wall
furnaces; (3) floor furnaces; and (4) room
heaters.
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Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules and Regulations
jlentini on DSKJ8SOYB1PROD with RULES2
The Department notes that essentially only
three manufacturers currently market
products for each of these four traditional
DHE categories. It appears from the record
that meeting the proposed standards may
require the manufacturers, even those
currently producing models that meet the
proposed standards, to make a substantial
capital investment to convert or expand their
production facilities. It also appears that each
manufacturer will have to commit significant
resources for research and development.
VerDate Nov<24>2008
19:13 Apr 15, 2010
Jkt 220001
Based on our review, the proposed
efficiency standards could affect competition
by limiting the number of competitors in
each category. Given the capital investments
and research and development costs required
to produce products meeting the standards,
there is a significant risk that no more than
one or two DHE manufacturers will choose
to continue to produce products in anyone
DHE category.
Although the Department of Justice is not
in a position to judge whether manufacturers
PO 00000
Frm 00126
Fmt 4701
Sfmt 9990
will be able to meet—or choose to make the
capital expenditures to meet—the proposed
standards, we ask the Department of Energy
to take into account the possible impact on
competition in determining its final energy
efficiency standards for DHE.
Sincerely,
Christine A. Varney
[FR Doc. 2010–7611 Filed 4–15–10; 8:45 am]
BILLING CODE 6450–01–P
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[Federal Register Volume 75, Number 73 (Friday, April 16, 2010)]
[Rules and Regulations]
[Pages 20112-20236]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-7611]
[[Page 20111]]
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Part III
Department of Energy
-----------------------------------------------------------------------
10 CFR Part 430
Energy Conservation Program: Energy Conservation Standards for
Residential Water Heaters, Direct Heating Equipment, and Pool Heaters;
Final Rule
Federal Register / Vol. 75, No. 73 / Friday, April 16, 2010 / Rules
and Regulations
[[Page 20112]]
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DEPARTMENT OF ENERGY
10 CFR Part 430
[Docket Number EE-2006-BT-STD-0129]
RIN 1904-AA90
Energy Conservation Program: Energy Conservation Standards for
Residential Water Heaters, Direct Heating Equipment, and Pool Heaters
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Department of Energy (DOE) is amending the existing
energy conservation standards for residential water heaters (other than
tabletop and electric instantaneous models), gas-fired direct heating
equipment, and gas-fired pool heaters. It has determined that the
amended energy conservation standards for these products would result
in significant conservation of energy, and are technologically feasible
and economically justified.
DATES: The effective date of this rule is June 15, 2010. Compliance
with the amended standards established for residential water heaters in
today's final rule is required starting on April 16, 2015, and
compliance with the standards established for DHE and pool heaters is
required starting on April 16, 2013.
ADDRESSES: For access to the docket to read background documents, the
technical support document, transcripts of the public meetings in this
proceeding, or comments received, visit the U.S. Department of Energy,
Resource Room of the Building Technologies Program, 950 L'Enfant Plaza,
SW., 6th Floor, Washington, DC 20024, (202) 586-2945, between 9 a.m.
and 4 p.m., Monday through Friday, except Federal holidays. Please call
Ms. Brenda Edwards at the above telephone number for additional
information regarding visiting the Resource Room. You may also obtain
copies of certain previous rulemaking documents in this proceeding
(i.e., framework document, notice of public meeting and announcement of
a preliminary technical support document (TSD), notice of proposed
rulemaking), draft analyses, public meeting materials, and related test
procedure documents from the Office of Energy Efficiency and Renewable
Energy's Web site at: https://www1.eere.energy.gov/buildings/appliance_standards/residential/waterheaters.html.
FOR FURTHER INFORMATION CONTACT: Mr. Mohammed Khan, U.S. Department of
Energy, Energy Efficiency and Renewable Energy, Building Technologies
Program, EE-2J, 1000 Independence Avenue, SW., Washington, DC 20585-
0121. Telephone: (202) 586-7892. E-mail: Mohammed.Khan@ee.doe.gov.
Mr. Eric Stas, U.S. Department of Energy, Office of the General
Counsel, GC-71, 1000 Independence Avenue, SW., Washington, DC 20585-
0121. Telephone: (202) 586-9507. E-mail: Eric.Stas@hq.doe.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Summary of the Final Rule and Its Benefits
A. The Energy Conservation Standard Levels
B. Benefits and Costs to Purchasers of the Three Heating
Products
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
C. Impact on Manufacturers
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
D. National Benefits
E. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for the Three Heating
Products
III. General Discussion
A. Test Procedures
B. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
C. Energy Savings
D. Economic Justification
1. Specific Criteria
a. Economic Impact on Consumers and Manufacturers
b. Life-Cycle Costs
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need of the Nation To Conserve Energy
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Comments on Methodology
A. Market and Technology Assessment
1. DOE's Determinations as to the Inclusion of Products in This
Rulemaking
a. Whether Certain Products Are Covered Under the Act
b. Covered Products Not Included in This Rulemaking
2. Product Classes
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
B. Screening Analysis
1. Comments on the Screening Analysis
2. Heat Pump Water Heater and Condensing Gas-Fired Storage Water
Heater Discussion
a. Condensing Gas-Fired Water Heaters
b. Heat Pump Water Heaters
C. Engineering Analysis
1. Representative Products for Analysis
2. Efficiency Levels Analyzed
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
3. Cost Assessment Methodology
a. Manufacturer Production Cost
b. Manufacturer Selling Price
4. Engineering Analysis Results
5. Scaling to Additional Rated Storage Capacities
6. Water Heater Energy Efficiency Equations
D. Markups To Determine Product Price
E. Energy Use Characterization
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
F. Life-Cycle Cost and Payback Period Analyses
1. Product Price
2. Installation Cost
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
3. Annual Energy Use
4. Energy Prices
5. Energy Price Trend
6. Repair and Maintenance Costs
7. Product Lifetime
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
8. Discount Rates
9. Compliance Date
10. Product Energy Efficiency in the Base Case
11. Inputs to Payback Period Analysis
G. National Impact Analysis--National Energy Savings and Net
Present Value Analysis
1. General
2. Shipments
a. Water Heaters
b. Direct Heating Equipment
c. Pool Heaters
d. Impact of Standards on Shipments
3. Base-Case and Standards-Case Efficiency Distributions
4. National Energy Savings
a. Annual Unit Energy Consumption
b. Site-to-Source Energy Conversion
5. Consumer Net Present Value
a. Increased Total Installed Costs and Operating Cost Savings
b. Discount Rates
H. Consumer Subgroup Analysis
I. Manufacturer Impact Analysis
1. Water Heater Conversion Costs
2. Manufacturer Markups and Markup Scenarios
3. Pool Heater Conversion Costs
4. Employment
5. Access to Capital
J. Employment Impact Analysis
K. Utility Impact Analysis
1. Effects of Standards on Energy Prices and Associated Benefits
L. Environmental Assessment
M. Monetizing Carbon Dioxide and Other Emissions Impacts
[[Page 20113]]
1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Social Cost of Carbon Values Used in Past Regulatory Analyses
c. Approach and Key Assumptions
2. Monetary Values of Non-Carbon Emissions
V. Discussion of Other Comments
A. Trial Standard Levels and Proposed Standards
1. Water Heaters
2. Direct Heating Equipment
3. Pool Heaters
B. Compliance Date of Amended Standards
VI. Analytical Results and Conclusions
A. Trial Standard Levels
1. Water Heaters
2. Direct Heating Equipment
3. Gas-Fired Pool Heaters
B. Significance of Energy Savings
C. Economic Justification
1. Economic Impact on Consumers
a. Life-Cycle Costs and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impact on Manufacturers
a. Cash-Flow Analysis Results for Water Heaters
b. Cash-Flow Analysis Results for Direct Heating Equipment
c. Cash-Flow Analysis Results for Pool Heaters
d. Impacts on Employment
e. Impacts on Manufacturing Capacity
f. Cumulative Regulatory Burden
g. Impacts on Manufacturers That Are Small Businesses
3. National Net Present Value of Consumer Costs and Benefits and
National Employment Impacts
4. Impact on Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
D. Conclusion
1. Overview
2. Water Heaters
3. Direct Heating Equipment
4. Pool Heaters
VII. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act of 1995
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VIII. Approval of the Office of the Secretary
I. Summary of the Final Rule and Its Benefits
A. The Energy Conservation Standard Levels
The Energy Policy and Conservation Act, as amended (42 U.S.C. 6291
et seq.; EPCA or the Act), provides that any new or amended energy
conservation standard the Department of Energy (DOE) prescribes for
covered consumer products, including residential water heaters, direct
heating equipment (DHE), and pool heaters (collectively referred to in
this document as the ``three heating products'') must be designed to
``achieve the maximum improvement in energy efficiency * * * which the
Secretary [of Energy] determines is technologically feasible and
economically justified.'' (42 U.S.C. 6295(o)(2)(A)) Furthermore, the
new or amended standard must ``result in significant conservation of
energy.'' (42 U.S.C. 6295(o)(3)(B)) The standards in today's final
rule, which apply to certain types of the three heating products,
satisfy these requirements.
Table I.1 shows the standard levels DOE is adopting today. These
standards will apply to the types of the three heating products listed
in the table and manufactured for sale in the United States, or
imported into the United States, on or after April 16, 2015 in the case
of water heaters, or on or after April 15, 2013 in the case of direct
heating equipment and pool heaters.
Table I.1--Amended Energy Conservation Standards for Residential Water
Heaters, Direct Heating Equipment, and Pool Heaters
------------------------------------------------------------------------
------------------------------------------------------------------------
Product class Standard level
------------------------------------------------------------------------
Residential water heaters*
------------------------------------------------------------------------
Gas-fired Storage........... For tanks with a For tanks with a
Rated Storage Rated Storage
Volume at or below Volume above 55
55 gallons: gallons:
EF = 0.675-(0.0015 x EF = 0.8012-(0.00078
Rated Storage x Rated Storage
Volume in gallons). Volume in gallons).
Electric Storage............ For tanks with a For tanks with a
Rated Storage Rated Storage
Volume at or below Volume above 55
55 gallons: gallons:
EF = 0.960-(0.0003 x EF = 2.057-(0.00113
Rated Storage x Rated Storage
Volume in gallons). Volume in gallons)
.
Oil-fired Storage........... EF = 0.68-(0.0019 x Rated Storage Volume
in gallons).
Gas-fired Instantaneous..... EF = 0.82-(0.0019 x Rated Storage Volume
in gallons).
------------------------------------------------------------------------
Product class Standard level
------------------------------------------------------------------------
Direct heating equipment**
------------------------------------------------------------------------
Gas wall fan type up to 42,000 AFUE = 75%
Btu/h.
Gas wall fan type over 42,000 Btu/ AFUE = 76%
h.
Gas wall gravity type up to AFUE = 65%
27,000 Btu/h.
Gas wall gravity type over 27,000 AFUE = 66%
Btu/h up to 46,000 Btu/h.
Gas wall gravity type over 46,000 AFUE = 67%
Btu/h.
Gas floor up to 37,000 Btu/h..... AFUE = 57%
Gas floor over 37,000 Btu/h...... AFUE = 58%
Gas room up to 20,000 Btu/h...... AFUE = 61%
Gas room over 20,000 Btu/h up to AFUE = 66%
27,000 Btu/h.
Gas room over 27,000 Btu/h up to AFUE = 67%
46,000 Btu/h.
Gas room over 46,000 Btu/h....... AFUE = 68%
Gas hearth up to 20,000 Btu/h.... AFUE = 61%
Gas hearth over 20,000 Btu/h and AFUE = 66%
up to 27,000 Btu/h.
[[Page 20114]]
Gas hearth over 27,000 Btu/h and AFUE = 67%
up to 46,000 Btu/h.
Gas hearth over 46,000 Btu/h..... AFUE = 68%
------------------------------------------------------------------------
Pool heaters
------------------------------------------------------------------------
Gas-fired........................ Thermal Efficiency = 82%
------------------------------------------------------------------------
* EF is the ``energy factor,'' and the ``Rated Storage Volume'' equals
the water storage capacity of a water heater (in gallons), as
specified by the manufacturer.
** Btu/h is ``British thermal units per hour,'' and AFUE is ``Annual
Fuel Utilization Efficiency.''
B. Benefits and Costs to Purchasers of the Three Heating Products
1. Water Heaters
Table I.2 presents the implications of today's standards for
consumers of residential water heaters. The economic impacts of the
standards on consumers, as measured by the average life-cycle cost
(LCC) savings, are positive, even though the standards may increase
some initial costs. For example, a typical gas storage water heater has
an average installed price of $1,079 and average lifetime operating
costs (discounted) of $2,473. To meet the amended standards, DOE
estimates that the average installed price of such equipment will
increase by $120, which will be offset by savings of $143 in average
lifetime operating costs (discounted).
Table I.2--Implications of Standards for Purchasers of Residential Water Heaters
----------------------------------------------------------------------------------------------------------------
Average Average
Energy baseline installed Average life- Median payback
Product class conservation installed price increase cycle cost period years
standard EF * price** $ $ savings*** $
----------------------------------------------------------------------------------------------------------------
Gas-Fired Storage Water Heater 0.62 (40 $1,072 $92 $6 2.0
gallons).
0.76 (56 1,261 805 77 9.8
gallons).
Weighted........ 1,079 120 18 2.3
Electric Storage Water Heater. 0.95 (50 554 140 10 6.9
gallons).
2.0 (56 gallons) 729 974 626 6.0
Weighted........ 569 213 64 6.8
Oil-Fired Storage Water Heater 0.62 (32 1,974 67 295 0.5
gallons).
Gas-Fired Instantaneous Water 0.82 (0 gallons) 1,779 601 6 14.8
Heater.
----------------------------------------------------------------------------------------------------------------
* The values are for the representative storage volumes (40 gallons for gas-fired storage water heaters, 50
gallons for electric storage water heaters, 32 gallons for oil-fired storage water heaters, and 0 gallons for
gas-fired instantaneous water heaters). The standard level is represented by an energy-efficiency equation,
which specifies an EF level over the entire storage volume range.
** For a baseline model.
*** The average life-cycle cost savings refers to the average savings in the discounted life-cycle costs of
owning and operating the product due to the standard. This value represents the net benefit (or cost) of a
more-efficient product after considering both the increased installed price and the lifetime operating cost
savings.
2. Direct Heating Equipment
Table I.3 presents the implications of today's standards for
consumers of direct heating equipment. The economic impacts of the
standards on consumers, as measured by the average LCC savings, are
positive, even though the standards may increase some initial costs.
For example, a typical gas wall fan DHE has an average installed price
of $1,832 and average lifetime operating costs (discounted) of $5,544.
To meet the amended standards, DOE estimates that the average installed
price of such equipment will increase by $81, which will be more than
offset by savings of $249 in average lifetime operating costs
(discounted).
Table I.3--Implications of Standards for Purchasers of Direct Heating Equipment at the Representative Rated
Input Capacity Range
----------------------------------------------------------------------------------------------------------------
Energy Average Average
conservation baseline installed Average life- Median payback
Product class standard* AFUE installed price increase cycle cost period Years
(%) price** $ $ savings*** $
----------------------------------------------------------------------------------------------------------------
Gas Wall Fan.................... 76 $1,832 $81 $102 3.2
Gas Wall Gravity................ 66 1,433 61 21 7.5
Gas Floor....................... 58 2,209 54 13 10.7
Gas Room........................ 67 1,208 83 60 4.5
Gas Hearth...................... 67 1,603 82 112 0.0
----------------------------------------------------------------------------------------------------------------
* The values are for the representative input capacity ranges (>42,000 Btu/h for wall fan, >27,000 Btu/h and
<=46,000 Btu/h for wall gravity, >37,000 Btu/h for floor, >27,000 Btu/h and <=46,000 Btu/h for room, and
>27,000 Btu/h and <=46,000 Btu/h for hearth). The standard levels vary by input capacity range.
** For a baseline model.
*** The average life-cycle cost savings refers to the average savings in the discounted life-cycle costs of
owning and operating the product due to the standard. This value represents the net benefit (or cost) of a
more-efficient product after considering both the increased installed price and the lifetime operating cost
savings.
[[Page 20115]]
3. Pool Heaters
Table I.4 presents the implications of today's standards for
consumers of pool heaters. The economic impacts of the standards on
consumers, as measured by the average LCC savings, are positive, even
though the standards may increase some initial costs. For example, a
typical pool heater has an average installed price of $3,240 and
average lifetime operating costs (discounted) of $5,099. To meet the
amended standards, DOE estimates that the average installed price of
such equipment will increase by $103, which will be offset by savings
of $226 in average lifetime operating costs (discounted).
Table I.4--Implications of Standards for Purchasers of Pool Heaters at 250,000 Btu/h
----------------------------------------------------------------------------------------------------------------
Energy
conservation Average Average Average life-
Product class standard* baseline installed cycle cost Median payback
Thermal installed price increase savings*** $ period Years
Efficiency (%) price** $ $
----------------------------------------------------------------------------------------------------------------
Gas-fired....................... 82 $3,240 $103 $22 8.6
----------------------------------------------------------------------------------------------------------------
* The values are for the representative input capacity of 250,000 Btu/h.
** For a baseline model.
*** The average life-cycle cost savings refers to the average savings in the discounted life-cycle costs of
owning and operating the product due to the standard. This value represents the net benefit (or cost) of a
more-efficient product after considering both the increased installed price and the lifetime operating cost
savings.
C. Impact on Manufacturers
1. Water Heaters
Using a real corporate discount rate of 8.9 percent for gas-fired
and electric storage water heaters, 7.6 percent for oil-fired storage
water heaters, and 9.5 percent for gas-fired instantaneous water
heaters, which DOE calculated by examining the financial statements of
residential water heater manufacturers, DOE estimates the industry net
present value (INPV) of the manufacturing industry to be $880 million
for gas-fired and electric storage water heaters, $9 million for oil-
fired storage water heaters, and $648 million for gas-fired
instantaneous water heaters (all figures in 2009$). DOE expects the
impact of the standards on the INPV of manufacturers of gas-fired and
electric storage water heaters to range from a loss of 2.9 percent to a
loss of 13.9 percent (a loss of $25.9 million to a loss of $122.6
million). DOE expects the impact of the standards on the INPV of
manufacturers of oil-fired storage water heaters to range from a loss
of 2.0 percent to a loss of 4.2 percent (a loss of $0.2 million to a
loss of $0.4 million). DOE expects the impact of the standards on the
INPV of manufacturers of gas-fired instantaneous water heaters to range
from an increase of 0.4 percent to a loss of 0.2 percent (an increase
of $2.3 million to a loss of $1.2 million). Based on DOE's interviews
with the major manufacturers of residential water heaters, DOE expects
minimal plant closings or loss of employment as a result of the
standards. At the amended standard level, DOE does not expect
significant impacts on competition in the overall water heater market.
For gas-fired and electric storage water heaters, DOE believes there
are primarily three major manufacturers who have established market
positions. In addition, DOE believes there is another major appliance
manufacturer with significant resources that has recently announced
intentions to scale its efforts in the water heating market. For oil-
fired storage water heaters and gas-fired instantaneous water heaters,
DOE believes the standards-case market can at least sustain the base-
case level of competition.
2. Direct Heating Equipment
Using a real corporate discount rate of 8.5 percent, which DOE
calculated by examining the financial statements of direct heating
equipment manufacturers, DOE estimates the INPV of the manufacturing
industry to be $17 million for traditional direct heating equipment and
$77 million for hearth direct heating equipment (both figures in
2009$). DOE expects the impact of the standards on the INPV of
manufacturers of traditional direct heating equipment to range from a
loss of 7.2 percent to a loss of 23.6 percent (a loss of $1.2 million
to a loss of $3.9 million). DOE expects the impact of the standards on
the INPV of manufacturers of hearth direct heating equipment to range
from a loss of 0.3 percent to a loss of 1.2 percent (a loss of $0.2
million to a loss of $0.9 million). Based on DOE's interviews with the
major manufacturers of both traditional and hearth direct heating
equipment, DOE expects minimal plant closings or loss of employment as
a result of the standards. DOE believes the impact of the amended
standards on competition in the traditional and hearth DHE market will
not be significant because small manufacturers will be able to upgrade
enough product lines to meet the standard, which in combination with
product lines that currently meet the standard, will enable them to
remain viable competitors.
3. Pool Heaters
Using a real corporate discount rate of 7.4 percent, which DOE
calculated by examining the financial statements of pool heater
manufacturers, DOE estimates the INPV of the manufacturing industry to
be $49 million for gas-fired pool heaters (figures in 2009$). DOE
expects the impact of the standards on the INPV of manufacturers of
gas-fired pool heaters to range from an increase of 0.5 percent to a
loss of 1.7 percent (an increase of $0.3 million to a loss of $0.8
million). Based on DOE's interviews with the major manufacturers of
pool heaters, DOE expects minimal plant closings or loss of employment
as a result of the standards. DOE does not believe there will be any
lessening of competition in the pool heater market as a result of the
standards established by today's final rule, because all of the
manufacturers already offer at least one product line that meets or
exceeds the standard level promulgated by today's final rule.
D. National Benefits
DOE estimates the standards will save approximately 2.81 quads
(quadrillion or 10\15\) British thermal units (Btu) of energy over a
30-year period: 2.58 quads for residential water heaters during 2015-
2045, and 0.21 and 0.02 quads for DHE and pool heaters, respectively,
during 2013-2043. The total of 2.81 quads is equivalent to all the
energy consumed by nearly 15 million American households in a single
year. By 2045, DOE expects the energy savings from today's standards to
eliminate the need for approximately three new 250 MW power plants.
These energy savings will result in cumulative greenhouse gas
emission
[[Page 20116]]
reductions of approximately 164 million tons (Mt) of carbon dioxide
(CO2), or an amount equal to that produced by approximately
46 million cars every year. Additionally, the standards will help
alleviate air pollution by resulting in cumulative emissions reductions
of approximately 125 kilotons (kt) for nitrogen oxides (NOX)
and 0.54 tons for power plant mercury (Hg).
The estimated monetary value of the cumulative CO2
emissions reductions, based on a range of values from a recent
interagency process, is $560 to $8,725 million. The estimated monetary
value of the cumulative CO2 emissions reductions, based on
the central value from the interagency process, is $2,861 million. The
estimated net present monetary value of the other emissions reductions
(discounted to 2010 using a 7-percent discount rate and expressed in
2009$) is $12.2 to 125 million for NOX. At a 3-percent
discount rate, the estimated net present value of these emissions
reductions is $27.2 to 284 million for NOX.
The national NPV of consumer benefit of today's standards is $1.98
billion using a 7-percent discount rate and $10.11 billion using a 3-
percent discount rate, cumulative from 2013 to 2043 for DHE and pool
heaters, and from 2015 to 2045 for water heaters, in 2009$. This is the
estimated present value of future operating cost savings minus the
estimated increased costs of purchasing and installing the three types
of heating products, discounted to 2010.
The benefits and costs of today's rule can also be expressed in
terms of annualized values from 2013 to 2043 for DHE and pool heaters,
and from 2015 to 2045 for water heaters. Estimates of annualized values
for the three types of heating products are shown in Table I.5, Table
I.6, and Table I.7. The annualized monetary benefits are the sum of the
annualized national economic value of operating cost savings (energy,
maintenance, and repair), expressed in 2009$, plus the monetary value
of the benefits of CO2 and NOX emission
reductions. For the value of CO2 emission reductions, DOE
uses the global Social Cost of Carbon (SCC) calculated using the
average value derived using a 3-percent discount rate (equivalent to
$21.40 per metric ton of CO2 emitted in 2010, in 2007$).
This value is a central value from a recent interagency process. The
derivation of this value is discussed in section IV.M. The monetary
benefits of cumulative emissions reductions are reported in 2009$ so
that they can be compared with the other costs and benefits in the same
dollar units.
Although the above consideration of benefits provides a valuable
perspective, please note the following: (1) The national operating cost
savings are domestic U.S. consumer monetary savings found in market
transactions, while the value of CO2 reductions is based on
a global value. Also, note that the central value is only one of four
SCC developed by the interagency workgroup. Other marginal SCC values
for 2010 are $4.70, $35.10, and $64.90 per metric ton (2007$ for
emissions in 2010), which reflect different discount rates and, for the
highest value, the possibility of higher-than-expected impacts further
out in the tails of the SCC distribution. (2) The assessments of
operating cost savings and CO2 savings are performed with
different computer models, leading to different time frames for
analysis. The national operating cost savings is measured for the
lifetime of heating products shipped in the period 2013-2043 (for DHE
and pool heaters) or 2015-2045 (for water heaters). The value of
CO2, on the other hand, reflects the present value of all
future climate-related impacts (out to 2300) due to emitting a ton of
carbon dioxide in each year of the forecast period.
Using a 7-percent discount rate and the central SCC value, the
combined cost of the standards adopted in today's final rule for
heating products is $1,285 million per year in increased equipment and
installation costs, while the annualized benefits are $1,500 million
per year in reduced equipment operating costs, $169 million in
CO2 reductions, and $7.7 million in reduced NOX
emissions. At a 7-percent discount rate, the net benefit amounts to
$391 million per year. Using a 3-percent discount rate and the central
SCC value, the cost of the standards adopted in today's rule is $1,249
million per year in increased equipment and installation costs, while
the benefits of today's standards are $1,843 million per year in
reduced operating costs, $169 million in CO2 reductions, and
$9.2 million in reduced NOX emissions. At a 3-percent
discount rate, the net benefit amounts to $771 million per year.
Table I.5--Annualized Benefits and Costs for Water Heaters (TSL 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary estimate Low estimate High estimate -----------------------------------------------------------
Category (AEO reference (low energy (high energy Period covered
case) price case) price case) Year dollars Disc. rate (2015-2045)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Energy Annualized Monetized (millions$/ 1407.0 1275.5 1537.5 2009 7% 30
year).
1729.6 1556.1 1902.9 2009 3% 30
CO2 Monetized Value (at $4.7/Metric 43.5 43.5 43.5 2009 5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/Metric 158.6 158.6 158.6 2009 3% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/Metric 245.7 245.7 245.7 2009 2.5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/Metric 483.8 483.8 483.8 2009 3% 30
Ton, millions$/year)*.
NOx Monetized Value (at $2,437/Metric 7.0 7.0 7.0 2009 7% 30
Ton, millions$/year).
8.5 8.5 8.5 2009 3% 30
Total Monetary Benefits (millions$/ 1457.5-1897.8 1326-1766.3 1588-2028.3 2009 7% range 30
year)**.
1572.7 1441.1 1703.2 2009 7% ..............
1896.7 1723.2 2070.0 2009 3% ..............
[[Page 20117]]
1781.5-2221.8 1608-2048.3 1954.9-2395.2 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized (millions$/year). 1250.3 1184.5 1321.6 2009 7% 30
1216.6 1145.7 1295.6 2009 3% 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized, including CO2 207.2-647.5 141.5-581.8 266.4-706.7 2009 7% range 30
Benefits (million$/year)**.
322.4 256.6 381.5 2009 7% 30
680.1 577.5 774.4 2009 3% 30
565-1005.3 462.3-902.6 659.3-1099.6 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7, $21.4, and
$35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $64.9 per ton
represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate
(averaged across three Integrated Assessment Models (IAMs)), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ``7% Range'' and ``3%
Range'' calculate consumer and NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value
at the low end, and the $64.9/ton value at the high end.
Table I.6--Annualized Benefits and Costs for Direct Heating Equipment
[TSL 2]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary estimate Low estimate High estimate -----------------------------------------------------------
Category (AEO reference (low energy (high energy Period
case) price case) price case) Year dollars Disc. rate covered (2013-
2043)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Energy Annualized Monetized (millions$/ 82.2 78.8 84.6 2009 7% 30
year).
100.6 96.3 103.6 2009 3% 30
CO2 Monetized Value (at $4.7/Metric 2.5 2.5 2.5 2009 5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/Metric 9.2 9.2 9.2 2009 3% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/Metric 14.3 14.3 14.3 2009 2.5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/Metric 28.1 28.1 28.1 2009 3% 30
Ton, millions$/year)*.
NOX Monetized Value (at $2,437/Metric 0.6 0.6 0.6 2009 7% 30
Ton, millions$/year).
0.6 0.6 0.6 2009 3% 30
Total Monetary Benefits (millions$/ 85.2-110.8 81.8-107.4 87.7-113.2 2009 7% range 30
year)**.
91.9 88.5 94.4 2009 7% ..............
110.4 106.2 113.4 2009 3% ..............
103.7-129.3 99.5-125 106.7-132.3 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized (millions$/year). 27.7 27.7 27.7 2009 7% 30
26.0 26.0 26.0 2009 3% 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized, including CO2 57.6-83.1 54.1-79.7 60-85.6 2009 7% range 30
Benefits (millions$/year)**.
64.3 60.8 66.7 2009 7% 30
84.4 80.1 87.4 2009 3% 30
[[Page 20118]]
77.7-103.2 73.4-99 80.7-106.3 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7, $21.4, and
$35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $64.9 per ton
represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate
(averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ``7% Range'' and ``3% Range'' calculate consumer and
NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value at the low end, and the $64.9/
ton value at the high end.
Table I.7--Annualized Benefits and Costs for Pool Heaters
[TSL 2]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Units
Primary Low estimate High estimate -----------------------------------------------------------
Category estimate (AEO (low energy (high energy Period
reference case) price case) price case) Year dollars Disc. rate covered (2013-
2043)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Energy Annualized Monetized (millions$/ 10.6 10.1 10.9 2009 7% 30
year).
12.5 12.0 12.9 2009 3% 30
CO2 Monetized Value (at $4.7/Metric 0.2 0.2 0.2 2009 5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/Metric 0.8 0.8 0.8 2009 3% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/Metric 1.3 1.3 1.3 2009 2.5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/Metric 2.4 2.4 2.4 2009 3% 30
Ton, millions$/year)*.
NOX Monetized Value (at $2,437/Metric 0.1 0.1 0.1 2009 7% 30
Ton, millions$/year).
0.1 0.1 0.1 2009 3% 30
Total Monetary Benefits (millions$/ 10.8-13 10.4-12.6 11.1-13.3 2009 7% range 30
year)**.
11.4 11.0 11.7 2009 7% ..............
13.4 12.8 13.7 2009 3% ..............
12.8-15 12.3-14.4 13.2-15.3 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized (millions$/year). 6.9 6.9 6.9 2009 7% 30
6.7 6.7 6.7 2009 3% 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Benefits/Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized, including CO2 3.9-6.1 3.4-5.6 4.2-6.4 2009 7% range 30
Benefits (millions$/year)**.
4.5 4.0 4.8 2009 7% 30
6.7 6.2 7.1 2009 3% 30
6.1-8.3 5.6-7.8 6.5-8.7 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7, $21.4, and
$35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $64.9 per ton
represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate
(averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ``7% Range'' and ``3% Range'' calculate consumer and
NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value at the low end, and the $64.9/
ton value at the high end.
[[Page 20119]]
Table I.8--Sum of Annualized Benefits and Costs for Heating Products Standards
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary estimate Low estimate High estimate Units
Category (AEO reference (low energy (high energy -----------------------------------------------------------
case) price case) price case) Year dollars Disc. rate Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Energy Annualized Monetized (millions$/ 1499.8 1364.4 1633.0 2009 7% 30
year).
1842.7 1664.4 2019.4 2009 3% 30
CO2 Monetized Value (at $4.7/Metric 46.2 46.2 46.2 2009 5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $21.4/Metric 168.6 168.6 168.6 2009 3% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $35.1/Metric 261.3 261.3 261.3 2009 2.5% 30
Ton, millions$/year)*.
CO2 Monetized Value (at $64.9/Metric 514.2 514.2 514.2 2009 3% 30
Ton, millions$/year)*.
NOX Monetized Value (at $2,437/Metric 7.6 7.6 7.6 2009 7% 30
Ton, millions$/year).
9.2 9.2 9.2 2009 3% 30
Total Monetary Benefits (millions$/ 1553.5-2021.6 1418.2-1886.3 1686.8-2154.8 2009 7% range 30
year)**.
1676.0 1540.6 1809.2 2009 7% ..............
2020.5 1842.2 2197.2 2009 3% ..............
1898-2366.1 1719.8-2187.7 2074.8-2542.8 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized.................. 1284.9 1219.1 1356.3 2009 7% 30
(millions$/year)......................
1249.3 1178.4 1328.3 2009 3% 30
Annualized Monetized, including CO2 268.7-736.7 199-667.1 330.6-798.7 2009 7% range 30
Benefits (millions$/year)**.
391.1 321.5 453.0 2009 7% 30
771.2 663.8 868.9 2009 3% 30
648.8-1116.8 541.3-1009.4 746.5-1214.6 2009 3% range 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These values represent global values (in 2009$) of the social cost of CO2 emissions in 2010 under several scenarios. The values of $4.7, $21.4, and
$35.1 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $64.9 per ton
represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. See section IV.M for details.
** Total Monetary Benefits for both the 3% and 7% cases utilize the central estimate of social cost of CO2 emissions calculated at a 3% discount rate
(averaged across three IAMs), which is equal to $21.4/ton in 2010 (in 2009$). The rows labeled as ``7% Range'' and ``3% Range'' calculate consumer and
NOX cases with the labeled discount rate but add these values to the full range of CO2 values with the $4.7/ton value at the low end, and the $64.9/
ton value at the high end.
E. Conclusion
Based upon the analysis culminating in this final rule, DOE has
concluded that the benefits (energy savings, consumer LCC savings,
positive national NPV, and emissions reductions) to the Nation of
today's amended standards outweigh their costs (a potential loss of
manufacturer INPV and consumer LCC increases for some users of the
three heating products). Table 1.9 below summarizes total annualized
monetized benefits and costs for these energy conservation standards.
Today's standards also represent the maximum improvement in energy
efficiency that is technologically feasible and economically justified,
and will result in significant energy savings for all three types of
the heating products. At present, residential water heaters, DHE, and
pool heaters that meet the new standard levels are either commercially
available or available as prototypes.
Table I.9--Summary Annualized Monetized Benefits and Costs
----------------------------------------------------------------------------------------------------------------
Category ($million/year) Discount rate
----------------------------------------------------------------------------------------------------------------
Benefits*
1676.0 7%
2020.5 3%
----------------------------------------------------------------------------------------------------------------
Costs
1284.9 7%
1249.3 3%
----------------------------------------------------------------------------------------------------------------
Net Benefits/Costs*
391.1 7%
771.2 3%
----------------------------------------------------------------------------------------------------------------
*Annualized Monetized, including monetized CO2 and NOX benefits.
[[Page 20120]]
II. Introduction
A. Authority
Title III of EPCA sets forth a variety of provisions designed to
improve energy efficiency. Part A\1\ of Title III (42 U.S.C. 6291-6309)
provides for the Energy Conservation Program for Consumer Products
Other Than Automobiles. The program covers consumer products and
certain commercial products (all of which are referred to hereafter as
``covered products''), including the three heating products that are
the subject of this rulemaking. (42 U.S.C. 6292(a)(4), (9), (11)) DOE
publishes today's final rule pursuant to Part A of Title III, which
also provides for test procedures, labeling, and energy conservation
standards for the three heating products and certain other types of
products, and authorizes DOE to require information and reports from
manufacturers. The test procedures for water heaters, vented DHE, and
pool heaters appear at Title 10 of the Code of Federal Regulations
(CFR) part 430, subpart B, appendices E, O, and P, respectively.
---------------------------------------------------------------------------
\1\ This part was originally titled Part B. It was redesignated
Part A in the United States Code for editorial reasons.
---------------------------------------------------------------------------
EPCA prescribes specific energy conservation standards for the
three heating products. (42 U.S.C. 6295(e)(1)-(3)) The statute further
directs DOE to conduct two cycles of rulemakings to determine whether
to amend these standards. (42 U.S.C. 6295(e)(4)) This rulemaking
represents the second round of amendments to the water heater
standards, and the first round of amendments to the DHE and pool heater
standards. The notice of proposed rulemaking (NOPR) in this proceeding
(the December 2009 NOPR; 74 FR 65852, 65858-59, 65866 (Dec. 11, 2009),
and section II.B.2 below, provide additional detail on the nature and
statutory history of the requirements for the three types of heating
products.
EPCA also provides criteria for prescribing amended standards for
covered products generally, including the three heating products. As
indicated above, any such amended standard must be designed to achieve
the maximum improvement in energy efficiency that is technologically
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A))
Additionally, EPCA provides specific prohibitions on prescribing such
standards. DOE may not prescribe an amended standard for any of the
three heating products for which it has not established a test
procedure. (42 U.S.C. 6295(o)(3)(A)) Further, DOE may not prescribe a
standard if DOE determines by rule that such standard would not result
in ``significant conservation of energy,'' or ``is not technologically
feasible or economically justified.'' (42 U.S.C. 6295(o)(3)(B))
EPCA also provides that in deciding whether a standard is
economically justified for covered products, DOE must, after receiving
comments on the proposed standard, determine whether the benefits of
the standard exceed its burdens by considering, to the greatest extent
practicable, the following seven factors:
1. The economic impact of the standard on manufacturers and
consumers of the products subject to the standard;
2. The savings in operating costs throughout the estimated average
life of the covered products in the type (or class) compared to any
increase in the price, initial charges, or maintenance expenses for the
covered products that are likely to result from the imposition of the
standard;
3. The total projected amount of energy (or, as applicable, water)
savings likely to result directly from the imposition of the standard;
4. Any lessening of the utility or the performance of the covered
products likely to result from the imposition of the standard;
5. The impact of any lessening of competition, as determined in
writing by the Attorney General, that is likely to result from the
imposition of the standard;
6. The need for national energy and water conservation; and
7. Other factors the Secretary of Energy (Secretary) considers
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
In addition, EPCA, as amended, establishes a rebuttable presumption
that any standard for covered products is economically justified if the
Secretary finds that ``the additional cost to the consumer of
purchasing a product complying with an energy conservation standard
level will be less than three times the value of the energy (and as
applicable, water) savings during the first year that the consumer will
receive as a result of the standard,'' as calculated under the test
procedure in place for that standard. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA also contains what is commonly known as an ``anti-
backsliding'' provision. (42 U.S.C. 6295(o)(1)) This provision mandates
that the Secretary not prescribe any amended standard that either
increases the maximum allowable energy use or decreases the minimum
required energy efficiency of a covered product. EPCA further provides
that the Secretary may not prescribe an amended 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 product type (or class) with performance characteristics
(including reliability), features, sizes, capacities, and volumes that
are substantially the same as those generally available in the United
States at the time of the Secretary's finding. (42 U.S.C. 6295(o)(4))
Under 42 U.S.C. 6295(q)(1), EPCA specifies requirements applicable
to promulgating standards for any type or class of covered product that
has two or more subcategories. Under this provision, DOE must specify a
different standard level than that which applies generally to such type
or class of product for any group of products ``which have the same
function or intended use,
