Energy Conservation Program for Consumer Products: Energy Conservation Standards for Residential Furnace Fans, 64067-64139 [2013-24613]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 78, Number 207 (Friday, October 25, 2013)]
[Proposed Rules]
[Pages 64067-64139]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24613]



[[Page 64067]]

Vol. 78

Friday,

No. 207

October 25, 2013

Part II





Department of Energy





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10 CFR Parts 429 and 430





 Energy Conservation Program for Consumer Products: Energy Conservation 
Standards for Residential Furnace Fans; Proposed Rule

Federal Register / Vol. 78, No. 207 / Friday, October 25, 2013 / 
Proposed Rules

[[Page 64068]]


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DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[Docket Number EERE-2010-BT-STD-0011]
RIN 1904-AC22


Energy Conservation Program for Consumer Products: Energy 
Conservation Standards for Residential Furnace Fans

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

ACTION: Notice of proposed rulemaking and announcement of public 
meeting.

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SUMMARY: Pursuant to the Energy Policy and Conservation Act of 1975 
(EPCA), as amended, the U.S. Department of Energy (DOE) must prescribe 
energy conservation standards for various consumer products and certain 
commercial and industrial equipment, including residential furnace 
fans. EPCA requires DOE to determine whether such standards would be 
technologically feasible and economically justified, and would save a 
significant amount of energy. In this notice, DOE is proposing new 
energy conservation standards for residential furnace fans. The notice 
also announces a public meeting to receive comment on these proposed 
standards and associated analyses and results.

DATES: Meeting: DOE will hold a public meeting on Tuesday, December 3, 
2013, from 9 a.m. to 4 p.m., in Washington, DC. The meeting will also 
be broadcast as a webinar. See section VII, ``Public Participation,'' 
for webinar registration information, participant instructions, and 
information about the capabilities available to webinar participants.
    Comments: DOE will accept comments, data, and information regarding 
this notice of proposed rulemaking (NOPR) before and after the public 
meeting, but no later than December 24, 2013. See section VII, ``Public 
Participation,'' for details.

ADDRESSES: The public meeting will be held at the U.S. Department of 
Energy, Forrestal Building, Room 8E-089, 1000 Independence Avenue SW., 
Washington, DC 20585. To attend, please notify Ms. Brenda Edwards at 
(202) 586-2945. Please note that foreign nationals visiting DOE 
Headquarters are subject to advance security screening procedures. Any 
foreign national wishing to participate in the meeting should advise 
DOE as soon as possible by contacting Ms. Edwards at the phone number 
above to initiate the necessary procedures. Please also note that any 
person wishing to bring a laptop computer into the Forrestal Building 
will be required to obtain a property pass. Visitors should avoid 
bringing laptops, or allow an extra 45 minutes. Persons may also attend 
the public meeting via webinar. For more information, refer to section 
VII, ``Public Participation,'' near the end of this notice.
    Instructions: Any comments submitted must identify the NOPR for 
Energy Conservation Standards for Residential Furnace Fans, and provide 
docket number EE-2010-BT-STD-0011 and/or regulatory information number 
(RIN) 1904-AC22. Comments may be submitted using any of the following 
methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    2. Email: FurnFans-2010-STD-0011@ee.doe.gov. Include the docket 
number and/or RIN in the subject line of the message. Submit electronic 
comments in Word Perfect, Microsoft Word, PDF, or ASCII file format, 
and avoid the use of special characters or any form of encryption.
    3. Postal Mail: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue 
SW., Washington, DC, 20585-0121. If possible, please submit all items 
on a compact disc (CD), in which case it is not necessary to include 
printed copies.
    4. Hand Delivery/Courier: Ms. Brenda Edwards, U.S. Department of 
Energy, Building Technologies Program, 950 L'Enfant Plaza SW., Suite 
600, Washington, DC 20024. Telephone: (202) 586-2945. If possible, 
please submit all items on a CD, in which case it is not necessary to 
include printed copies.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy through the methods listed above and by email to 
Chad_S._Whiteman@omb.eop.gov.
    No telefacsimilies (faxes) will be accepted. For detailed 
instructions on submitting comments and additional information on the 
rulemaking process, see section VII of this document (Public 
Participation).
    Docket: The docket is available for review at www.regulations.gov, 
including Federal Register notices, framework documents, public meeting 
attendee lists and transcripts, comments, and other supporting 
documents/materials. All documents in the docket are listed in the 
www.regulations.gov index. However, not all documents listed in the 
index may be publicly available, such as information that is exempt 
from public disclosure.
    A link to the docket Web page can be found at: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/41. This Web page contains a link to the docket for this notice 
on the www.regulations.gov site. The www.regulations.gov Web page 
contains simple instructions on how to access all documents, including 
public comments, in the docket. See section VII, ``Public 
Participation,'' for further information on how to submit comments 
through www.regulations.gov.
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the public meeting, 
contact Ms. Brenda Edwards at (202) 586-2945 or by email: 
Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Ron Majette, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Program, EE-2J, 1000 Independence Avenue SW., Washington, 
DC, 20585-0121. Telephone: (202) 586-7935. Email: 
Ronald.Majette@ee.doe.gov.
    Mr. Eric Stas, U.S. Department of Energy, Office of the General 
Counsel, GC-71, 1000 Independence Avenue SW., Washington, DC, 20585-
0121. Telephone: (202) 586-9507. Email: Eric.Stas@hq.doe.gov.
    For information on how to submit or review public comments, contact 
Ms. Brenda Edwards at (202) 586-2945 or by email: 
Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Proposed Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Residential Furnace Fans
III. General Discussion
    A. Test Procedure
    B. Product Classes and Scope of Coverage
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. Economic Justification
    1. Specific Criteria

[[Page 64069]]

    a. Economic Impact on Manufacturers and Consumers
    b. Life-Cycle Costs
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion
    A. Market and Technology Assessment
    1. Definition and Scope of Coverage
    2. Product Classes
    3. Technology Options
    a. Fan Housing and Airflow Path Design Improvements
    b. Inverter Controls for PSC Motors
    c. High-Efficiency Motors
    d. Multi-Stage or Modulating Heating Controls
    e. Backward-Inclined Impellers
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    a. High-Efficiency Motors
    b. Backward-Inclined Impellers
    C. Engineering Analysis
    1. Efficiency Levels
    a. Baseline
    b. Percent Reduction in FER
    2. Manufacturer Production Cost (MPC)
    a. Production Volume Impacts on MPC
    b. Inverter-Driven PSC Costs
    c. Furnace Fan Motor MPC
    d. Motor Control Costs
    e. Backward-Inclined Impeller MPC
    D. Markups Analysis
    E. Energy Use Analysis
    F. Life-Cycle Cost and Payback Period Analysis
    1. Installed Cost
    2. Operating Costs
    3. Other Inputs
    4. Base-Case Efficiency Distribution
    5. Rebuttable Presumption Payback Period
    G. Shipments Analysis
    H. National Impact Analysis
    1. National Energy Savings Analysis
    2. Net Present Value Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model
    a. Government Regulatory Impact Model Key Inputs
    b. Government Regulatory Impact Model Scenarios
    3. Discussion of Comments
    a. Testing and Certification Burdens
    b. Cumulative Regulatory Burden
    c. Compliance Date and Implementation Period
    d. Small Businesses
    e. Conversion Costs
    4. Manufacturer Interviews
    a. Testing and Certification Burdens
    b. Market Size
    c. Cumulative Regulatory Burden
    d. Consumer Confusion
    e. Motors
    K. Emissions Analysis
    L. Monetizing Carbon Dioxide and Other Emissions Impacts
    1. Social Cost of Carbon
    a. Monetizing Carbon Dioxide Emissions
    b. Social Cost of Carbon Values Used in Past Regulatory Analyses
    c. Current Approach and Key Assumptions
    2. Valuation of Other Emissions Reductions
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impact on Manufacturers
    a. Industry Cash-Flow Analysis Results
    b. Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Product Utility or Performance
    5. Impact of Any Lessening of Competition
    6. Need of the Nation to Conserve Energy
    7. Other Factors
    C. Proposed Standards
    1. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Furnace Fans
    2. Summary of Benefits and Costs (Annualized) of the Proposed 
Standards
VI. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    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
VII. Public Participation
    A. Attendance at the Public Meeting
    B. Procedure for Submitting Requests to Speak and Prepared 
General Statements For Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

    Title III, Part B \1\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified), established the Energy Conservation Program for Consumer 
Products Other Than Automobiles, a program covering most major 
household appliances, including the residential furnace fans that are 
the focus of this notice. Pursuant to EPCA, any new or amended energy 
conservation standard that DOE prescribes for certain products, such as 
residential furnace fans, shall 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)) Furthermore, the new 
or amended standard must result in a significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA specifically provides that DOE 
must consider and prescribe energy conservation standards or energy use 
standards for electricity used for purposes of circulating air through 
duct work (products for which DOE has adopted the term ``furnace fans'' 
as shorthand) not later than December 31, 2013. (42 U.S.C. 
6295(f)(4)(D))
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    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
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    In accordance with these and other statutory provisions discussed 
in this notice, DOE is proposing new energy conservation standards for 
residential furnace fans. Table I.1 below presents the proposed 
standards, which represent the ``estimated annual electrical energy 
consumption'' normalized by the estimated total number of annual 
operating hours (1870) and the airflow in the maximum airflow-control 
setting to produce a fan energy rating (FER). These proposed standards, 
if adopted, would apply to all products listed in Table I.1 and 
manufactured in, or imported into, the United States on or after the 
date five years from the publication of the final rule.

[[Page 64070]]



                 Table I.1--Proposed Energy Conservation Standards for Residential Furnace Fans
                          [Compliance Starting Five Years From Final Rule Publication]
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            Product class               Product class description       Proposed standard: FER * (W/1000 cfm)
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1...................................  Non-Weatherized, Non-         FER = 0.029 x QMax + 180.
                                       Condensing Gas Furnace Fan
                                       (NWG-NC).
2...................................  Non-Weatherized, Condensing   FER = 0.029 x QMax + 196.
                                       Gas Furnace Fan (NWG-C).
3...................................  Weatherized Non-Condensing    FER = 0.029 x QMax + 135.
                                       Gas Furnace Fan (WG-NC).
4...................................  Non-Weatherized, Non-         FER = 0.051 x QMax + 301.
                                       Condensing Oil Furnace Fan
                                       (NWO-NC).
5...................................  Non-Weatherized Electric      FER = 0.029 x QMax + 165.
                                       Furnace/Modular Blower Fan
                                       (NWEF/NWMB).
6...................................  Manufactured Home Non-        FER = 0.051 x QMax + 242.
                                       Weatherized, Non-Condensing
                                       Gas Furnace Fan (MH-NWGNC).
7...................................  Manufactured Home Non-        FER = 0.051 x QMax + 262.
                                       Weatherized, Condensing Gas
                                       Furnace Fan (MH-NWG-C).
8...................................  Manufactured Home Electric    FER = 0.029 x QMax + 105.
                                       Furnace/Modular Blower Fan
                                       (MH-EF/MB).
9...................................  Manufactured Home             Reserved.
                                       Weatherized Gas Furnace Fan
                                       (MH-WG).
10..................................  Manufactured Home Non-        Reserved.
                                       Weatherized Oil Furnace Fan
                                       (MH-NWO).
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* QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the proposed DOE test
  procedure. 78 FR 19606, 19627 (April 2, 2013).

A. Benefits and Costs to Consumers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed standards on consumers of residential furnace fans, as 
measured by the average life-cycle cost (LCC) savings and the median 
payback period (PBP). In overview, the average LCC savings are positive 
for all product classes.

  Table I.2--Impacts of Proposed Standards on Consumers of Residential
                              Furnace Fans
------------------------------------------------------------------------
                                       Average LCC       Median payback
           Product class             savings (2012$)     period (years)
------------------------------------------------------------------------
Non-Weatherized, Non-Condensing                   474               5.38
 Gas Furnace Fan (NWG-NC).........
Non-Weatherized, Condensing Gas                   371               5.39
 Furnace Fan (NWG-C)..............
Weatherized Non-Condensing Gas                    247               6.39
 Furnace Fan (WG-NC)..............
Non-Weatherized, Non-Condensing                    40               5.49
 Oil Furnace Fan (NWO-NC).........
Non-Weatherized Electric Furnace/                 185               3.55
 Modular Blower Fan (NWEF/NWMB)...
Manufactured Home Non-Weatherized,                 26               3.35
 Non-Condensing Gas Furnace Fan
 (MH-NWGNC).......................
Manufactured Home Non-Weatherized,                 27               2.73
 Condensing Gas Furnace Fan (MH-
 NWG-C)...........................
Manufactured Home Electric Furnace/                78               4.61
 Modular Blower Fan (MH-EF/MB)....
------------------------------------------------------------------------

B. Impact on Manufacturers

    The industry net present value (INPV) is the sum of the discounted 
cash flows to the industry from the base year through the end of the 
analysis period (2013 to 2048). Using a real discount rate of 7.8 
percent, DOE estimates that the INPV for manufacturers of residential 
furnace fans is $252.2 million in 2012$. Under the proposed standards, 
DOE expects that manufacturers may lose up to 21.6 percent of their 
INPV, which is approximately $54.4 million. Total conversion costs 
incurred by industry prior to the compliance date are expected to reach 
$3.1 million.

C. National Benefits and Costs

    DOE's analyses indicate that the proposed standards would save a 
significant amount of energy. The cumulative energy savings for 
residential furnace fan products purchased in the 30-year period that 
begins in the first full year of compliance with new standards (2019-
2048) amount to 4.58 quads.\2\ For comparison, the estimated annual 
energy savings in 2030 (0.074 quads) is equal to 0.3 percent of total 
projected residential energy use in 2030.\3\
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    \2\ A quad is equal to 10\15\ British thermal units (Btu).
    \3\ Projected residential energy use in 2030 in the Annual 
Energy Outlook 2013 is 21.65 quads.
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    The cumulative net present value (NPV) of total consumer costs and 
savings for the proposed residential furnace fan standards in 2012$ 
ranges from $8.51 billion (at a 7-percent discount rate) to $26.16 
billion (at a 3-percent discount rate). This NPV expresses the 
estimated total value of future operating-cost savings minus the 
estimated increased product costs for residential furnace fans 
purchased in 2019-2048, discounted to 2013.
    In addition, the proposed standards would have significant 
environmental benefits.\4\ The energy savings would result in 
cumulative emission reductions of 429.8 million metric tons (Mt) \5\ of 
carbon dioxide (CO2), 230.9 thousand tons of nitrogen oxides 
(NOX), 313.5 thousand tons of sulfur dioxide 
(SO2), 1.77 tons of mercury (Hg), 913.7 thousand tons of 
methane (CH4), and 5.12 thousand tons of nitrous oxide 
(N2O).\6\
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    \4\ DOE calculates emissions reductions relative to the Annual 
Energy Outlook 2012 (AEO 2012) Reference case, which incorporated 
projected effects of all emissions regulations promulgated as of 
January 31, 2012.
    \5\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons.
    \6\ DOE also estimated CO2 and, for CH4 
and N2O, CO2 equivalent (CO2eq) 
emissions that occur through 2030. The estimated emissions 
reductions through 2030 are 40 million metric tons CO2, 
2.3 million tons CO2eq for CH4, and 167 
thousand tons CO2eq for N2O.
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    The value of the CO2 reductions is calculated using a 
range of values per metric ton of CO2 (otherwise known as 
the Social Cost of Carbon, or SCC) developed by an interagency process. 
For this NOPR, DOE used an updated set of SCC values \7\ (the 
derivation of the

[[Page 64071]]

SCC values is discussed in section IV.L). DOE estimates that the 
present monetary value of the CO2 emissions reduction is 
between $2.25 and $35.56 billion, expressed in 2012$ and discounted to 
2013. DOE also estimates the net present monetary value of the 
NOX emissions reduction, expressed in 2012$ and discounted 
to 2013, is $0.109 billion at a 7-percent discount rate and $0.314 
billion at a 3-percent discount rate.\8\
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    \7\ Technical Update of the Social Cost of Carbon for Regulatory 
Impact Analysis Under Executive Order 12866, Interagency Working 
Group on Social Cost of Carbon, United States Government (May 2013) 
(Available at: https://www.whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_ria_2013_update.pdf).
    \8\ DOE did not monetize Hg or SO2 emission 
reductions for this NOPR because it is currently evaluating 
appropriate valuation of reduction in these emissions.
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    Table I.3 summarizes the national economic benefits and costs 
expected to result from these proposed standards for residential 
furnace fans.

 Table I.3--Summary of National Economic Benefits and Costs of Proposed
   Residential Furnace Fans Energy Conservation Standards (TSL 4), in
                             Billion 2012$ *
------------------------------------------------------------------------
                                     Present value
             Category                billion 2012$    Discount rate  (%)
------------------------------------------------------------------------
Benefits:
    Consumer Operating Cost                     11.6                 7
     Savings.....................
                                                32.0                 3
    CO2 Reduction Monetized Value                2.2                 5
     ($12.9/t case)**............
    CO2 Reduction Monetized Value               11.5                 3
     ($40.8/t case)**............
    CO2 Reduction Monetized Value               18.8                 2.5
     ($62.2/t case)**............
    CO2 Reduction Monetized Value               35.6                 3
     ($117/t case)**.............
    NOX Reduction Monetized Value                0.1                 7
     (at $2,639/ton).............
                                                 0.3                 3
                                  --------------------------------------
        Total Benefits [dagger]..               23.2                 7
                                                43.8                 3
Costs:
    Consumer Incremental                         3.1                 7
     Installed Costs.............
                                                 5.8                 3
Net Benefits:
    Including CO2 and NOX                       20.1                 7
     Reduction Monetized Value...
                                                38.0                 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with residential
  furnace fans shipped in 2019-2048. These results include benefits to
  consumers which accrue after 2048 from the products purchased in 2019-
  2048. The results account for the incremental variable and fixed costs
  incurred by manufacturers due to the standard, some of which may be
  incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
  2012$, in 2015 under several scenarios of the updated SCC values. The
  first three cases use the averages of SCC distributions calculated
  using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
  represents the 95th percentile of the SCC distribution calculated
  using a 3% discount rate. The SCC time series used by DOE incorporate
  an escalation factor. The value for NOX is the average of the low and
  high values used in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using
  the series corresponding to SCC value in 2015 of $40.8/t.

    Although combining the values of operating savings and 
CO2 emission reductions provides a useful perspective, two 
issues should be considered. First, the national operating savings are 
domestic U.S. consumer monetary savings that occur as a result of 
market transactions, whereas the value of CO2 reductions is 
based on a global value. Second, the assessments of operating cost 
savings and CO2 savings are performed with different methods 
that use different time frames for analysis. The national operating 
cost savings is measured for the lifetime of residential furnace fans 
shipped in 2019-2048. The SCC values, on the other hand, reflect the 
present value of some future climate-related impacts resulting from the 
emission of one ton of carbon dioxide in each year. These impacts 
continue well beyond 2100.
    The benefits and costs of these proposed standards, for products 
sold in 2019-2048, can also be expressed in terms of annualized values. 
The annualized monetary values are the sum of: (1) the annualized 
national economic value of the benefits from consumer operation of 
products that meet the proposed standards (consisting primarily of 
operating cost savings from using less energy, minus increases in 
equipment purchase and installation costs, which is another way of 
representing consumer NPV); and (2) the annualized monetary value of 
the benefits of emission reductions, including CO2 emission 
reductions.\9\
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    \9\ DOE used a two-step calculation process to convert the time-
series of costs and benefits into annualized values. First, DOE 
calculated a present value in 2013, the present year used for 
discounting the NPV of total consumer costs and savings, for the 
time-series of costs and benefits using discount rates of three and 
seven percent for all costs and benefits except for the value of 
CO2 reductions. For the latter, DOE used a range of 
discount rates, as shown in Table I.4. From the present value, DOE 
then calculated the fixed annual payment over a 30-year period (2019 
through 2048) that yields the same present value. The fixed annual 
payment is the annualized value. Although DOE calculated annualized 
values, this does not imply that the time-series of cost and 
benefits from which the annualized values were determined is a 
steady stream of payments.
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    Estimates of annualized benefits and costs of the proposed 
standards are shown in Table I.4. The results under the primary 
estimate are as follows. (All monetary values below are expressed in 
2012$.) Using a 7-percent discount rate for benefits and costs other 
than CO2 reduction (for which DOE used a 3-percent discount 
rate along with the SCC series corresponding to a value of $40.8/ton in 
2015), the cost of the residential furnace fan standards proposed in 
this rule is $231 million per year in increased equipment costs, while 
the benefits are $872 million per year in reduced equipment operating 
costs, $571 million in CO2 reductions, and $8.24 million in 
reduced NOX emissions. In this case, the net benefit amounts 
to $1,220 million per year. Using a 3-percent discount rate for all 
benefits and costs and the SCC series corresponding to a value of 
$40.8/ton in 2015, the cost of the residential furnace fans standards 
proposed in this rule is $290 million per year in increased equipment 
costs, while the benefits are $1,585 million per year in reduced 
operating costs, $571 million in CO2

[[Page 64072]]

reductions, and $15.56 million in reduced NOX emissions. In 
this case, the net benefit amounts to $1,882 million per year.

                  Table I.4--Annualized Benefits and Costs of Proposed Standards for Residential Furnace Fans (TSL 4), in Million 2012$
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                                              Discount rate               Primary estimate *       Low net benefits estimate  High net benefits estimate
                                                                     -----------------------------------------------------------------------------------
                                                                                                      million 2012$/year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
    Consumer Operating Cost         7%..............................  872.......................  710.......................  1082.
     Savings.
                                    3%..............................  1585......................  1264......................  2011.
    CO2 Reduction Monetized Value   5%..............................  139.......................  117.......................  171.
     ($12.9/t case) **.
    CO2 Reduction Monetized Value   3%..............................  571.......................  477.......................  702.
     ($40.8/t case) **.
    CO2 Reduction Monetized Value   2.5%............................  877.......................  732.......................  1079.
     ($62.2/t case) **.
    CO2 Reduction Monetized Value   3%..............................  1761......................  1471......................  2167.
     ($117/t case) **.
    NOX Reduction Monetized Value   7%..............................  8.24......................  6.97......................  9.99.
     (at $2,639/ton) **.
                                    3%..............................  15.56.....................  13.03.....................  19.09.
                                   ---------------------------------------------------------------------------------------------------------------------
        Total Benefits [dagger]...  7% plus CO2 range...............  1,019 to 2,641............  834 to 2,188..............  1,263 to 3,259.
                                    7%..............................  1,451.....................  1,194.....................  1,794.
                                    3% plus CO2 range...............  1,740 to 3,362............  1,394 to 2,748............  2,201 to 4,197.
                                    3%..............................  2,172.....................  1,754.....................  2,732.
Costs:
    Consumer Incremental Installed  7%..............................  231.......................  273.......................  201.
     Costs.
                                    3%..............................  290.......................  346.......................  250.
Net Benefits:
    Total [dagger]................  7% plus CO2 range...............  788 to 2,410..............  561 to 1,915..............  1,062 to 3,058.
                                    7%..............................  1,220.....................  921.......................  1,593.
                                    3% plus CO2 range...............  1,450 to 3,072............  1,047 to 2,402............  1,951 to 3,947.
                                    3%..............................  1,882.....................  1,407.....................  2,482.
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* This table presents the annualized costs and benefits associated with residential furnace fans shipped in 2019-2048. These results include benefits to
  consumers which accrue after 2048 from the products purchased in 2019-2048. The results account for the incremental variable and fixed costs incurred
  by manufacturers due to the standard, some of which may be incurred in preparation for the rule. The Primary, Low Benefits, and High Benefits
  Estimates utilize projections of energy prices and housing starts from the AEO 2012 Reference case, Low Estimate, and High Estimate, respectively.
  Incremental product costs reflect a constant product price trend in the Primary Estimate, an increasing price trend in the Low Benefits Estimate, and
  a decreasing price trend in the High Benefits Estimate.
** The CO2 values represent global values of the SCC, in 2012$, in 2015 under several scenarios. The first three cases use the averages of SCC
  distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution
  calculated using a 3% discount rate. The SCC values increase over time. The value for NOX (in 2012$) is the average of the low and high values used in
  DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to SCC value of $40.8/t in 2015. In the rows labeled
  ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and NOX benefits are calculated using the labeled discount rate, and those values
  are added to the full range of CO2 values.

    DOE has tentatively concluded that the proposed standards represent 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified, and would result in the 
significant conservation of energy. DOE further notes that products 
achieving these standard levels are already commercially available for 
at least some, if not most, product classes covered by this proposal. 
Based on the analyses described above, DOE has tentatively concluded 
that the benefits of the proposed standards to the Nation (energy 
savings, positive NPV of consumer benefits, consumer LCC savings, and 
emission reductions) would outweigh the burdens (loss of INPV for 
manufacturers and LCC increases for some consumers).
    DOE also considered more-stringent energy efficiency levels as 
trial standard levels, and is still considering them in this 
rulemaking. However, DOE has tentatively concluded that the potential 
burdens of the more-stringent energy efficiency levels would outweigh 
the projected benefits. Based on consideration of the public comments 
DOE receives in response to this notice and related information 
collected and analyzed during the course of this rulemaking effort, DOE 
may adopt energy efficiency levels presented in this notice that are 
either higher or lower than the proposed standards, or some combination 
of level(s) that incorporate the proposed standards in part.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposal, as well as some of the relevant historical 
background related to the establishment of standards for residential 
furnace fans.

A. Authority

    Title III, Part B \10\ of the Energy Policy and Conservation Act of 
1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291-6309, as 
codified) established the Energy Conservation Program for Consumer 
Products Other Than Automobiles, a program covering most major 
household appliances (collectively referred to as ``covered 
products'').\11\ These include products that use electricity for 
purposes of circulating air through duct work, hereafter referred to as 
``residential furnace fans'' or simply ``furnace fans,'' the subject of 
this rulemaking. (42 U.S.C. 6295(f)(4)(D))
---------------------------------------------------------------------------

    \10\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \11\ All references to EPCA in this document refer to the 
statute as amended through the American Energy Manufacturing 
Technical Corrections Act, Public Law 112-210 (enacted December 18, 
2012).

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

[[Page 64073]]

    Pursuant to EPCA, DOE's energy conservation program for covered 
products consists essentially of four parts: (1) Testing; (2) labeling; 
(3) the establishment of Federal energy conservation standards; and (4) 
certification and enforcement procedures. The Federal Trade Commission 
(FTC) is primarily responsible for labeling, and DOE implements the 
remainder of the program. Subject to certain criteria and conditions, 
DOE is required by EPCA to consider and establish energy conservation 
standards for residential furnace fans by December 31, 2013. (42 U.S.C. 
6295(f)(4)(D)) DOE is also required to develop test procedures to 
measure the energy efficiency, energy use, or estimated annual 
operating cost of each covered product prior to the adoption of an 
energy conservation standard. (42 U.S.C. 6295(o)(3)(A) and (r)) 
Manufacturers of covered products must use the prescribed DOE test 
procedure as the basis for certifying to DOE that their products comply 
with the applicable energy conservation standards adopted under EPCA 
and when making representations to the public regarding the energy use 
or efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) 
Similarly, DOE must use these test procedures to determine whether the 
products comply with standards adopted pursuant to EPCA. (42 U.S.C. 
6295(s)) DOE does not currently have a test procedure for furnace fans. 
Accordingly, to fulfill the statutory requirements, DOE is 
simultaneously conducting a test procedure rulemaking for residential 
furnace fans. DOE published a notice of proposed rulemaking (NOPR) in 
the Federal Register for a residential furnace fans test procedure on 
May 15, 2012. 77 FR 28674. After considering public comments, DOE 
subsequently published in the Federal Register a supplemental notice of 
proposed rulemaking (SNOPR) on April 2, 2013, which contained a revised 
test procedure proposal for furnace fans. 78 FR 19606. In accordance 
with the statutory requirements outlined in EPCA, DOE will establish a 
test procedure for residential furnace fans at or before the time it 
prescribes furnace fan energy conservation standards Details on the 
furnace fan test procedure rulemaking are available at: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/40.
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including residential furnace 
fans. As indicated above, any new or amended standard for a covered 
product must be designed to achieve the maximum improvement in energy 
efficiency that is technologically feasible and economically justified. 
(42 U.S.C. 6295(o)(2)(A) and (3)(B)) Furthermore, DOE may not adopt any 
standard that would not result in the significant conservation of 
energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a 
standard: (1) For certain products, including residential furnace fans, 
if no test procedure has been established for the product, or (2) if 
DOE determines by rule that the proposed standard is not 
technologically feasible or economically justified. (42 U.S.C. 
6295(o)(3)(A)-(B)) In deciding whether a proposed standard is 
economically justified, after receiving comments on the proposed 
standard, DOE must determine whether the benefits of the standard 
exceed its burdens by, to the greatest extent practicable, considering 
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 standard;
    (3) The total projected amount of energy (or as applicable, water) 
savings likely to result directly from the standard;
    (4) Any lessening of the utility or the performance of the covered 
products likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary of Energy (Secretary) considers 
relevant.

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

    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any standard that either increases the maximum allowable energy use or 
decreases the minimum required energy efficiency of a covered product. 
(42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended 
or new standard if interested persons have established by a 
preponderance of the evidence that the standard is likely to result in 
the unavailability in the United States of any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))
    Further, EPCA, as codified, establishes a rebuttable presumption 
that a standard is economically justified if the Secretary finds that 
the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure. (See 42 U.S.C. 6295(o)(2)(B)(iii))
    Additionally, under 42 U.S.C. 6295(q)(1), the statute specifies 
requirements when promulgating an energy conservation standard for a 
covered product that has two or more subcategories. DOE must specify a 
different standard level for a type or class of covered product that 
has the same function or intended use, if DOE determines that products 
within such group: (A) consume a different kind of energy from that 
consumed by other covered products within such type (or class); or (B) 
have a capacity or other performance-related feature which other 
products within such type (or class) do not have and such feature 
justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)). In 
determining whether a performance-related feature justifies a different 
standard level, DOE must consider such factors as the utility to the 
consumer of the feature and other factors DOE deems appropriate. Id. 
Any rule prescribing such a standard must include an explanation of the 
basis on which such higher or lower level was established. (42 U.S.C. 
6295(q)(2))
    Federal energy conservation requirements generally supersede State 
laws or regulations concerning energy conservation testing, labeling, 
and standards. (42 U.S.C. 6297(a)-(c)) DOE may, however, grant waivers 
of Federal preemption for particular State laws or regulations, in 
accordance with the procedures and other provisions set forth under 42 
U.S.C. 6297(d)).
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, 
any final rule for new or amended energy conservation standards 
promulgated after July 1, 2010, is required to address standby mode and 
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE 
adopts a standard for a covered product after that date, it must, if 
justified by the criteria for adoption of standards under EPCA (42 
U.S.C.

[[Page 64074]]

6295(o)), incorporate standby mode and off mode energy use into a 
single standard, or, if that is not feasible, adopt a separate standard 
for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)-(B)) 
The proposed furnace fan energy rating metric would not account for the 
electrical energy consumption in standby mode and off mode, because 
energy consumption in those modes is already fully accounted for in the 
DOE energy conservation standards rulemaking for residential furnaces 
and residential central air conditioners (CAC) and heat pumps (HP). 76 
FR 37408 (June 27, 2011); 76 FR 67037 (Oct. 31, 2011). Manufacturers 
will be required to use the new metrics and methods adopted in those 
rulemakings for the purposes of certifying to DOE that their products 
comply with the applicable energy conservation standards adopted 
pursuant to EPCA and for making representations about the efficiency of 
those products. (42 U.S.C. 6293(c); 42 U.S.C. 6295(s))
Background
1. Current Standards
    Currently, no Federal energy conservation standards apply to 
residential furnace fans.
2. History of Standards Rulemaking for Residential Furnace Fans
    Pursuant to 42 U.S.C. 6295(f)(4)(D), DOE must consider and 
prescribe new energy conservation standards or energy use standards for 
electricity used for purposes of circulating air through duct work. DOE 
has interpreted this statutory language to allow regulation of the 
electricity use of any electrically-powered device applied to 
residential central heating, ventilation, and air-conditioning (HVAC) 
systems for the purpose of circulating air through duct work.
    DOE initiated the current rulemaking by issuing an analytical 
Framework Document, ``Rulemaking Framework for Furnace Fans'' (June 1, 
2010). DOE then published the Notice of Public Meeting and Availability 
of the Framework Document for furnace fans in the Federal Register on 
June 3, 2010. 75 FR 31323. See https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/41. The Framework Document 
explained the issues, analyses, and process that DOE anticipated using 
to develop energy conservation standards for residential furnace fans. 
DOE held a public meeting on June 18, 2010 to solicit comments from 
interested parties regarding DOE's analytical approach. DOE originally 
scheduled the comment period on the Framework Document to close on July 
6, 2010, but due to the large number and broad scope of questions and 
issues raised, DOE subsequently published a notice in the Federal 
Register reopening the comment period from July 15, 2010 until July 27, 
2010, to allow additional time for interested parties to submit 
comments. 75 FR 41102 (July 15, 2010).
    As a concurrent effort to the residential furnace fan energy 
conservation standard rulemaking, DOE also initiated a test procedure 
rulemaking for residential furnace fans. On May 15, 2012, DOE published 
a notice of proposed rulemaking for the test procedure in the Federal 
Register. 77 FR 28674. In that NOPR, DOE proposed to establish methods 
to measure the performance of covered furnace fans and to obtain a 
value for the proposed metric, referred to as the ``fan efficiency 
rating'' (FER).\12\ DOE held the test procedure NOPR public meeting on 
June 15, 2012, and the comment period closed on July 30, 2012. After 
receiving comments on the NOPR alleging significant manufacturer burden 
associated with the proposed test procedure, DOE determined that an 
alternative test method should be developed. DOE published in the 
Federal Register an SNOPR on April 2, 2013, which contained its revised 
test procedure proposal and an explanation of the changes intended to 
reduce burden. 78 FR 19606. DOE proposed to adopt a modified version of 
the alternative test method recommended by the Air-Conditioning, 
Heating, and Refrigeration Institute (AHRI) and other furnace fan 
manufacturers to rate the electrical energy consumption of furnace 
fans. DOE has tentatively concluded that the AHRI-proposed method 
provides a framework for accurate and repeatable determinations of FER 
that is comparable to the test method previously proposed by DOE, but 
at a significantly reduced test burden. As required by EPCA, DOE will 
complete its final rule for residential furnace fan test procedures in 
advance of the final rule adopting energy conservation standards for 
those products. (42 U.S.C. 6295(o)(3)(A) and (r))
---------------------------------------------------------------------------

    \12\ In the May 15, 2012 NOPR for the test procedure, DOE 
referred to FER as ``fan efficiency rating.'' However, in the April 
2, 2013 test procedure SNOPR, DOE proposed to rename the metric as 
``fan energy rating,'' thereby keeping the same abbreviation (FER).
---------------------------------------------------------------------------

    To further develop the energy conservation standards for 
residential furnace fans, DOE gathered additional information and 
performed a preliminary technical analysis. This process culminated in 
publication in the Federal Register of a Notice of Public Meeting and 
the Availability of the Preliminary Technical Support Document (TSD) on 
July 10, 2012. 77 FR 40530. In that document, DOE requested comment on 
the following matters discussed in the TSD: (1) the selected product 
classes; (2) the analytical framework, models, and tools that DOE is 
using to evaluate standards; and (3) the results of the preliminary 
analyses performed by DOE. Id. DOE also invited written comments on 
these subjects, as well as any other relevant issues, and announced the 
availability of the TSD on its Web site. Id. at 40530-31. A PDF copy of 
the preliminary TSD is available at https://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0011-0037.
    The preliminary TSD provided an overview of the activities DOE 
undertook in developing potential energy conservation standards for 
residential furnace fans, and discussed the comments DOE received in 
response to the Framework Document. It also described the analytical 
methodology that DOE used and each analysis DOE had performed up to 
that point. These analyses were as follows:
     A market and technology assessment addressed the scope of 
this rulemaking, identified the potential product classes of 
residential furnace fans, characterized the markets for these products, 
and reviewed techniques and approaches for improving their efficiency;
     A screening analysis reviewed technology options to 
improve the efficiency of furnace fans, and weighed these options 
against DOE's four prescribed screening criteria;
     An engineering analysis estimated the increase in 
manufacturer selling prices (MSPs) associated with more energy-
efficient furnace fans;
     An energy use analysis estimated the annual energy use of 
furnace fans at various potential standard levels;
     A markups analysis converted estimated MSPs to consumer-
installed prices.
     A life-cycle cost (LCC) analysis calculated, at the 
consumer level, the discounted savings in operating costs throughout 
the estimated average life of the product, compared to any increase in 
installed costs likely to result directly from the adoption of a given 
standard;
     A payback period (PBP) analysis estimated the amount of 
time it would take consumers to recover the higher expense of 
purchasing more-energy-efficient products through lower operating 
costs;

[[Page 64075]]

     A shipments analysis estimated shipments of residential 
furnace fans over the time period examined in the analysis (30 years), 
which were used in performing the national impact analysis;
     A national impact analysis assessed the aggregate impacts 
at the national level of potential energy conservation standards for 
residential furnace fans, as measured by the net present value of total 
consumer economic impacts and national energy savings; and
     A preliminary manufacturer impact analysis took the 
initial steps in evaluating the effects new energy conservation 
standards may have on furnace fan manufacturers.
    The nature and function of the analyses in this rulemaking, 
including the engineering analysis, energy-use characterization, 
markups to determine installed prices, LCC and PBP analyses, and 
national impact analysis, are summarized in the July 2012 notice. 77 FR 
40530, 40532-33 (July 10, 2012).
    The preliminary analysis public meeting took place on July 27, 
2012. At this meeting, DOE presented the methodologies and results of 
the analyses set forth in the preliminary TSD. The numerous comments 
received since publication of the July 2012 notice, including those 
received at the preliminary analysis public meeting, have contributed 
to DOE's proposed resolution of the issues noted by interested parties.
    The submitted comments include a joint comment from the American 
Council for an Energy-Efficiency Economy (ACEEE), Adjuvant Consulting, 
on behalf of the Northwest Energy Efficiency Alliance (NEEA), the 
Appliance Standards Awareness Project (ASAP), the National Consumer Law 
Center (NCLC), and the Natural Resources Defense Council (NRDC); a 
comment from the Air-Conditioning, Heating, and Refrigeration Institute 
(AHRI); a second joint comment from California Investor-Owned Utilities 
(CA IOUs) including Pacific Gas and Electric Company (PG&E), Southern 
California Edison (SCE), Southern California Gas Company, and San Diego 
Gas and Electric (SDGE); a comment from Earthjustice; a comment from 
ebm-papst Inc. (ebm-papst); a comment from Edison Electric Institute 
(EEI); and a comment from the Northeast Energy Efficiency Partnership 
(NEEP). Manufacturers submitting written comments included: First 
Company, Goodman Global, Inc. (Goodman), Ingersoll Rand, Lennox 
International, Inc. (Lennox), Morrison Products, Inc. (Morrison), 
Mortex Product, Inc. (Mortex), National Motor Corporation (NMC), and 
Rheem Manufacturing Company (Rheem). Comments made during the public 
meeting by those not already listed include the U.S. Environmental 
Protection Agency (EPA), the motor manufacturer Regal Beloit, and Unico 
Incorporated. This NOPR summarizes and responds to the issues raised in 
these comments. A parenthetical reference at the end of a quotation or 
paraphrase provides the location of the item in the public record.

III. General Discussion

A. Test Procedure

    In the SNOPR for the residential furnace fan test procedure 
published in the Federal Register on April 2, 2013 (78 FR 19606), DOE 
proposed to adopt a modified version of a test method recommended by 
AHRI and supported by other furnace fan manufacturers in the written 
comments on the May 2012 Test Procedure NOPR. (Docket No. EERE-2010-BT-
TP-0010, AHRI, No. 16 at p. 3) DOE agrees with AHRI's assessment that 
its method provides a framework for accurate and repeatable 
determinations of FER that is comparable to the test method previously 
proposed by DOE, but at a significantly reduced test burden. In 
general, the test burden of the AHRI method is reduced relative to the 
test procedure originally proposed in the NOPR because it: (1) Does not 
require airflow to be measured directly; (2) avoids the need to make 
multiple determinations in each airflow-control setting because outlet 
restrictions to achieve the specified reference system external static 
pressure (ESP) would be set in the maximum airflow-control setting and 
maintained for measurements in subsequent airflow-control settings; and 
(3) can be conducted using the test setup currently required to rate 
furnace annual fuel utilization efficiency (AFUE) for compliance with 
residential furnace standards.
    In the April 2, 2013 test procedure SNOPR, DOE proposed to 
incorporate by reference the definitions, test setup and equipment, and 
procedures for measuring steady-state combustion efficiency provisions 
of American National Standards Institute (ANSI)/American Society of 
Heating, Refrigerating and Air Conditioning Engineers (ASHRAE) Standard 
103-2007, Method of Testing for Annual Fuel Utilization Efficiency of 
Residential Central Furnaces and Boilers (ASHRAE Standard 103). In 
addition to these provisions, DOE proposed additional provisions for 
apparatuses and procedures for measuring throughput temperature, 
external static pressure, and furnace fan electrical input power. DOE 
also proposed calculations to derive FER based on the results of 
testing for each basic model. 78 FR 19606, 19608-09 (April 2, 2013).
    In the SNOPR, DOE proposed to define ``fan energy rating'' (FER) as 
the estimated annual electrical energy consumption of the furnace fan 
normalized by: (a) the estimated total number of annual fan operating 
hours (1,870); \13\ and (b) the airflow in the maximum airflow-control 
setting. Id. at 19608. The estimated annual electrical energy 
consumption, as proposed, is a weighted average of the furnace fan 
electrical input power (in Watts) measured separately for multiple 
airflow-control settings at different external static pressures (ESPs). 
These ESPs are determined by a reference system that represents 
national average duct work system characteristics. Id. Table III.1 
below includes the proposed reference system ESP values by installation 
type.
---------------------------------------------------------------------------

    \13\ Details about the derivation of operating hours used to 
calculate FER are found in the test procedure NOPR. 77 FR 28674, 
28680 (May 15, 2012).

    Table III.1--Proposed Reference System ESP Values by Furnace Fan
                            Installation Type
------------------------------------------------------------------------
                                                               Weighted
                                                                average
                      Installation type                        ESP (in.
                                                                 w.c.)
------------------------------------------------------------------------
Units with an internal evaporator coil......................        0.50
Units designed to be paired with an evaporator coil.........        0.65
Units installed in a manufactured homes \14\................        0.30
------------------------------------------------------------------------

    The proposed rated airflow-control settings correspond to operation 
in cooling mode (which DOE finds is predominantly associated with the 
maximum airflow-control setting), heating mode, and constant-
circulation mode. Table III.2 illustrates the airflow-control settings 
that would be rated for various product types.
---------------------------------------------------------------------------

    \14\ Manufactured home external static pressure is much lower 
than non-manufactured home installations because there is no return 
air duct work in manufactured homes. Also, the United States 
Department of Housing and Urban Development (HUD) requirements for 
manufactured homes stipulate that the duct work for cooling should 
be set at 0.3 in. w.c.

[[Page 64076]]



                      Table III.2--Proposed Rated Airflow-Control Settings by Product Type
----------------------------------------------------------------------------------------------------------------
                                    Rated airflow-control     Rated airflow-
           Product type                   setting 1          control setting 2   Rated airflow-control setting 3
----------------------------------------------------------------------------------------------------------------
Single-stage Heating..............  Default constant-      Default heat........  Absolute maximum.
                                     circulation.
Multi-stage or Modulating Heating.  Default constant-      Default low heat....  Absolute maximum.
                                     circulation.
----------------------------------------------------------------------------------------------------------------

    As shown in Table III.2, for products with single-stage heating, 
the three proposed rated airflow-control settings are the default 
constant-circulation setting, the default heating setting, and the 
absolute maximum setting. 78 FR 19606, 19609 (April 2, 2013). For 
products with multi-stage heating or modulating heating, the proposed 
rated airflow-control settings are the default constant-circulation 
setting, the default low heating setting, and the absolute maximum 
setting. The absolute lowest default airflow-control setting is used to 
represent constant circulation if a default constant-circulation 
setting is not specified. DOE proposed to define ``default airflow-
control settings'' as the airflow-control settings specified for 
installed use by the manufacturer in the product literature shipped 
with the product in which the furnace fan is integrated. Id. 
Manufacturers typically provide detailed instructions for setting the 
default heating airflow-control setting to ensure that the product in 
which the furnace fan is integrated operates safely. Manufacturer 
installation guides also provide detailed instructions regarding 
compatible thermostats and how to wire them to achieve the specified 
default settings.
    In the SNOPR, DOE proposed to weight the Watt measurements using 
designated annual operating hours for each function (i.e., cooling, 
heating, and constant circulation) that are intended to represent 
national average operation. Table III.3 shows the proposed estimated 
national average operating hours for each function to be used to 
calculate FER.

                Table III.3--Estimated National Average Operating Hour Values for Calculating FER
----------------------------------------------------------------------------------------------------------------
                                                                 Single-stage       Multi-stage or modulating
          Operating mode                     Variable               (hours)                  (hours)
----------------------------------------------------------------------------------------------------------------
Heating...........................  HH (heating hours)........             830  830/HCR (heat capacity ratio).
Cooling...........................  CH (cooling hours)........             640  640.
Constant Circulation..............  CCH (constant-circulation              400  400.
                                     hours).
                                                               -------------------------------------------------
    Total.........................  ..........................           1,870  (830/HCR) + 1,040.
----------------------------------------------------------------------------------------------------------------

    The specified operating hours for the heating mode for multi-stage 
heating or modulating heating products are divided by the heat capacity 
ratio (HCR) to account for variation in time spent in this mode 
associated with turndown of heating output. The HCR is the ratio of the 
reduced heat output capacity to maximum heat output capacity. The 
proposed FER equation is:
[GRAPHIC] [TIFF OMITTED] TP25OC13.000

Where:

CH = annual furnace fan cooling operating hours;
EMax = furnace fan electrical consumption at maximum 
airflow-control setting operating point;
HH = annual furnace fan heating operating hours;
EHeat = furnace fan electrical consumption at the default 
heating airflow-control setting operating point for units with 
single-stage heating or the default low-heating airflow control 
setting operating point for units with multi-stage heating;
CHH = annual furnace fan constant circulation hours;
ECirc = furnace fan electrical consumption at the default 
constant-circulation airflow-control setting operating point (or 
minimum airflow-control setting operating point if a default 
constant-circulation airflow-control setting is not specified);
QMax = airflow at maximum airflow-control setting 
operating point; and
1000 = constant to put metric in terms of watts/1000cfm, which is 
consistent with industry practice.

    The public meeting for the energy conservation standards 
preliminary analysis occurred only two months after the public meeting 
for the test procedure NOPR. At the time of the preliminary analysis 
meeting, the comment period for the test procedure NOPR was still open. 
Consequently, many of the written comments and oral comments made 
during the preliminary analysis public meeting focused on test 
procedure issues and echoed comments in the test procedure rulemaking 
proceeding. While these test procedure issues are germane to the 
regulation of residential furnace fans more broadly, they are beyond 
the scope of the present energy conservation standards rulemaking. 
Accordingly, DOE addressed these test procedure-related comments, with 
detailed responses, in the April 2, 2013 test procedure SNOPR. Any 
additional comments made during the preliminary analysis relating to 
the test procedure that were not discussed in the test procedure SNOPR 
(i.e., did not result in changes to DOE's proposed test procedure) will 
be addressed in the test procedure final rule.

B. Product Classes and Scope of Coverage

    Although the title of 42 U.S.C. 6295(f) refers to ``furnaces and 
boilers,'' DOE notes that 42 U.S.C. 6295(f)(4)(D) was written using 
notably broader language than the other provisions within the

[[Page 64077]]

same section. Specifically, that statutory provision directs DOE to 
``consider and prescribe energy conservation standards or energy use 
standards for electricity used for purposes of circulating air through 
duct work.'' Such language could be interpreted as encompassing 
electrically-powered devices used in any residential HVAC product to 
circulate air through duct work, not just furnaces, and DOE has 
received numerous comments on both sides of this issue. At the present 
time, however, DOE is only proposing to cover those circulation fans 
that are used in furnaces and modular blowers. DOE is using the term 
``modular blower'' to refer to HVAC products powered by single-phase 
electricity that comprise an encased circulation blower that is 
intended to be the principal air-circulation source for the living 
space of a residence. A modular blower is not contained within the same 
cabinet as a residential furnace, CAC, or heat pump. Instead, modular 
blowers are designed to be paired with separate residential HVAC 
products that provide heating and cooling, typically a separate CAC/HP 
coil-only unit. DOE finds that modular blowers and electric furnaces 
are very similar in design. In many cases, the only difference between 
a modular blower and electric furnace is the presence of an electric 
resistance heating kit. DOE is aware that some modular blower 
manufacturers offer electric resistance heating kits to be installed in 
their modular blower models so that the modular blowers can be 
converted to stand-alone electric furnaces. In addition, FER values for 
modular blowers can be easily calculated using the proposed test 
procedure. DOE proposes to address the furnace fans used in modular 
blowers in this rulemaking for these reasons. As a result of the extent 
of the current rulemaking, DOE is not addressing public comments that 
pertain to fans in other types of HVAC products.
    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
a different standard. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility to the consumer of the feature and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q)) For this 
rulemaking, DOE proposes to differentiate between product classes based 
on internal structure and application-specific design differences that 
impact furnace fan energy consumption. Details regarding how internal 
structure and application-specific design differences that impact 
furnace fan energy consumption are included in chapter 3 of the NOPR 
technical support document (TSD). DOE proposes the following product 
classes for this rulemaking.

 Non-Weatherized, Non-Condensing Gas Furnace Fan (NWG-NC)
 Non-Weatherized, Condensing Gas Furnace Fan (NWG-C)
 Weatherized Non-Condensing Gas Furnace Fan (WG-NC)
 Non-Weatherized, Non-Condensing Oil Furnace Fan (NWO-NC)
 Non-Weatherized Electric Furnace/Modular Blower Fan (NWEF/
NWMB)
 Manufactured Home Non-Weatherized, Non-Condensing Gas Furnace 
Fan (MH-NWG-NC)
 Manufactured Home Non-Weatherized, Condensing Gas Furnace Fan 
(MH-NWG-C)
 Manufactured Home Electric Furnace/Modular Blower Fan (MH-EF/
MB)
 Manufactured Home Weatherized Gas Furnace Fan (MH-WG)
 Manufactured Home Non-Weatherized Oil Furnace Fan (MH-NWO).
    Each product class title includes descriptors that indicate the 
application-specific design and internal structure of its included 
products. ``Weatherized'' and ``non-weatherized'' are descriptors that 
indicate whether the HVAC product is installed outdoors or indoors, 
respectively. Weatherized products also include an internal evaporator 
coil, while non-weatherized products are not shipped with an evaporator 
coil but may be designed to be paired with one. ``Condensing'' refers 
to the presence of a secondary, condensing heat exchanger in addition 
to the primary combustion heat exchanger in certain furnaces. The 
presence of an evaporator coil or secondary heat exchanger 
significantly impacts the internal structure of an HVAC product, and in 
turn, the energy performance of the furnace fan integrated in that HVAC 
product. ``Manufactured home'' products meet certain design 
requirements that allow them to be installed in manufactured homes 
(e.g., a more compact cabinet size). Descriptors for ``gas,'' ``oil,'' 
or ``electric'' indicate the type of fuel that the HVAC product uses to 
produce heat, which determines the type and geometry of the primary 
heat exchanger used in the HVAC product.

C. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially-available products or in working prototypes to be 
technologically feasible. 10 CFR part 430, subpart C, appendix A, 
section 4(a)(4)(i).
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; and (3) adverse impacts on 
health or safety. 10 CFR part 430, subpart C, appendix A, section 
4(a)(4)(ii)-(iv). Additionally, it is DOE policy not to include in its 
analysis any proprietary technology that is a unique pathway to 
achieving a certain efficiency level. Section IV.B of this notice 
discusses the results of the screening analysis for residential furnace 
fans, particularly the designs DOE considered, those it screened out, 
and those that are the basis for the trial standard levels (TSLs) in 
this rulemaking. For further details on the screening analysis for this 
rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt a new standard for a type or class of 
covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (``max-tech'') improvements in energy efficiency for 
residential furnace fans, using the design parameters for the most-
efficient products available on the market or in working prototypes. 
The max-tech levels that DOE determined for this rulemaking are 
described in

[[Page 64078]]

section IV.C of this proposed rule and in chapter 5 of the NOPR TSD.

D. Energy Savings

1. Determination of Savings
    For each TSL, DOE projected energy savings from the products that 
are the subject of this rulemaking purchased in the 30-year period that 
begins in the anticipated year of compliance with new standards (2019-
2048). These savings are measured over the entire lifetime of products 
purchased in the 30-year analysis period.\15\ DOE quantified the energy 
savings attributable to each TSL as the difference in energy 
consumption between each standards case and the base case. The base 
case represents a projection of energy consumption in the absence of 
mandatory energy conservation standards, and it considers market forces 
and policies that affect demand for more-efficient products.
---------------------------------------------------------------------------

    \15\ In the past, DOE presented energy savings results for only 
the 30-year period that begins in the year of compliance. In the 
calculation of economic impacts, however, DOE considered operating 
cost savings measured over the entire lifetime of products purchased 
in the 30-year period. DOE has chosen to modify its presentation of 
national energy savings to be consistent with the approach used for 
its national economic analysis.
---------------------------------------------------------------------------

    DOE used its national impact analysis (NIA) spreadsheet model to 
estimate energy savings from potential standards for the products that 
are the subject of this rulemaking. The NIA spreadsheet model 
(described in section IV.H of this notice) calculates energy savings in 
site energy, which is the energy directly consumed by products at the 
locations where they are used. DOE reports national energy savings on 
an annual basis in terms of the primary (source) energy savings, which 
is the savings in the energy that is used to generate and transmit the 
site energy. To convert site energy to primary energy, DOE derived 
annual conversion factors from the model used to prepare the Energy 
Information Administration's (EIA's) Annual Energy Outlook 2012 (AEO 
2012).
    DOE has begun to also estimate energy savings using full-fuel-cycle 
metrics. 76 FR 51282 (Aug. 18, 2011), as amended at 77 FR 49701 (August 
17, 2012). The full-fuel-cycle (FFC) metric includes the energy 
consumed in extracting, processing, and transporting primary fuels 
(i.e., coal, natural gas, petroleum fuels), and thus presents a more 
complete picture of the impacts of efficiency standards. DOE's approach 
is based on calculation of an FFC multiplier for each of the primary 
fuels used by covered products and equipment. For more information on 
FFC energy savings, see section IV.H.1.
2. Significance of Savings
    As noted above, 42 U.S.C. 6295(o)(3)(B) prevents DOE from adopting 
a standard for a covered product unless such standard would result in 
``significant'' energy savings. Although the term ``significant'' is 
not defined in the Act, the U.S. Court of Appeals for the District of 
Columbia Circuit, in Natural Resources Defense Council v. Herrington, 
768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended 
``significant'' energy savings in this context to be savings that were 
not ``genuinely trivial.'' The energy savings for all of the TSLs 
considered in this rulemaking are nontrivial, and, therefore, DOE 
considers them ``significant'' within the meaning of section 325 of 
EPCA.

E. Economic Justification

1. Specific Criteria
    As discussed above, EPCA provides seven factors to be evaluated in 
determining whether a potential energy conservation standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential new or amended standard 
on manufacturers, DOE conducts a manufacturer impact analysis (MIA), as 
discussed in section IV.J. DOE first uses an annual cash-flow approach 
to determine the quantitative impacts. This step includes both a short-
term assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include: (1) Industry net 
present value (INPV), which values the industry on the basis of 
expected future cash flows; (2) cash flows by year; (3) changes in 
revenue and income; and (4) other measures of impact, as appropriate. 
Second, DOE analyzes and reports the impacts on different types of 
manufacturers, including impacts on small manufacturers. Third, DOE 
considers the impact of standards on domestic manufacturer employment 
and manufacturing capacity, as well as the potential for standards to 
result in plant closures and loss of capital investment, as discussed 
in section IV.N. Finally, DOE takes into account cumulative impacts of 
various DOE regulations and other regulatory requirements on 
manufacturers.
    For individual consumers, measures of economic impact include the 
changes in life-cycle cost (LCC) and payback period (PBP) associated 
with new or amended standards. The LCC, which is specified separately 
in EPCA as one of the seven factors to be considered in determining the 
economic justification for a new or amended standard, 42 U.S.C. 
6295(o)(2)(B)(i)(II), is discussed in the following section. For 
consumers in the aggregate, DOE also calculates the national net 
present value of the economic impacts applicable to a particular 
rulemaking.
b. Life-Cycle Costs
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC savings for the considered efficiency levels are 
calculated relative to a base case that reflects projected market 
trends in the absence of standards. The LCC analysis requires a variety 
of inputs, such as product prices, product energy consumption, energy 
prices, maintenance and repair costs, product lifetime, and consumer 
discount rates. For its analysis, DOE assumes that consumers will 
purchase the considered products in the first year of compliance with 
new standards.
    To account for uncertainty and variability in specific inputs, such 
as product lifetime and discount rate, DOE uses a distribution of 
values, with probabilities attached to each value. DOE identifies the 
percentage of consumers estimated to receive LCC savings or experience 
an LCC increase, in addition to the average LCC savings associated with 
a particular standard level. DOE also evaluates the LCC impacts of 
potential standards on identifiable subgroups of consumers that may be 
affected disproportionately by a national standard. DOE's LCC analysis 
is discussed in further detail in section IV.F.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section IV.H, DOE uses

[[Page 64079]]

the NIA spreadsheet to project national energy savings.
d. Lessening of Utility or Performance of Products
    In establishing classes of products, and in evaluating design 
options and the impact of potential standard levels, DOE evaluates 
potential standards that would not lessen the utility or performance of 
the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) The standards 
proposed in this notice will not reduce the utility or performance of 
the products under consideration in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider any lessening of competition that is 
likely to result from standards. It also directs the Attorney General 
of the United States (Attorney General) to determine the impact, if 
any, of any lessening of competition likely to result from a proposed 
standard and to transmit such determination to the Secretary within 60 
days of the publication of a proposed rule, together with an analysis 
of the nature and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) 
and (ii)) DOE will transmit a copy of this proposed rule to the 
Attorney General with a request that the Department of Justice (DOJ) 
provide its determination on this issue. DOE will publish and respond 
to the Attorney General's determination in the final rule.
f. Need for National Energy Conservation
    In evaluating the need for national energy conservation, DOE notes 
that the energy savings from the proposed standards are likely to 
provide improvements to the security and reliability of the nation's 
energy system. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) Reductions in the 
demand for electricity also may result in reduced costs for maintaining 
the reliability of the nation's electricity system. DOE conducts a 
utility impact analysis to estimate how standards may affect the 
nation's needed power generation capacity, as discussed in section 
IV.M.
    The proposed standards also are likely to result in environmental 
benefits in the form of reduced emissions of air pollutants and 
greenhouse gases associated with energy production. DOE reports the 
emissions impacts from each TSL it considered in section IV.K of this 
notice. DOE also reports estimates of the economic value of emissions 
reductions resulting from the considered TSLs, as discussed in section 
IV.L.
g. Other Factors
    EPCA allows 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)) 
To the extent interested parties submit any relevant information 
regarding economic justification that does not fit into the other 
categories described above, DOE could consider such information under 
``other factors.''
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analysis generates values used to determine which of the considered 
standard levels meet the three-year payback period contemplated under 
the rebuttable presumption test. The rebuttable presumption payback 
calculation is discussed in section V.B.1 of this notice. In addition, 
DOE routinely conducts an economic analysis that considers the full 
range of impacts to consumers, manufacturers, the Nation, and the 
environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results 
of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification).

IV. Methodology and Discussion

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to residential furnace fans. After a brief 
discussion of the spreadsheet tools and models used, separate 
subsections will address each component of DOE's analysis.
    DOE used three spreadsheet tools to estimate the impact of this 
proposed standards. The first spreadsheet calculates LCCs and payback 
periods of potential standards. The second provides shipments 
forecasts, and then calculates national energy savings and net present 
value impacts of potential standards. Finally, DOE assessed 
manufacturer impacts, largely through use of the Government Regulatory 
Impact Model (GRIM). All three spreadsheet tools are available online 
at the rulemaking portion of DOE's Web site: https://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/41.
    Additionally, DOE estimated the impacts on utilities and the 
environment that would be likely to result from potential standards for 
residential furnace fans. DOE used a version of EIA's National Energy 
Modeling System (NEMS) for the utility and environmental analyses.\16\ 
The NEMS simulates the energy sector of the U.S. economy. EIA uses NEMS 
to prepare its Annual Energy Outlook, a widely-known energy forecast 
for the United States. NEMS 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.
---------------------------------------------------------------------------

    \16\ For more information on NEMS, refer to the U.S. Department 
of Energy, Energy Information Administration documentation. A useful 
summary is National Energy Modeling System: An Overview 2003, DOE/
EIA-0581(2003) (March, 2003).
---------------------------------------------------------------------------

A. Market and Technology Assessment

    DOE develops information that provides an overall picture of the 
market for the products concerned, including the purpose of the 
products, the industry structure, manufacturers, market 
characteristics, and technologies used in the products. This activity 
includes both quantitative and qualitative assessments, based primarily 
on publicly-available information. The subjects addressed in the market 
and technology assessment for this residential furnace fans rulemaking 
include: (1) A determination of the scope of this rulemaking; (2) 
product classes and manufacturers; (3) quantities and types of products 
sold and offered for sale; (4) retail market trends; (5) regulatory and 
non-regulatory programs; and (6) technologies or design options that 
could improve the energy efficiency of the product(s) under 
examination. The key findings of DOE's market assessment are summarized 
below. See chapter 3 of the NOPR TSD for further discussion of the 
market and technology assessment.
1. Definition and Scope of Coverage
    EPCA provides DOE with the authority to consider and prescribe new 
energy conservation standards for electricity used to circulate air 
through duct work. (42 U.S.C. 6295(f)(4)(D)) In the preliminary 
analysis, DOE defined a ``furnace fan'' as ``any electrically-powered 
device used in residential, central heating, ventilation, and air-
conditioning (HVAC) systems for the purpose of circulating air through 
duct

[[Page 64080]]

work.'' 77 FR 40530, 40532 (July 10, 2012). DOE considered a typical 
furnace fan as consisting of a fan motor and its controls, an impeller, 
and a housing, all of which are components of an HVAC product that 
includes additional components, including the cabinet.
    Interested parties disagreed with DOE's approach to set component-
level regulations, which they warned would ignore system effects that 
could impact both fan and system energy consumption. CA IOUs suggested 
that ``furnace fan'' be defined as a unit consisting of a fan motor, 
its controls, an impeller, shroud, and cabinet that houses all of the 
heat exchange material for the furnace. According to CA IOUs, their 
suggested definition would reduce ambiguity and ensure that the 
components in HVAC products that affect furnace fan energy consumption 
are considered in this rulemaking. (CA IOUs, No. 56 at p. 1) Ingersoll 
Rand went further and suggested a system-level regulatory approach, 
where the entire duct and furnace system would be regulated, 
maintaining that such approach would produce a more useful metric to 
consumers when evaluating performance. (Ingersoll Rand, No. 43 at p. 
42) Conversely, NEEP observed that by regulating fan energy use 
separately, the individual efficiency of the component is considered 
when it would otherwise be ignored by manufacturers. (NEEP, No. 51 at 
p. 3) Rheem commented that some designs require higher air velocity to 
improve heat transfer but also require more electrical consumption to 
drive the blower at the higher velocity. (Rheem, No. 43 at p. 63) Rheem 
commented that turbulent flow is considerably more efficient for heat 
transfer than laminar flow, but more energy is required to move 
turbulent air. (Rheem, No. 54 at p. 10) Similarly, Lennox and Morrison 
commented that in order to improve heating and cooling efficiency, 
often a second heating coil is added, but this also leads to higher 
electrical consumption by the furnace fan. (Lennox, No. 43 at p. 64; 
Morrison, No. 43 at p. 64) Ingersoll Rand argued that as the efficiency 
of the furnace fan motor increases, it dissipates less heat and a 
furnace consumes more gas to compensate and meet house heat load. 
(Ingersoll Rand, No. 43 at p. 66)
    In response, DOE is required by EPCA to consider and prescribe new 
energy conservation standards or energy use standards for electricity 
used for purposes of circulating air through duct work. (42 U.S.C. 
6295(f)(4)(D)) Pursuant to this statutory mandate, DOE plans to 
establish energy conservation standards for circulation fans used in 
residential central HVAC systems. DOE does not interpret its authority 
as including the duct work itself. DOE is aware that component-level 
regulations could have system-level impacts. Accordingly, DOE plans to 
conduct its analyses and set standards in such a way that meets the 
statutory requirements set forth by EPCA without ignoring system 
effects, which otherwise might compromise the thermal performance of 
the HVAC products that incorporate furnace fans. For example, the 
proposed test procedure outlined in the April 2, 2013 SNOPR specifies 
that the furnace fan be tested as factory-installed in the HVAC 
product, thereby enabling the rating metric to account for system 
effects on airflow delivery and, ultimately, energy performance. 78 FR 
19606, 19612-13. In addition, the product class structure allows for 
differentiation of products with designs that achieve higher thermal 
efficiency but may have lower fan performance, such as condensing 
furnaces.
    The scope of the preliminary analysis included furnace fans used in 
furnaces, modular blowers, and hydronic air handlers. Even though DOE 
has interpreted its authority as encompassing any electrically-powered 
device used in residential HVAC products to circulate air through duct 
work, the preliminary analysis scope excluded single package central 
air conditioners (CAC) and heat pumps (HP) and split-system CAC/HP 
blower-coil units. At the time of the preliminary analysis, DOE 
determined that it may consider these and other such products in a 
future rulemaking as data and information to develop credible analyses 
becomes available.
    Efficiency advocates expressed concern at the exclusion of packaged 
and split-system CAC products because they believe current standards 
for these products do not maximize the technologically feasible and 
economically justified energy savings for the circulation fans 
integrated in these products. ASAP and Adjuvant stated that the metric 
used for CAC products does not accurately represent field conditions 
and requested that they be added to the scope. (ASAP, No. 43 at p. 17; 
Adjuvant, No. 43 at p. 39) Specifically, efficiency advocates found 
that the reference external static pressures (ESPs) used to determine 
the seasonal energy efficiency ratio (SEER) and heating seasonal 
performance factor (HSPF), which already rate these products, did not 
reflect field-installed conditions. (ASAP, No. 43 at p. 38; 
Earthjustice, No. 49 at p. 1) In a joint comment from ACEEE, ASAP, 
NCLC, NEEA, and NRDC (hereafter referred to as ACEEE, et al.), in 
addition to a comment from CA IOU, efficiency advocates and utilities 
stated that the reference ESP of 0.1-0.2 in. w.c. was too low when 
compared to the average field ESP of 0.73 in. w.c. identified in the 
TSD. (ACEEE, et al., No. 55 at p. 1; CA IOU, No. 56 at p. 2) ACEEE, et 
al. also noted that SEER and HSPF do not account for continuous-
circulation operation which is expected to increase as stricter 
building codes call for tighter building envelopes. (ACEEE, et al., No. 
55 at p. 2; CA IOU, No. 56 at p. 3) NEEP commented that SEER and HSPF 
do not reward for any efficiency gains made by the furnace fan. (NEEP, 
No. 51 at p. 3) By excluding these products from the analysis, ACEEE, 
et al. argued that DOE is ignoring a significant fraction of the 
furnace fan market. (ACEEE, et al., No. 55 at p. 1)
    In contrast, many manufacturers believe that the scope of coverage 
presented in the preliminary analysis exceeds the statutory authority 
granted to DOE because the statutory language for this rulemaking is 
found in 42 U.S.C 6295(f) under the title ``Standards for furnaces and 
boilers.'' Consequently, manufacturers stated that DOE should not 
include any non-furnace products such as central air conditioners, heat 
pumps, or condensing unit-blower-coil combinations. Lennox, Mortex, and 
First Co. explicitly stated that no equipment other than residential 
furnaces and boilers should be included, as doing so is beyond DOE's 
statutory authority. (Lennox, No. 47 at p. 4; Mortex, No. 59 at p. 1; 
First Co., No. 53 at p. 1) Mortex further stated that the electricity 
used to circulate air through duct work is already adequately accounted 
for in existing energy efficiency metrics, and that if DOE insists on 
proceeding on new energy conservation standards for furnace fans, DOE 
should limit it to residential warm air furnaces until there is a 
change made by Congress to include additional products. (Mortex, No. 59 
at p. 1) Goodman and Ingersoll Rand argued that packaged equipment and 
air handlers should not be included in the scope because the electrical 
energy consumed by these products to circulate air through duct work is 
already accounted for in SEER and HSPF. (Goodman, No. 50 at p. 7; 
Ingersoll Rand, No. 57 at pp. A-1) Rheem and Morrison recommended that 
hydronic air handlers and modular blowers be excluded from the scope 
because these products have not been previously covered by an energy 
conservation standard and cannot be defined as furnaces. (Morrison, No. 
43 at p. 94;

[[Page 64081]]

Morrison, No. 58 at p. 9; Rheem, No. 54 at p. 2)
    Manufacturers also argued that the electricity used to circulate 
air through duct work for warm air furnaces with cooling capabilities 
is already covered by SEER. (Goodman, No. 50 at p. 7; Mortex, No. 59 at 
p. 1) Additionally, for a residential warm air furnace, Mortex stated 
that Eae already accounts for heating-mode-related energy 
consumption, including energy consumed by the fan. (Mortex, No. 59 at 
p. 2) Additionally, by including annual furnace fan cooling and heating 
electricity consumption in the FER metric, central air conditioner and 
heat pumps products will be covered by multiple metrics. (Goodman, No. 
50 at p. 6; Mortex, No. 59 at p. 2)
    As discussed in the furnace fan test procedure April 2, 2013 SNOPR, 
DOE notes that, although the title of this statutory section refers to 
``furnaces and boilers,'' the applicable provision at 42 U.S.C. 
6295(f)(4)(D) was written using notably broader language than the other 
provisions within the same section. 78 FR 19606, 19611. Specifically, 
that statutory provision directs DOE to ``consider and prescribe energy 
conservation standards or energy use standards for electricity used for 
purposes of circulating air through duct work.'' Such language could be 
interpreted as encompassing electrically-powered devices used in any 
residential HVAC product to circulate air through duct work, not just 
furnaces, and DOE has received numerous comments on both sides of this 
issue. At the present time, however, DOE is only proposing energy 
conservation standards for those circulation fans that are used in 
residential furnaces and modular blowers (see discussion below). As a 
result, DOE is not addressing public comments that pertain to fans in 
other types of HVAC products. The following list describes the furnace 
fans which DOE proposes to address in this rulemaking.

 Products addressed in this rulemaking: furnace fans used in 
weatherized and non-weatherized gas furnaces, oil furnaces, electric 
furnaces, and modular blowers.
 Products not addressed in this rulemaking: furnace fans used 
in other products, such as split-system CAC and heat pump air handlers, 
through-the-wall air handlers, small-duct, high-velocity (SDHV) air 
handlers, energy recovery ventilators (ERVs), heat recovery ventilators 
(HRVs), draft inducer fans, exhaust fans, or hydronic air handlers.

    DOE is using the term ``modular blower'' to refer to HVAC products 
powered by single-phase electricity that comprise an encased 
circulation blower that is intended to be the principal air circulation 
source for the living space of a residence. A modular blower is not 
contained within the same cabinet as a residential furnace, CAC, or 
heat pump. Instead, modular blowers are designed to be paired with 
separate residential HVAC products that provide heating and cooling, 
typically a separate CAC/HP coil-only unit. DOE finds that modular 
blowers and electric furnaces are very similar in design. In many 
cases, the only difference between a modular blower and electric 
furnace is the presence of an electric resistance heating kit. DOE is 
aware that some modular blower manufacturers offer electric resistance 
heating kits to be installed in their modular blower models so that the 
modular blowers can be converted to stand-alone electric furnaces. In 
addition, FER values for modular blowers can be easily calculated using 
the proposed test procedure. DOE proposes to address the furnace fans 
used in modular blowers in this rulemaking for these reasons.
    After considering available information and public comments 
regarding fan operation in cooling mode, DOE maintains its proposal to 
account for the electrical consumption of furnace fans while performing 
all active mode functions (i.e., heating, cooling, and constant 
circulation). DOE recognizes that furnace fans are used not just for 
circulating air through duct work during heating operation, but also 
for circulating air during cooling and constant-circulation operation. 
DOE anticipates that higher airflow-control settings are factory set 
for cooling operation. Therefore, DOE expects that the electrical 
energy consumption of a furnace fan is generally higher while 
performing the cooling function. Additionally, the design of the fan as 
well as its typical operating characteristics (i.e., ESP levels during 
operation in different modes) is directly related to the performance 
requirements in cooling mode. DOE is also concerned that excluding some 
functions from consideration in rating furnace fan performance would 
incentivize manufacturers to design fans that are optimized to perform 
efficiently at the selected rating airflow-control settings but that 
are not efficient over the broad range of field operating conditions. 
In DOE's view, in order to obtain a complete assessment of overall 
performance and a metric that reflects the product's electrical energy 
consumption during a representative average use cycle, the metric must 
account for electrical consumption in a set of airflow-control settings 
that spans all active mode functions. This would ensure a more accurate 
accounting of the benefits of improved furnace fans.
    DOE is aware that fan electrical consumption is accounted for in 
the SEER and HSPF metrics that DOE uses for CAC and heat pump products. 
However, DOE does not agree with manufacturers' comments suggesting 
that the electricity used to circulate air through duct work is already 
adequately accounted for in existing energy efficiency metrics of other 
covered products, particularly the SEER and HSPF metrics of CAC/HP. 
This is because SEER and HSPF are used to test cooling and heating 
performance of a CAC or heat pump product, whereas FER rates airflow 
performance of a furnace fan product. While furnace fan airflow 
performance contributes to cooling and heating performance, 
manufacturers can improve SEER and HSPF without improving fan 
performance. In short, SEER and HSPF-based standards do not directly 
regulate the efficiency of furnace fans, as required by 42 U.S.C. 
6295(f)(4)(D). DOE recognizes that the energy savings in cooling mode 
from higher-efficiency furnace fans used in some higher-efficiency CAC 
and heat pumps is already accounted for in the analysis of energy 
conservation standards for those products. As a result, DOE conducted 
its analysis in this current rulemaking in such a way as to avoid 
double-counting these benefits by excluding furnace fan electricity 
savings that were already included in DOE's analyses for CAC and heat 
pump products. Chapter 7 of the NOPR TSD provides a more detailed 
discussion of this issue.
2. Product Classes
    DOE identified nine key product classes in the preliminary 
analysis, each of which was assigned its own candidate energy 
conservation standard and baseline FER. DOE identified twelve 
additional product classes that represent significantly fewer shipments 
and significantly less overall energy use. DOE grouped each non-key 
product class with a key product class to which it is closely related 
in application-specific design and internal structure (i.e., the 
primary criteria used to differentiate between product classes). DOE 
assigned the analytical results of each key product class to the non-
key product classes with which it is grouped because DOE expected the 
energy use and incremental manufacturer production costs (MPCs) of 
improving

[[Page 64082]]

efficiency to be similar within each grouping. Table IV.1 lists the 21 
preliminary analysis product classes.

            Table IV.1--Preliminary Analysis Product Classes
------------------------------------------------------------------------
           Key product class                Additional product classes
------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas
 Furnace Fan (NWG-NC).
Non-weatherized, Condensing Gas Furnace
 Fan (NWG-C).
Weatherized Non-Condensing Gas Furnace   Weatherized, Non-Condensing Oil
 Fan (WG-NC).                             Furnace Fan (WO-NC).
                                         Weatherized Electric Furnace/
                                          Modular Blower Fan (WEF/WMB).
                                         Manufactured Home Weatherized
                                          Gas Furnace Fan (MH-WG).
                                         Manufactured Home Weatherized
                                          Oil Furnace Fan (MH-WO).
                                         Manufactured Home Weatherized
                                          Electric Furnace/Modular
                                          Blower Fan (MH-WEF/WMB).
Non-weatherized, Non-Condensing Oil      Non-Weatherized, Condensing Oil
 Furnace Fan (NWO-NC).                    Furnace Fan (NWO-C).
                                         Manufactured Home Non-
                                          Weatherized Oil Furnace Fan
                                          (MH-NWO).
Non-weatherized Electric Furnace/        ...............................
 Modular Blower Fan (NWEF/NWMB).
Heat/Cool Hydronic Air Handler Fan (HAH- Heat-Only Hydronic Air Handler
 HC).                                     Fan (HAH-H).
                                         Hydronic Air Handler Fan with
                                          Coil (HAH-C).
                                         Manufactured Home Heat/Cool
                                          Hydronic Air Handler Fan (MH-
                                          HAH-HC).
                                         Manufactured Home Heat-Only
                                          Hydronic Air Handler Fan (MH-
                                          HAH-H).
                                         Manufactured Home Hydronic Air
                                          Handler Fan with Coil (MH-HAH-
                                          C).
Manufactured Home Non-Weatherized, Non-  ...............................
 Condensing Gas Furnace Fan (MH-NWG-NC).
Manufactured Home Non-Weatherized,       ...............................
 Condensing Gas Furnace Fan (MH-NWG-C).
Manufactured Home Electric Furnace/      ...............................
 Modular Blower Fan (MH-EF/MB).
------------------------------------------------------------------------

    Goodman and Rheem agreed that the selected key product classes are 
an accurate representation of the market, with Rheem commenting that it 
manufactures six of the nine proposed key product classes. (Goodman, 
No. 50 at p. 1; Rheem, No. 54 at p. 4) NEEP found that the proposed key 
product class structure appropriately allows for differentiation of 
products with higher thermal efficiency. (NEEP, No. 51 at p. 2) 
Goodman, Rheem, and Ingersoll Rand disagreed with DOE's approach to 
specify additional product classes within a key product class, stating 
that shipment data indicates that the additional product classes are 
too small to be covered. (Goodman, No. 50 at p. 1; Ingersoll Rand, No. 
57 at pp. A-1; Rheem, No. 54 at p. 4)
    Mortex expressed concern that the key product classes only 
represent furnace fan products with the most shipments and, if the 
energy conservation standards are set inappropriately high for these 
key product classes, the additional products classes (some of which 
serve unique applications) may also have trouble meeting any scaled 
standards levels based thereon. (Mortex, No. 43 at p. 53)
    DOE agrees with Goodman, Rheem, and Ingersoll Rand that the 
additional product classes represent products with few and in many 
cases, no shipments. Individual discussions with manufacturers for the 
MIA confirm DOE's assumption. Additionally, review of the AHRI 
appliance directory reveals that only two of the additional product 
classes have active models listed: (1) Manufactured home weatherized 
gas furnace fans (MH-WG) and (2) manufactured home non-weatherized oil 
furnace fans (MH-NWO). The number of active basic models for MH-WG and 
MH-NWO are 4 and 16, respectively. For this reason, DOE proposes to 
eliminate the additional product classes except for MH-WG and MH-NWO. 
Due to the limited number of basic models for MH-WG and MH-NWO, DOE did 
not have data to directly analyze and establish standards for these 
additional product classes. As a result, DOE proposes to reserve space 
to establish standards for MH-WG and MH-NWO furnace fans in the future 
as sufficient data become available.
    As discussed previously in section IV.A.1, DOE proposes to also 
exclude hydronic air handlers from consideration in this rulemaking, 
thereby further reducing the number of product classes addressed by 
this rulemaking to eight. Table IV.2 includes a list of the revised set 
of product classes for residential furnace fans.

    Table IV.2--Proposed Product Classes for Residential Furnace Fans
------------------------------------------------------------------------
                              Product class
-------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan (NWG-NC).
Non-Weatherized, Condensing Gas Furnace Fan (NWG-C).
Weatherized Non-Condensing Gas Furnace Fan (WG-NC).
Non-Weatherized, Non-Condensing Oil Furnace Fan (NWO-NC).
Non-Weatherized Electric Furnace/Modular Blower Fan (NWEF/NWMB).
Manufactured Home Non-Weatherized, Non-Condensing Gas Furnace Fan (MH-
 NWG-NC).
Manufactured Home Non-Weatherized, Condensing Gas Furnace Fan (MH-NWG-
 C).
Manufactured Home Electric Furnace/Modular Blower Fan (MH-EF/MB).
Manufactured Home Weatherized Gas Furnace Fan (MH-WG).
Manufactured Home Non-Weatherized Oil Furnace Fan (MH-NWO).
------------------------------------------------------------------------


[[Page 64083]]

3. Technology Options
    In the preliminary analysis, DOE considered seven technology 
options that would be expected to improve the efficiency of furnace 
fans: (1) Fan housing and airflow path design modifications; (2) high-
efficiency fan motors (in some cases paired with multi-stage or 
modulating heating controls); (3) inverter-driven permanent-split 
capacitor (PSC) fan motors; (4) backward-inclined impellers; (5) 
constant-airflow brushless permanent magnet (BPM) motor control relays; 
(6) toroidal transformers; and (7) switching mode power supplies. Since 
that time, DOE notes that its proposed scope of coverage no longer 
includes hydronic air handlers, the only furnace fan product class for 
which standby mode and off mode energy consumption is not accounted for 
in a separate DOE rulemaking. Consequently, the standby mode and off 
mode technology options (options 5 through 7 in the list above) are no 
longer applicable, because energy consumption in those modes is already 
fully accounted for in the DOE energy conservation standards rulemaking 
for residential furnaces and residential CAC and HP for the remaining 
proposed product classes. 76 FR 37408 (June 27, 2011); 76 FR 67037 
(Oct. 31, 2011). In addition, DOE found that multi-staging and 
modulating heating controls can also improve FER, so hence DOE 
evaluated multi-staging and modulating heating controls as a separate 
technology option for the NOPR. Thus, the resultant list of potential 
technology options identified for the NOPR include: (1) Fan housing and 
airflow path design modifications; (2) inverter-driven PSC fan motors; 
(3) high-efficiency fan motors; (4) multi-staging and modulating 
heating controls; and (5) backward-inclined impellers. Each identified 
technology option is discussed below and in more detail in chapter 3 of 
the NOPR TSD.
a. Fan Housing and Airflow Path Design Improvements
    The preliminary analysis identified fan housing and airflow path 
design modifications as potential technology options for improving the 
energy efficiency of furnace fans. Optimizing the shape of the inlet 
cone \17\ of the fan housing, minimizing gaps between the impeller and 
fan housing inlet, and optimizing cut-off location and manufacturing 
tolerances were identified as enhancements to a fan housing that could 
improve efficiency. Separately, modification of elements in the airflow 
path, such as the heat exchanger, could reduce internal static pressure 
and as a result, reduce energy consumption. Manufacturer input was 
requested to determine the use and practicability of these potential 
technology options.
---------------------------------------------------------------------------

    \17\ The inlet cone is the opening of the furnace fan housing 
through which return air enters the housing. The inlet cone is 
typically curved inward, forming a cone-like shape around the 
perimeter of the opening, to provide a smooth surface to direct air 
from outside the housing to inside the housing and into the 
impeller.
---------------------------------------------------------------------------

    ASAP expressed support for DOE's consideration of the aerodynamics 
of furnace fan cabinets in its initial analysis of technology options. 
(ASAP, No. 43 at p. 16) In particular, ASAP cited a 2003 GE study \18\ 
that quantified energy savings produced by modifying fan housing as 
justification for its inclusion as an option. (ASAP, No. 43 at p. 71) 
ACEEE, et al. also cited a Lawrence Berkeley National Laboratory (LBNL) 
study \19\ that linked changes in efficiency to modifying the clearance 
between fan housing and an air handler cabinet wall. (ACEEE, et al., 
No. 55 at p. 2) According to Ingersoll Rand, there are proprietary fan 
housing designs on the market that already improve mechanical 
efficiency by 10-20 percent at a cost much lower than the cost to 
implement high-efficiency motors or make changes to the impeller and 
its tolerances. (Ingersoll Rand, No. 57 at pp. A-3)
---------------------------------------------------------------------------

    \18\ Wiegman, Herman, Final Report for the Variable Speed 
Integrated Intelligent HVAC Blower (2003) (Available at: https://www.osti.gov/bridge/servlets/purl/835010-GyvYDi/native/835010.pdf).
    \19\ Walker, I.S, State-of-the-art in Residential and Small 
Commercial Air Handler Performance (2005) LBNL 57330 (Available at: 
https://epb.lbl.gov/publications/pdf/lbnl-57330plus.pdf).
---------------------------------------------------------------------------

    DOE is aware of the studies cited by ASAP and ACEEE, as well as the 
proprietary housing design mentioned by Ingersoll Rand. For the NOPR, 
DOE decided to include fan housing design modifications as a technology 
to be evaluated further in the screening analysis because of these 
indications that each could improve fan efficiency.
    Many interested parties requested that DOE keep airflow path design 
as a technology option. (Unico, No. 43 at p. 72; EPA, No. 43 at p. 76; 
ASAP, No. 43 at p. 77; CA IOU, No. 56 at p. 3; ACEEE, et al., No. 55 at 
p. 2) Manufacturers stated that improving airflow path design, like 
modifying fan housing, is highly cost-effective when compared to other 
enhancements. (Rheem, No. 43 at p. 74; Lennox, No. 43 at p. 74; 
Adjuvant, No. 43 at p. 74) Lennox noted a 10-20 percent improvement in 
efficiency could be achieved by changing the airflow path when 
evaluated against a baseline design coupled with a PSC motor. (Lennox, 
No. 47 at p. 9; Morrison, No. 58 at p. 5) However, the EPA questioned 
whether considering modified airflow path as a technology option was 
appropriate when DOE plans to only regulate the fan itself and not the 
entire air handler. (EPA, No. 43 at p. 62)
    While Morrison agreed that airflow path and fan housing design 
affect performance and efficiency, it argued that establishing a 
baseline design (over which to determine improvement) might be 
difficult because parameters used to select an individual 
manufacturer's design may have taken into account considerations 
outside the scope of the furnace fan rulemaking. (Morrison, No. 43 at 
p. 75) Rheem suggested that AHRI should present airflow path and fan 
housing design data to the DOE in order to help establish the two 
technology options. (Rheem, No. 43 at p. 79)
    Similar to the fan housing design modifications, DOE decided to 
include airflow path design as a technology option to be evaluated 
further in the screening analysis as a result of these claims of 
potential fan efficiency improvement. In response to the comment 
received from the EPA, DOE believes including airflow path design is 
appropriate because of its potential to impact fan efficiency. Airflow 
path design will impact the proposed rating metric, FER, because DOE is 
proposing to test the furnace fan as it is factory installed in the 
HVAC product. As discussed previously in section IV.A.1, DOE has 
conducted its NOPR analyses in such a way as to meet the statutory 
requirements set forth by EPCA without ignoring system effects. Chapter 
3 of the NOPR TSD provides more technical detail regarding fan housing 
and airflow path design modifications and how these measures could 
reduce furnace fan energy consumption.
b. Inverter Controls for PSC Motors
    In the preliminary analysis, DOE identified inverter-driven PSC 
motors as a technology option. DOE is aware of a series of non-
weatherized gas furnaces with inverter-driven PSC furnace fan motors 
that was once commercially available. DOE has determined that inverter 
controls provide efficiency improvement by offering additional 
intermediate airflow-control settings and a wider range of airflow-
control settings (i.e., lower turndown ratio) than conventional PSC 
controls. The additional airflow-control settings and range enable the 
furnace fan to better match demand. Publically-available performance 
data for the series of furnaces using inverter-driven PSCs demonstrate 
that the use of this technology results in reduced FER

[[Page 64084]]

values compared to baseline PSC furnace fans. Consequently, DOE 
considered inverter-driven PSCs as a technologically feasible option 
for reducing furnace fan energy consumption.
    Manufacturers were opposed to listing inverter-driven PSCs as a 
viable technology option. Goodman commented that there are alternate, 
more cost-effective solutions to reduce energy consumption for air-
moving systems, such as airflow path design. (Goodman, No. 50 at p. 2) 
Ingersoll Rand and Morrison commented that the small energy savings 
provided by inverter-driven PSCs are not worth the added cost and 
complexity when ECM (referred to herein by DOE as a ``constant-airflow 
BPM motor'') technology is available at a comparable cost and greater 
efficiency. (Ingersoll Rand, No. 57 at pp. A-1; Morrison, No. 58 at p. 
2; Rheem, No. 54 at p. 6) Morrison suggested that the motor industry 
was seeking lower-cost alternatives to ECM motors, such as fractional 
horsepower switched reluctance motors or inverter-driven PSCs, but that 
no low-cost alternative currently exists. (Morrison, No. 58 at p. 2) 
NMC, a motor manufacturer, went further, stating that inverter-driven 
PSC motors using wave chopper controls are not typically more efficient 
than multi-tap PSC motors and that they are not a practical alternative 
to brushless permanent magnet technology. (NMC, No. 60 at p. 2)
    DOE recognizes manufacturers' concerns with the cost-effectiveness 
of inverter-driven PSC fan motors. However, DOE decided to include 
inverter-driven PSC motors as a technology option to be evaluated 
further in the screening analysis due to their potential to reduce 
furnace fan energy consumption. DOE evaluates in the engineering 
analysis the cost-effectiveness of all energy-saving technology options 
that are not screened out. Chapter 3 of the NOPR TSD provides a more 
detailed discussion of inverter-driven PSC furnace fan motors.
c. High-Efficiency Motors
    In the preliminary analysis, DOE identified four motor types that 
are typically used in furnace fan assemblies: (1) PSC motors; (2) PSC 
motors that have more than 3 airflow-control settings and sometimes 
improved materials (hereinafter referred to as ``improved PSC'' 
motors); (3) constant-torque BPM motors (often referred to as ``X13 
motors''); and (4) constant-airflow BPM motors (often referred to as 
``ECMs'').\20\ DOE finds that furnace fans using high-efficiency motor 
technology options operate more efficiently than furnace fans using 
baseline PSC motors by:
---------------------------------------------------------------------------

    \20\ ``ECM'' and ``X13'' refer to the constant-airflow and 
constant torque (respectively) BPM offerings of a specific motor 
manufacturer. Throughout this notice, DOE will refer to these 
technologies using generic terms, which are introduced in the list 
above. However, DOE's summaries of interested-party submitted 
comments include the terminology used by the interested party when 
referring to motor technologies.
---------------------------------------------------------------------------

     Functioning more efficiently at a given operating 
condition;
     Maintaining efficiency throughout the expected operating 
range; and
     Achieving a lower turndown ratio \21\ (i.e., ratio of 
airflow in lowest setting to airflow in highest setting).
---------------------------------------------------------------------------

    \21\ A lower turndown ratio can significantly improve furnace 
fan efficiency because fan input power has a cubic relationship with 
airflow.
---------------------------------------------------------------------------

    Ingersoll Rand commented that a PSC motor will use less energy at 
higher static pressures, while an ECM increases energy use as static 
pressure rises. Ingersoll Rand stated that as a result, understanding 
the impact of switching to an ECM at higher static pressures may 
confuse the consumer. (Ingersoll Rand, No. 43 at p. 67)
    DOE is aware that consumers may be confused when BPM motors 
(referred to as ECMs by Ingersoll Rand above) consume more energy than 
PSC motors at higher static pressures, because consumers expect BPM 
motors to consume less energy than PSC motors under the same operating 
conditions. In general, input power to the fan motor increases as 
static pressure increases to provide a given airflow (i.e., the fan 
motor has to work harder in the face of increased resistance to provide 
a desired amount of air).\22\ DOE agrees with Ingersoll Rand that as 
static pressure increases, input power to a PSC-driven furnace fan will 
decrease, which is seemingly contradictory to the principle described 
above. DOE finds that input power to a PSC-driven furnace fan decreases 
because the airflow provided by the fan decreases as static pressure 
rises (i.e., the fan does not have to work as hard in the face of 
increased resistance because the fan is not providing as much air). 
Input power to a constant-airflow BPM motor-driven furnace fan, on the 
other hand, will increase as static pressure rises because the BPM 
motor-driven fan is designed to maintain the desired level of airflow. 
Recognizing that this behavior could complicate comparing the relative 
performance of these motor technologies, DOE's proposed rating metric, 
FER, is normalized by airflow to result in ratings that are in units of 
watts/cfm. DOE believes that a comparison using a watts/cfm metric will 
mitigate confusion by accurately reflecting that even though a 
constant-airflow BPM motor is consuming more power at higher statics, 
it is also providing more airflow, which is useful to the consumer.
---------------------------------------------------------------------------

    \22\ See chapter 3 of the TSD for more details regarding fan 
operation.
---------------------------------------------------------------------------

    Interested parties recognized the benefits provided by constant-
torque and constant-airflow BPM motors. NMC agreed that variable-speed 
technology is useful in furnace fan applications, because the airflow 
settings can be adjusted and optimized for a range of static pressure 
levels. (NMC, No. 60 at p. 1) NEEP supported DOE's proposal for an 
efficiency level based on a constant-torque ECM as part of the furnace 
fan analysis, given that these motors are widely available and less 
expensive than ``full blown'' ECM motors. (NEEP, No. 51 at p. 3) 
Morrison commented that ECM technology offers the best cost for 
performance value. (Morrison, No. 58 at p. 2)
    Interested parties agreed that the BPM motor variations (i.e., 
constant-torque and constant-airflow) and inverter-driven PSC motors 
generally have lower turndown ratios than a three-speed PSC motor. 
Table IV.3 contains the turndown ratio estimates supplied publicly by 
interested parties. Manufacturers generally provided similar feedback 
during interviews. NMC stated that the turndown ratios achieved by ECM 
technology allow for continuous circulation at optimal CFM levels, 
unlike PSC options, which cannot achieve low enough CFM. (NMC, No. 60 
at p. 1) Lennox commented that including constant circulation as part 
of FER will penalize PSCs and artificially inflate the performance of 
ECMs. (Lennox, No. 47 at p. 9) Ingersoll Rand stated that furnace fan 
turndown ability is limited by the physical characteristics of the 
impeller and bearings. (Ingersoll Rand, No. 57 at pp. A-2)

[[Page 64085]]



                           Table IV.3--Stakeholder Estimated Fan Motor Turndown Ratios
----------------------------------------------------------------------------------------------------------------
                                                            Wave chopper     Constant-torque   Constant- airflow
             Stakeholder                     PSC           controller PSC          ECM                ECM
----------------------------------------------------------------------------------------------------------------
NMC (NMC, No. 60 at p. 1)...........               0.45               0.36               0.45               0.20
Goodman (Goodman, No. 50 at p. 2)...          0.70-0.75  .................          0.40-0.50          0.25-0.35
Rheem (Rheem, No. 54 at p. 6).......               0.60  .................               0.30               0.20
----------------------------------------------------------------------------------------------------------------

    Overall, comments regarding high-efficiency motor turndown ratio 
validated DOE's expectation that lower turndowns are associated with 
improved PSCs, inverter-driven PSCs, and BPM motor variations. These 
motors consume significantly less energy over a typical residential 
furnace fan operating range. DOE disagrees with Lennox that including 
constant circulation as part of FER would ``artificially'' inflate the 
performance of BPM motors compared to PSC motors, because DOE concludes 
that there is non-trivial use of this mode by consumers. As part of the 
test procedure rulemaking, DOE estimates that on average, consumers 
operate furnace fans in constant-circulation mode 400 hours annually. 
This estimate is used to weight fan constant-circulation electrical 
energy consumption in FER. Excluding this mode from the rating metric 
would underestimate the potential efficiency improvements of technology 
options, such as BPM motors, that could reduce fan electrical 
consumption while performing this function. A detailed discussion of 
DOE's estimate for national average constant-circulation furnace fan 
operating hours can be found in the test procedure NOPR. 77 FR 28674, 
28682 (May 15, 2012). DOE did not revise these estimates in the test 
procedure SNOPR published on April 2, 2013. 78 FR 19606.
d. Multi-Stage or Modulating Heating Controls
    In the preliminary analysis (77 FR 40530 (July 10, 2012)), DOE 
identified two-stage and modulating heating controls (hereinafter 
collectively referred to as ``multi-stage'' controls) as a method of 
reducing residential furnace fan energy consumption. Multi-stage 
furnaces typically operate at lower heat input rates and, in turn, a 
lower airflow-control setting for extended periods of time compared to 
single-stage furnaces to heat a residence.\23\ Due to the cubic 
relationship between fan input power and airflow, operating at the 
reduced airflow-control setting reduces overall fan electrical energy 
consumption for heating despite the extended hours. In the preliminary 
analysis, DOE analyzed multi-staging controls paired with use of a 
constant-airflow BPM fan motor as one technology option, because DOE 
found the two to be almost exclusively used together in commercially-
available products.
---------------------------------------------------------------------------

    \23\ A further discussion of multi-stage heating controls is 
found in chapter 3 of the preliminary analysis TSD, which can be 
found at the following web address: https://www.regulations.gov/#!documentDetail;D=EERE-2010-BT-STD-0011-0037.
---------------------------------------------------------------------------

    ASAP, ACEEE, NCLC, NRDC, and NEEA encouraged DOE to consider X13-
level motors applied with multi-stage furnace controls as a technology 
option. ACEEE et al. added that they expect an X13-level motor paired 
with multi-stage furnace controls to operate at a lower speed 
(corresponding to the lower burner output) in heating mode for a 
greater number of hours compared to an X13-level motor applied with 
single-stage furnace controls. According to ACEEE et al., the net 
effect of operating at a lower speed for a greater number of hours 
could be electricity savings, because motor power decreases with the 
cube of the speed. (ACEEE et al., No. 55 at p. 3) Rheem commented that 
it does use modulating furnace controls with PSC and X13 motors, not 
just ECM motors. (Rheem, No. 43 at p. 81) During interviews, other 
manufacturers also commented that multi-stage heating controls can be 
and are used regardless of motor type.
    Based on comments from Rheem and other manufacturers, DOE 
recognizes that multi-stage controls can be paired with other motor 
types, not just constant-airflow BPM motors. DOE agrees with ACEEE et 
al. that implementing multi-stage heating controls independent of motor 
type could result in residential furnace fan efficiency improvements. 
Consequently, DOE has decided to de-couple multi-staging controls from 
the constant-airflow BPM motor technology option. Accordingly, DOE has 
evaluated multi-staging controls as a separate technology option for 
the NOPR.
e. Backward-Inclined Impellers
    DOE determined in the preliminary analysis that using backward-
inclined impellers could lead to possible residential furnace fan 
energy savings. Although limited commercial data regarding backward-
inclined impeller performance were available, DOE cited research by 
General Electric that showed large improvements in efficiency were 
achievable under certain operating conditions.\24\
---------------------------------------------------------------------------

    \24\ Wiegman, Herman, Final Report for the Variable Speed 
Integrated Intelligent HVAC Blower (2003) (Available at: https://www.osti.gov/bridge/servlets/purl/835010-GyvYDi/native/835010.pdf).
---------------------------------------------------------------------------

    Morrison disagreed with the DOE's findings, stating that literature 
indicates there are varying degrees of performance improvement when 
backward-inclined impellers are used in place of forward-curved 
impellers. (Morrison, No. 43 at p. 132) Specifically, Morrison cited an 
LBNL study \25\ where a furnace with a backward-inclined impeller 
exhibited no efficiency gains compared to a low efficiency forward-
curved impeller. (Morrison, No. 58 at p. 3) According to Morrison, 
limitations on operating speed also make it necessary to couple 
backward-inclined impellers with high-efficiency motors. (Morrison, No. 
58 at p. 2) Other commenters asserted that the optimal range of 
operation for backward-inclined impellers may fall outside that of 
typical residential furnace fan use. (SCE, No. 43 at p. 59; Ingersoll 
Rand, No. 57 at p. A-3; EEI, No. 60 at p. 2; CA IOU, No. 56 at p. 4) CA 
IOU testing showed that backward-inclined impellers are more sensitive 
to external static pressures, which could also limit their use. (CA 
IOU, No. 56 at p. 4) Rheem stated that improved efficiency of backward-
inclined impellers is often achieved at mid-flow rates and high static 
levels. (Rheem, No. 54 at p. 7) Rheem commented that research by the 
replacement part manufacturer (Lau) reveals that backward-inclined 
impellers, at diameters typically used in residential applications, 
offer no significant efficiency improvements. (Rheem, No. 43 at p. 132)
---------------------------------------------------------------------------

    \25\ Walker, I.S., Laboratory Evaluation of Residential Furnace 
Blower Performance (2005) (Available at: https://www.escholarship.org/uc/item/7tx9c86s#page-1).
---------------------------------------------------------------------------

    Ebm-papst, a company that provides custom air-movement products, 
offered a diverging opinion from most manufacturers regarding the 
energy-saving potential of backward-inclined impellers. That company 
retrofitted

[[Page 64086]]

several HVAC products with furnace fan assemblies that incorporated 
backward-inclined impellers without increasing cabinet size and tested 
them. Depending on the application and the external static pressure 
load (typically 0.5 in.w.c. to 1 in.w.c.), ebm-papst found that the 
backward-inclined impeller achieved input power reductions from 15-30 
percent. (ebm-papst Inc., No. 52 at p. 1) Ebm-papst did note that for 
backward-inclined impellers to match the performance of forward-curved 
impellers without increasing impeller dimensions, fan speed must 
increase. However, ebm-papst did not anticipate that this would be an 
obstacle to implementation using available motor technologies. (ebm-
papst Inc., No. 52 at p. 1)
    DOE recognizes that backward-inclined impellers may not be more 
efficient than forward-curved impellers under all operating conditions 
and that there may be considerable constraints to implementation. 
However, the GE prototype and ebm-papst prototype both demonstrate that 
significant energy consumption reduction is achievable at some points 
within the range of residential furnace fan operation. For this reason, 
DOE has included backward-inclined impellers as a technology option to 
be evaluated further in the screening analysis, where DOE investigates 
any other concerns regarding the use of a technology option, such as 
the practicability to manufacture or impacts on reliability, utility, 
and safety in the screening analysis.

B. Screening Analysis

    DOE uses the following four screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:
    1. Technological feasibility. Technologies that are not 
incorporated in commercial products or in working prototypes will not 
be considered further.
    2. Practicability to manufacture, install, and service. If it is 
determined that mass production and reliable installation and servicing 
of a technology in commercial products could not be achieved on the 
scale necessary to serve the relevant market at the time of the 
compliance date of the standard, then that technology will not be 
considered further.
    3. Impacts on product utility or product availability. If it is 
determined that a technology would have 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 
generally available in the United States at the time, it will not be 
considered further.
    4. Adverse impacts on health or safety. If it is determined that a 
technology would have significant adverse impacts on health or safety, 
it will not be considered further.

(10 CFR part 430, subpart C, appendix A, 4(a)(4) and 5(b))
    In sum, if DOE determines that a technology, or a combination of 
technologies, fails to meet one or more of the above four criteria, it 
will be screened out from further consideration in the engineering 
analysis. The reasons for eliminating any technology are discussed 
below.
    The subsequent sections include comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
    DOE screened out fan housing and airflow path design improvements 
in the preliminary analysis. DOE had little quantitative data to 
correlate specific fan housing alterations with efficiency 
improvements. Additionally, DOE anticipated that any improvements to 
airflow path design that would result in fan efficiency improvement 
would require an increase in furnace fan cabinet size or negatively 
impact heat exchanger performance, thereby compromising the 
practicability to manufacture or reducing utility to consumers.
    Interested parties stated many concerns associated with modifying 
airflow path designs to reduce residential furnace fan electrical 
energy consumption. Morrison provided an example illustrating the 
tradeoffs in thermal performance of selecting an airflow path that 
enhances fan performance. Specifically, Morrison stated that, ``a 90%+ 
efficient furnace will have higher pressure drop through the furnace 
than a similarly sized 80%+ efficient furnace because of the added heat 
transfer surface area.'' (Morrison, No. 58 at p. 5) Conversely, 
manufacturers noted that higher SEER requirements call for increased 
central air conditioner or heat pump indoor coil size, leaving reduced 
space for other HVAC system components. Having to decrease the size of 
the fan due to these additional regulations could also make the furnace 
fan less efficient. (Morrison, No. 43 at p. 62) Mortex and Morrison 
also commented that the primary concern when selecting an airflow path 
design is usually safety or impact on heat transfer, not efficiency. 
(Mortex, No. 43 at p. 135; Morrison, No. 58 at p. 5) AHRI and Rheem 
outlined all of the possible housing design modifications that would 
affect airflow path design, including housing shape, distance between 
components, size of duct openings, and motor mounting. (AHRI, No. 48 at 
p. 3; Rheem, No. 54 at p. 9) AHRI emphasized that some modifications 
could improve or decrease efficiency, but all would require an increase 
in product size and, thus, manufacturing costs. (AHRI, No. 48 at p. 3) 
During manufacturer interviews, many manufacturers reiterated or echoed 
that airflow path design modifications would likely require increasing 
HVAC product size. Manufacturers explained that increasing HVAC 
products size would have adverse impacts on practicability to install 
and consumer utility, because the furnace fan market is predominantly a 
replacement market. Installing HVAC products that are larger in size 
compared to the products they are purchased to replace would likely 
present issues, mainly significant increases in installation costs or 
minimizing product availability to consumers.
    DOE did not receive or find additional quantitative data that shows 
a measurable increase in fan efficiency as a result of a specific fan 
housing or airflow path design modification. Even after individual 
discussion with manufacturers, DOE was not able to identify a case 
where fan housing or airflow path design modifications could lead to 
potential fan energy savings without increasing the size of the HVAC 
product in which the furnace fan is used or compromising thermal 
performance or safety. In response to Morrison's comment, DOE assumes 
that the ``added heat transfer surface area'' in the 90%+ efficient 
furnace that Morrison refers to is the secondary heat exchanger 
typically used in condensing furnaces. DOE is aware of the impacts on 
thermal efficiency and furnace fan performance of the additional heat 
exchanger in condensing furnaces. As discussed in section III.B, DOE 
accounted for these impacts in its criteria for differentiating product 
classes. The 90%+ furnace (condensing) and 80%+ furnace (non-
condensing) that Morrison refers to would not be in the same product 
class

[[Page 64087]]

according to DOE's proposed product classes. In addition, DOE concurs 
with manufacturers' observations that an increase in envelope size 
would adversely impact practicability to manufacture and install, as 
well as product utility. Accordingly, DOE has decided to screen out fan 
housing and airflow path design modifications until quantitative data 
become available to show that a fan housing or airflow path design 
modification results in improved fan efficiency without increasing HVAC 
product size or compromising thermal performance or safety.
2. Remaining Technologies
    Through a review of each technology, DOE found that all of the 
other identified technologies met all four screening criteria to be 
examined further in DOE's analysis. In summary, DOE did not screen out 
the following technology options: (1) Inverter-driven PSC fan motors; 
(2) high-efficiency fan motors; (3) multi-stage heating controls; and 
(4) backward-inclined impellers. DOE understands that all of these 
technology options are technologically feasible, given that the 
evaluated technologies are being used (or have been used) in 
commercially-available products or working prototypes. These 
technologies all incorporate materials and components that are 
commercially available in today's supply markets for the residential 
furnace fans that are the subject of this NOPR. Therefore, DOE believes 
all of the efficiency levels evaluated in this notice are 
technologically feasible. For additional details, please see chapter 4 
of the NOPR TSD.
    DOE finds that all of the remaining technology options also meet 
the other screening criteria (i.e., practicable to manufacture, 
install, and service and do not result in adverse impacts on consumer 
utility, product availability, health, or safety). Interested parties, 
however, voiced concerns regarding these screening criteria as they 
apply to BPM fan motors and backward-inclined impellers. DOE addresses 
these concerns in the sections immediately below. DOE did not receive 
public comments relevant to the screening analysis criteria for the 
other remaining technology options.
a. High-Efficiency Motors
    AHRI stated that there are a limited number of ECM motor suppliers 
to furnace fan manufacturers. (AHRI, No. 48 at p. 2) Lennox commented 
that the technology is proprietary and dominated by a single motor 
manufacturer. Lennox added that industry competition is adversely 
affected as a result. (Lennox, No. 47 at p. 6) AHRI and Lennox noted 
that furnace fan manufacturers already have difficulties securing an 
adequate supply, so mandating ECM use would impact product 
availability. (Lennox, No. 47 at p. 8; AHRI, No. 48 at p. 2) AHRI and 
Mortex stated that no alternative ECM exists at the scale of Regal 
Beloit ECMs and that limiting PSC applicability would reduce product 
flexibility. (AHRI, No. 48 at p. 2; Mortex, No. 43 at p. 129) Both 
Goodman and Ingersoll Rand do not expect that a technology with better 
or equivalent performance to brushless permanent magnet motors will be 
available at a reasonable cost in the next decade. (Goodman, No. 50 at 
p. 2; Ingersoll Rand, No. 57 at pp. A-2)
    Regal Beloit disagreed with residential furnace fan manufacturers, 
claiming that there is more than just a single motor manufacturer 
offering ECM technology. (Regal Beloit, No. 43 at p. 130) NMC concurred 
with Regal Beloit, stating that it too sells brushless permanent magnet 
motors in high volumes to furnace fan manufacturers. (NMC, No. 60 at p. 
2) NMC supported DOE's assumption that after implementation of furnace 
fan efficiency standards, brushless permanent magnet motor technologies 
will become increasingly available over time. (NMC, No. 60 at p. 2) 
Ingersoll Rand confirmed that brushless DC motors are an ECM 
alternative available from several suppliers, although prices vary. 
(Ingersoll Rand, No. 57 at pp. A-2) Although Rheem commented that they 
have applied brushless DC motors produced by more than just a single 
vendor, their current designs and production processes have been 
developed to be specifically paired with Regal Beloit products. (Rheem, 
No. 54 at p. 7) DOE discovered during interviews with manufacturers 
that there are multiple suppliers of BPM motors. DOE also found further 
evidence that some manufacturers purchase BPM motors from multiple 
suppliers. EEI stated that the expiration of Regal Beloit ECM patents 
around 2020 may increase the availability of this motor type while 
decreasing cost. (EEI, No. 43 at p. 127)
    In the preliminary analysis, DOE requested comment as to whether 
manufacturers could alternatively develop BPM motor controls in-house 
when using high-efficiency motors from other, non-Regal Beloit, 
suppliers. Currently, Regal Beloit offers BPM motors packaged with 
controls. Manufacturers may buy BPM motors that are not pre-packaged 
with controls from a supplier other than Regal Beloit, and develop 
their own controls. DOE anticipated that if furnace fan manufacturers 
had the ability to develop controls independently of Regal Beloit, this 
might drive down costs as well as dependency on a single manufacturer.
    Most furnace fan manufacturers claimed that development of in-house 
controls for BPM motors is not an option. For example, Rheem uses 
General Electric and Regal Beloit software tools to program motors and 
does not currently have the capability to design motor controls without 
this tool. (Rheem, No. 54 at p. 6) Lennox and Morrison noted that 
having to design, build, and test motor controls would increase burden 
for large manufacturers and be prohibitively expensive to small 
manufacturers, neither of which have the expertise to develop these 
types of complex controls internally. (Lennox, No. 47 at p. 6; 
Morrison, No. 58 at p. 2) Lennox was also fearful that ECM suppliers 
might find motor control development an attempt to develop a 
replacement product and cut ties with furnace fan manufacturers. 
(Lennox, No. 47 at p. 7)
    NMC confirmed that many U.S. motor suppliers bring in equipment 
from a fan manufacturer and develop unique ECM controls tailored to the 
manufacturer. (NMC, No. 43 at p. 128)
    While DOE recognizes that Regal Beloit possesses a number of 
patents in the BPM motor space, other motor manufacturers (e.g., Broad 
Ocean or NMC) also offer BPM models. Additionally, DOE is aware that in 
years past, residential furnace fans paired with constant-airflow BPM 
motors accounted for 30 percent of the market. While DOE estimates that 
constant-airflow BPM motors represent only 10-15 percent of the current 
furnace fan market, the manufacturing capability to meet BPM motor 
demand exists. Thus, DOE has tentatively concluded that BPM motor 
technology is currently available from more than one source and will 
become increasingly available to residential furnace fan manufacturers.
    Some fan manufacturers expressed concern that high-efficiency motor 
reliance on rare earth metals would impact supply. However, DOE is 
aware of high-efficiency motors that do not contain rare earth 
materials. DOE is also confident, after manufacturer discussions, that 
if BPM motors are adopted as a means to meet a future residential 
furnace fan energy conservation standard, manufacturers would have a 
number of cost- and performance-competitive suppliers from which to 
choose who have available, or could rapidly develop, control systems 
independently of the motor manufacturer.

[[Page 64088]]

b. Backward-Inclined Impellers
    According to Rheem, backward-inclined impellers must have larger 
diameter and operate at higher speed than forward-curve impellors in 
order to attain equivalent performance (i.e., flow and pressure rise). 
(Rheem, No. 54 at p. 7) Goodman asserted that a 40-50 percent increase 
in diameter would be necessary for backward-inclined impellers to 
outperform their forward-curved counterparts. (Goodman, No. 50 at p. 2) 
According to AHRI, an impeller diameter increase would lead to an 
increase in overall product size, a change which may not be possible 
without redesigning the product. (AHRI, No. 48 p. 2) Morrison and Rheem 
argued that the larger evaporator coil size required to meet higher 
SEER requirements already limits the space available for furnaces, so 
an increase in product size due to backward-inclined impellers would 
severely restrict product application. (Morrison, No. 58 at p. 3; 
Rheem, No. 54 at p. 7) Ingersoll Rand stated that when used with 
backward-inclined impellers, motors typically operate at twice the RPM 
of forward-curved impellers for the same air delivery and static 
pressure. (Ingersoll Rand, No. 57 at pp. A-3) However, ebm-papst stated 
that they retrofitted existing equipment with backward-curved 
impellers, which only required making minor changes to the airflow path 
within the equipment. Ebm-papst also stated that it tested the 
retrofitted products, which achieved reductions of input power to the 
furnace fan in the range of 15-30 percent, depending on the specific 
equipment and the external static pressure (typically tested at 0.5 
in.w.c. and 1.0 in.w.c.). (ebm-papst, No. 52 at p. 1)
    AHRI and Rheem were also concerned with the potential impacts that 
backward-inclined impellers could have on heat exchanger temperatures. 
AHRI and Rheem stated that the air distribution out of a blower housing 
with a forward-curved wheel is maximum at the outside edges of the 
wheel and decreases at the center of the wheel. The air distribution 
out of a blower housing with a backward-inclined wheel is maximum at 
the center of the wheel and tapers off at the outside edges. The 
modified air distribution out of the blower housing would require 
assessment of heat exchanger temperatures for reliability and safety, 
as temperature limits operation. (AHRI, No. 48 at p. 2; Rheem, No. 54 
at p. 8)
    Some commenters also argued that backward-inclined impellers may 
affect furnace fan utility, because the noise produced by this impeller 
type may limit product application. Utilities have claimed that a 
backward-inclined impeller, in combination with increased fan motor 
speeds to achieve higher efficiency, leads to amplified noise levels. 
(EEI, No. 60 at p. 3; SCE, No. 43 at p. 59) However, during its testing 
of HVAC products retrofitted with a backward-inclined impeller, ebm-
papst expressed a contrary view, observing that noise levels produced 
by the backward-inclined impeller were not significantly different from 
forward-curved impellers. (ebm-papst Inc., No. 52 at p. 1)
    DOE finds that there are multiple approaches to implementing 
backward-inclined impellers to reduce furnace fan energy consumption. 
DOE recognizes that one approach is to use a backward-inclined impeller 
that is larger than a standard forward-curved impeller, which may lead 
to larger HVAC products. Another approach is to pair the backward-
inclined impeller with a motor that operates at increased RPM. Ebm-
papst tests show a significant potential to reduce fan electrical 
energy consumption for a backward-inclined impeller assembly that uses 
existing motor technology at higher RPMs and is implemented in existing 
HVAC products (i.e., no increase in product size required). Ebm-papst 
does not believe that achieving higher RPMs with existing motor 
technology is an obstacle for implementing this technology. DOE 
believes that this prototype represents a backward-inclined 
implementation approach that could achieve fan energy savings while 
avoiding the negative impacts listed by manufacturers. Consequently, 
DOE decided not to screen out the backward-inclined impeller technology 
option.

C. Engineering Analysis

    In the engineering analysis (corresponding to chapter 5 of the NOPR 
TSD), DOE establishes the relationship between the manufacturer selling 
price (MSP) and improved residential furnace fan efficiency. This 
relationship serves as the basis for cost-benefit calculations for 
individual consumers, manufacturers, and the Nation. DOE typically 
structures the engineering analysis using one of three approaches: (1) 
Design option; (2) efficiency level; or (3) reverse engineering (or 
cost-assessment). The design-option approach involves adding the 
estimated cost and efficiency of various efficiency-improving design 
changes to the baseline to model different levels of efficiency. The 
efficiency-level approach uses estimates of cost and efficiency at 
discrete levels of efficiency from publicly-available information, and 
information gathered in manufacturer interviews that is supplemented 
and verified through technology reviews. The reverse engineering 
approach involves testing products for efficiency and determining cost 
from a detailed bill of materials derived from reverse engineering 
representative products. The efficiency values range from that of a 
least-efficient furnace fan sold today (i.e., the baseline) to the 
maximum technologically feasible efficiency level. For each efficiency 
level examined, DOE determines the MSP; this relationship is referred 
to as a cost-efficiency curve.
1. Efficiency Levels
    In this rulemaking, DOE used an efficiency-level approach in 
conjunction with a design-option approach to identify incremental 
improvements in efficiency for each product class. An efficiency-level 
approach enabled DOE to identify incremental improvements in efficiency 
for efficiency-improving technologies that furnace fan manufacturers 
already incorporate in commercially-available models. A design-option 
approach enabled DOE to model incremental improvements in efficiency 
for technologies that are not commercially available in residential 
furnace fan applications. In combination with these approaches, DOE 
used a cost-assessment approach to determine the manufacturing 
production cost (MPC) at each efficiency level identified for analysis. 
This methodology estimates the incremental cost of increasing product 
efficiency. When analyzing the cost of each efficiency level, the MPC 
is not for the entire HVAC product, because furnace fans are a 
component of the HVAC product in which they are integrated. The MPC 
includes costs only for the components of the HVAC product that impact 
FER.
a. Baseline
    During the preliminary analysis, DOE selected baseline units 
typical of the least-efficient furnace fans used in commercially-
available, residential HVAC models that have a large number of annual 
shipments. This sets the starting point for analyzing potential 
technologies that provide energy efficiency improvements. Additional 
details on the selection of baseline units may be found in chapter 5 of 
the NOPR TSD. DOE compared the FER at higher energy efficiency levels 
to the FER of the baseline unit and compared baseline MPCs to the MPCs 
at higher efficiency levels.
    DOE reviewed FER values that it calculated using test data and

[[Page 64089]]

performance information from publicly-available product literature to 
determine baseline FER ratings. Table IV.4 presents the baseline FER 
values identified in the preliminary analysis for each product class.

              Table IV.4--Preliminary Analysis Baseline FER
------------------------------------------------------------------------
               Product class                      FER  (W/1000 cfm)
------------------------------------------------------------------------
Non-Weatherized, Non-condensing Gas                                  380
 Furnace Fan..............................
Non-Weatherized, Condensing Gas Furnace                              393
 Fan......................................
Weatherized, Non-Condensing Gas Furnace                              333
 Fan......................................
Non-Weatherized, Non-Condensing Oil                                  333
 Furnace Fan..............................
Electric Furnace/Modular Blower Fan.......                           312
Manufactured Home Non-weatherized, Non-                              295
 condensing Gas Furnace Fan...............
Manufactured Home Non-weatherized,                                   319
 Condensing Gas Furnace Fan...............
Manufactured Home Electric Furnace/Modular                           243
 Blower Fan...............................
------------------------------------------------------------------------

    Manufacturers asserted that the baseline FER values presented in 
the preliminary analysis were not representative of the furnace fans in 
the least-efficient residential HVAC models offered for sale today. 
Specifically, manufacturers stated that non-weatherized, non-condensing 
gas furnaces should be assigned a baseline FER of 451 instead of 380 
and that non-weatherized, condensing gas furnaces should have an FER of 
494 rather than 393. (AHRI, No. 48 at p. 5; Morrison, No. 58 at p. 6; 
Goodman, No. 50 at p. 5) Rheem also doubted that the difference in 
efficiency between non-condensing and condensing gas furnaces was only 
13 points, a FER of 380 versus 393, as presented in the DOE's 
preliminary analysis. (Rheem, No. 43 at p. 96) Mortex calculated that 
their manufactured home, non-weatherized, non-condensing gas furnace 
had an FER of 420, not 295 as suggested by the DOE. Mortex also stated 
that published data used to calculate FER values were generated using 
ASHRAE Standard 103, not AMCA Standard 210, and that calculating FER 
based on published data may not be the best approach. (Mortex, No. 59 
at p. 3; Mortex, No. 43 at p. 25) In contrast, Ingersoll Rand stated 
that the baseline FER presented in the preliminary analysis was 
consistent with the figures presented in AHRI Standard 210/240. 
(Ingersoll Rand, No. 57 at pp. A-7) Unico emphasized that the DOE 
should consider the broad range of designs fitting the ``baseline'' 
definition, lest the selected FER only be achievable by one 
manufacturer's design. (Unico, No. 43 at p. 79) Mortex disagreed with 
the DOE's key product approach, arguing that the selected product 
classes will have huge variation in efficiency (i.e., baseline FER). 
(Mortex, No. 43 at p. 50) Manufacturers also provided additional 
baseline FER estimates during manufacturer interviews.
    Some manufacturers also requested that DOE alter FER to better 
reflect unit capacity. Goodman suggested that DOE should consider using 
only one metric for all furnace fan capacities falling within the 
residential range (< 130 kBtuh) after making adjustments to the metric 
to include higher capacity units. (Goodman, No. 50 at p. 2) 
Alternatively, Mortex recommended that DOE should set maximum FER 
values for sub-product classes based on cooling capacity and cabinet 
size. (Mortex, No. 59 at p. 3) Similarly, AHRI stated that residential 
furnace fans having a 5-ton capacity also have higher FERs and 
recommended that DOE adjust baseline FER values to include the largest-
capacity fan within a product class. (AHRI, No. 48 at p. 2) Rheem 
calculated FER for 19 models of gas-fired furnaces that used the same 
blower housing design, and it found that FER was generally not 
dependent on capacity. A graphic summary of Rheem's results are 
available in the written comment that Rheem submitted.\26\ (Rheem, No. 
54 at p. 5).
---------------------------------------------------------------------------

    \26\ Publically available at: https://www.regulations.gov/# 
!documentDetail;D=EERE-2010-BT-STD-0011-0054.
---------------------------------------------------------------------------

    DOE evaluated the feedback it received and used the data provided 
by interested parties to generate new FER values and to revise its 
baseline, intermediate efficiency levels, and max-tech FER estimates. 
DOE's revisions included FER results for furnace fan models that span 
the capacity range of residential products. After reviewing all of the 
available FER values based on new data, DOE concluded that FER can best 
be represented as a linear function of airflow capacity (i.e., a first 
constant added to airflow multiplied by a second constant). The slope 
characterizes the change in FER for each unit of airflow capacity 
increase, and the y-intercept represents where the FER line intersects 
the y-axis (where airflow capacity is theoretically zero). DOE proposes 
to use such linear functions to represent FER for the different 
efficiency levels of the different product classes. A more detailed 
description of the analysis and the methodology DOE used to generate 
FER equations for each efficiency level can be found in chapter 5 of 
the NOPR TSD.
    Table IV.5 shows the revised FER baseline efficiency levels 
estimates that DOE used for the NOPR.

                 Table IV.5--NOPR Baseline FER Estimates
------------------------------------------------------------------------
          Product class                     FER*  (W/1000 cfm)
------------------------------------------------------------------------
Non-Weatherized, Non-condensing   FER = 0.057 x QMax + 362 .
 Gas Furnace Fan.
Non-Weatherized, Condensing Gas   FER = 0.057 x QMax + 395.
 Furnace Fan.
Weatherized Non-Condensing Gas    FER = 0.057 x QMax + 271.
 Furnace Fan.
Non-Weatherized, Non-Condensing   FER = 0.057 x QMax + 336.
 Oil Furnace Fan.
Electric Furnace/Modular Blower   FER = 0.057 x QMax + 331.
 Fan.
Manufactured Home Non-            FER = 0.057 x QMax + 271.
 weatherized, Non-condensing Gas
 Furnace Fan.

[[Page 64090]]

 
Manufactured Home Non-            FER = 0.057 x QMax + 293.
 weatherized, Condensing Gas
 Furnace Fan.
Manufactured Home Electric        FER = 0.057 x QMax + 211.
 Furnace/Modular Blower Fan.
Manufactured Home Weatherized     Reserved.
 Gas Furnace Fan.
Manufactured Home Non-            Reserved.
 Weatherized Oil Furnace Fan.
------------------------------------------------------------------------
* QMax is the airflow, in cfm, at the maximum airflow-control setting
  measured using the proposed DOE test procedure. 78 FR 19606, 19627
  (April 2, 2013).

b. Percent Reduction in FER
    For the preliminary analysis, DOE determined average FER reductions 
for each efficiency level for a subset of key product classes and 
applied these reductions to all product classes. DOE found from 
manufacturer feedback and its review of publically-available product 
literature that manufacturers use similar furnace fan components and 
follow a similar technology path to improving efficiency across all 
product classes. DOE does not expect the percent reduction in FER 
associated with each design option, whether commercially available or 
prototype, to differ across product classes as a result. Table IV.6 
includes DOE's preliminary analysis estimates for the percent reduction 
in FER from baseline for each efficiency level.

 Table IV.6--Preliminary Analysis Estimates for Percent Reduction in FER
                 From Baseline for Each Efficiency Level
------------------------------------------------------------------------
                                                       Percent reduction
   Efficiency level (EL)          Design option            in FER from
                                                            baseline
------------------------------------------------------------------------
1.........................  Improved PSC.............                  2
2.........................  Inverter-Driven PSC......                 10
3.........................  Constant-Torque BPM Motor                 45
4.........................  Constant-Airflow BPM                      59
                             Motor + Multi-Staging.
5.........................  Premium Constant-Airflow               * 63
                             BPM Motor + Multi-
                             Staging + Backward-
                             Inclined Impeller.
------------------------------------------------------------------------
* DOE estimates that implementing a backward-inclined impeller at EL 5
  results in a 10% reduction in FER from EL 4. This is equivalent to a
  reduction of 4% percent of the baseline FER. The total percent
  reduction in FER from baseline for EL 5 includes the 59% reduction
  from EL 4 and the 4% net reduction of the backward-inclined impeller
  for a total percent reduction of 63% from baseline.

    Interested parties questioned DOE's estimates for the FER reduction 
for high-efficiency motors. NMC commented that the company offers a 
special high-efficiency PSC motor line called PEP[supreg] that can 
achieve 10 points of efficiency improvement over standard PSC motors 
rather than 1.6-percent improvement shown in the preliminary analysis. 
(NMC, No. 60 at p. 1) Other interested parties provided similar 
estimates for improved PSC motors during manufacturer interviews. Unico 
noted that the high-efficiency BPM motor technology options in the 
Engineering Analysis (constant-torque or constant-air-flow BPM) do not 
improve fan efficiency as much as DOE's percent reduction in FER 
estimates suggest. (Unico, No. 43 at p. 109) Lennox suggested that a 
more accurate estimate of reduction in FER resulting from PSC to X13 
motor conversions would be 30 percent as opposed to the 45 percent 
presented in the preliminary analysis. (Lennox, No. 47 at p. 2) Goodman 
provided a reference to a report from Advanced Energy of North Carolina 
\27\ that stated that replacing PSC motors with full-ECM motors results 
in a 51-percent reduction in full-load efficiency. (Goodman, No. 50 at 
p. 3) Goodman would expect that the reduction in FER for X13 and ECM 
conversions be lower than presented in the preliminary analysis such as 
35-50 percent for X13s and 45-50 percent for ECM. (Goodman, No. 50 at 
p. 5)
---------------------------------------------------------------------------

    \27\ Fitzpatrick and Murray, Residential HVAC Electronically 
Commutated Motor Retrofit Report (2012) (Available at: https://www.advancedenergy.org/ci/services/testing/files/Residential%20HVAC%20Electronically%20Commutated%20Motor%20Retrofit%20Final%20Report.pdf).
---------------------------------------------------------------------------

    DOE reviewed its estimates of percent reduction in FER from 
baseline for each efficiency level based on interested party feedback. 
In addition to the comments presented above, interested parties also 
provided FER values for higher-efficiency products in manufacturer 
interviews. DOE used these data to revise its percent reduction 
estimates. Table IV.7 shows DOE's revised estimates for the percent 
reduction in FER for each efficiency level that DOE used in the NOPR 
analyses. For a given product class, DOE applied the percent reductions 
below to both the slope and y-intercept of the baseline FER equation to 
generate FER equations to represent each efficiency level above 
baseline.

[[Page 64091]]



  Table IV.7--NOPR Estimates for Percent Reduction in FER From Baseline
                        for Each Efficiency Level
------------------------------------------------------------------------
                                                       Percent reduction
   Efficiency level (EL)          Design option            in FER from
                                                            baseline
------------------------------------------------------------------------
1.........................  Improved PSC.............                 10
2.........................  Inverter-Driven PSC......                 25
3.........................  Constant-Torque BPM Motor                 42
4.........................  Constant-Torque BPM Motor                 50
                             and Multi-Staging.
5.........................  Constant-Airflow BPM                      53
                             Motor and Multi-Staging.
6.........................  Premium Constant-Airflow               * 57
                             BPM Motor and Multi-
                             Staging + Backward-
                             Inclined Impeller.
------------------------------------------------------------------------
* DOE estimates that implementing a backward-inclined impeller at EL 6
  results in a 10% reduction in FER from EL 5. This is equivalent to a
  4% percent reduction in FER from baseline. The total percent reduction
  in FER from baseline for EL 6 includes the 53% reduction from EL 5 and
  the 4% net reduction from the backward-inclined impeller for a total
  percent reduction of 57% from baseline.

    DOE believes that these revised estimates are consistent with the 
comments received from interested parties. Note that EL 4 in the table 
above is a newly proposed efficiency level. As discussed in section 
IV.A.3, DOE analyzed multi-staging as a separate technology option. For 
the NOPR, DOE also has evaluated a separate efficiency level 
representing applying multi-staging to a furnace fans with a constant-
torque BPM motor. DOE recognizes that the percent reduction in FER for 
inverter-driven PSC increased considerably. However, since the baseline 
FER values increased for the NOPR, DOE believes that the percent 
reductions cannot directly be compared to those proposed in the 
preliminary analysis. DOE notes that the cited reductions may not 
appear to be fully consistent with stakeholder comments in part because 
they are FER reductions rather than reductions in full-load electrical 
efficiency. DOE expects that FER reductions may be significantly higher 
than full-load input power reductions, especially for efficiency levels 
based on use of BPM motors, because FER includes electrical energy 
consumption at reduced operating modes, for which these motors achieve 
much greater power reduction than PSC designs.
2. Manufacturer Production Cost (MPC)
    In the preliminary analysis, DOE estimated the manufacturer 
production cost associated with each efficiency level to characterize 
the cost-efficiency relationship of improving furnace fan performance. 
The MPC estimates are not for the entire HVAC product because furnace 
fans are a component of the HVAC product in which they are integrated. 
The MPC estimates includes costs only for the components of the HVAC 
product that impact FER, which DOE considered to be the:
     Fan motor and integrated controls;
     Primary control board (PCB);
     Multi-staging components;
     Impeller;
     Fan housing; and
     Components used to direct or guide airflow.
    DOE separated the proposed product classes into high-volume and 
low-volume product classes and generated high-volume and low-volume MPC 
estimates to account for the increased purchasing power of high-volume 
manufacturers.\28\
---------------------------------------------------------------------------

    \28\ High-volume and low-volume product classes are discussed 
further in chapter 5 of the NOPR TSD.
---------------------------------------------------------------------------

a. Production Volume Impacts on MPC
    Morrison stated that DOE's assumption that large manufacturers have 
the same purchasing power across product types, even when those 
products are low volume, may or may not be true, because low-volume 
products may run through different processes. (Morrison, No. 43 at p. 
118) Rheem stated that, in some cases, it uses the same blower system 
in low-volume products that it uses in high-volume products. (Rheem, 
No. 43 at p. 118) Unico commented that it uses different manufacturing 
processes than those presented in DOE's analysis and recommended that a 
different metric should be used to evaluate technologies that differ by 
process. (Unico, No. 43 at p. 122) Mortex stated that the motor costs 
for smaller manufacturers can be 15-20 percent greater than for large 
manufacturers because they do not, as stated by NEMA, benefit from 
economies of scale. (Mortex, No. 59 at p. 3; NEMA, No. 43 at p. 113)
    DOE recognizes that high-volume manufacturers may use different 
processes to manufacture low-volume products than to manufacture high-
volume products. However, DOE finds that 94 percent of the MPC for 
furnace fans is attributed to materials (including purchased parts like 
fan motors), which are not impacted by process differences. DOE's 
estimates also already account for process differences between 
manufacturers for high-volume and low-volume products. The products 
that DOE evaluated to support calculation of MPC included furnace fans 
from various manufacturers, including both high-volume and low-volume 
models. Observed process differences are reflected in the bills of 
materials for those products. DOE agrees with Mortex that low-volume 
manufacturers experience higher costs for materials, such as motors. 
DOE believes that its approach to distinguish between high-volume and 
low-volume product classes accounts for the expected difference in MPC 
between high-volume and low-volume product classes.\29\
---------------------------------------------------------------------------

    \29\ High-volume and low-volume product classes are discussed 
further in chapter 5 of the NOPR TSD.
---------------------------------------------------------------------------

b. Inverter-Driven PSC Costs
    In the preliminary analysis, DOE estimated that the MPC of inverter 
control for a PSC motor is $10-$12, depending on production volume. 
Ingersoll Rand stated that an inverter cannot be added to a PSC for 
only $10-$12. (Ingersoll Rand, No. 57 at pp. A-7) NMC also questioned 
the validity of the inverter controller cost estimate, stating that the 
cost of an inverter driven controller is significantly higher than $12, 
unless DOE is erroneously equating inverters to wave chopper 
technology, which is far less efficient. (NMC, No. 60 at p. 1)
    DOE's preliminary analysis estimate for the MPC of an inverter-
driven PSC was indeed based on a wave chopper drive. DOE finds that 
more sophisticated and costly inverters are required to achieve the 
efficiencies reflected in DOE's analysis. Consequently, DOE has 
adjusted its cost estimate for PSC inverter technology. DOE gathered 
more information about the cost of inverters that are suited for 
improving furnace fan efficiency. In addition to receiving cost 
estimates during manufacturer interviews, DOE also reviewed its cost 
estimates for inverter drives used in other residential applications, 
such as clothes washers. DOE finds that $30 for high-volume

[[Page 64092]]

products and $42.29 for low-volume products are better estimates of the 
MPC for inverters used to drive PSC furnace fan motors. Accordingly, 
DOE has updated these values for the NOPR.
c. Furnace Fan Motor MPC
    Manufacturers stated that DOE underestimated the incremental MPC to 
implement high-efficiency motors in HVAC products, other than oil 
furnaces. (Rheem, No. 54 at p. 10) Most manufacturers stated that the 
cost increase to switch from PSCs to more-efficient motor technologies 
was at least twice that of the DOE's estimate. (Lennox, No. 43 at p. 
23, 113 and No. 47 at p. 1; Mortex, No. 43 at p. 25; Rheem, No. 43 at 
p. 112; Goodman, No. 50 at p. 3) AHRI and Morrison claimed incremental 
costs associated with an X13 motor should be $60, instead of the $22.73 
reported by DOE and in the case of ECMs, $133 instead of the $91.95 
reported by DOE. (AHRI, No. 48 at p. 6; Morrison, No. 58 at p. 6) 
Nidec, a motor manufacturer, commented that DOE should directly contact 
motor suppliers to confirm motor prices. (NMC, No. 43 at p. 112) Regal 
Beloit requested DOE review its assumption on motor horsepower range to 
explain why Rheem and other manufacturers claim their motors cost twice 
what is shown in DOE's preliminary analysis. (Regal Beloit, No. 52 at 
p. 242) DOE received additional feedback regarding its estimated motor 
prices during NOPR-phase manufacturer interviews.
    Based upon the input received from interested parties, DOE adjusted 
its motor cost estimates. In general, DOE increased its estimates by 
approximately 10 to 15 percent, which is consistent with the feedback 
DOE received. Details regarding DOE's revised motor MPC estimates are 
provided in chapter 5 of the NOPR TSD.
d. Motor Control Costs
    In the preliminary analysis, DOE estimated that the MPC of the 
primary control board (PCB) increases with each conversion to a more-
efficient motor type (i.e., from PSC to constant-torque BPM motor and 
from constant-torque to constant-airflow BPM motor). Both Lennox and 
Goodman confirmed that higher-efficiency motors require more 
sophisticated and costly controls. These manufacturers stated that 
control costs for an X13 motor application increase from 50-100 
percent, as compared to controls for PSC motors. (Lennox, No. 47 at p. 
8; Goodman, No. 50 at p. 2) Rheem stated that the controls of one of 
its modulating furnace models that uses a variable speed furnace fan 
are costly, although no quantified estimate was provided. (Rheem, No. 
54 at p. 7) Rheem also responded that Regal Beloit's Evergreen \30\ 
motors, which are designed as replacements for PSCs, may be used with 
the same primary controls developed for the original PSC motor.\31\ 
(Rheem, No. 54 at p. 7) Ingersoll Rand stated that boards supporting 
modulating motors and communication are the most costly. (Ingersoll 
Rand, No. 57 at pp. A-2) DOE also received feedback regarding the cost 
of the PCBs associated with each motor type during manufacturer 
interviews. In general, manufacturers commented that the PCBs used with 
constant-torque BPM motors are more costly. However, other manufacturer 
interview participants stated that the MPC of the PCB used with these 
motors should be equivalent or even less expensive than the PCBs used 
with PSC motors.
---------------------------------------------------------------------------

    \30\ Evergreen is a constant-airflow BPM motor that is meant to 
be installed as an on-site replacement of outdated PSC motors.
    \31\ The constant-airflow BPM motors that DOE analyzed for EL 5 
and EL 6 cannot be used with the same primary controls for a PSC 
motor. See chapter 3 and chapter 5 of the NOPR TSD.
---------------------------------------------------------------------------

    DOE agrees with interested parties that the MPC of the PCB needed 
for a constant-airflow BPM motor is higher than for the PCB paired with 
a PSC motor. DOE maintained this assumption for the NOPR. DOE estimates 
that the MPC of a PCB paired with a constant-airflow BPM motor is 
roughly twice as much as for a PCB paired with a constant-torque BPM 
motor or PSC. DOE also agrees with the interested parties that stated 
that the MPC for a PCB paired with a constant-torque BPM motor is 
equivalent to that of a PCB needed for a PSC motor. DOE revised its 
analysis to reflect this assumption in the NOPR as a result.
e. Backward-Inclined Impeller MPC
    Interested parties commented that DOE's preliminary analysis 
estimate for the incremental MPC associated with implementing a 
backward-inclined impeller, in combination with a premium constant-
airflow BPM motor and multi-staging, is too low. (AHRI, No. 48 at p. 2; 
Ingersoll Rand, No. 57 at p. 2) Morrison and AHRI commented that 
tighter tolerances and increased impeller diameter lead to increased 
material costs, as well as increased costs associated with motor mount 
structure and reverse forming fabrication processes. (AHRI, No. 48 at 
p. 3; Morrison, No. 43 at p. 120) Rheem and Morrison stated that the 
dimensional clearance for a backward-inclined impeller would be 0.04-
0.05 inches instead of 0.24-0.5 for a forward-curved impeller. (Rheem, 
No. 54 at p. 8; Morrison, No. 58 at p. 3) This increase in product size 
and tolerance could lead to increased production costs. Ingersoll Rand, 
Morrison, and Rheem all cited increased material, assembly controls, 
reverse forming processes, and the strengthening of motor mounting 
systems (necessary at increased motor speeds) as potential costs 
associated with backward-inclined impellers. (Ingersoll Rand, No. 57 at 
pp. A-3; Morrison, No. 58 at p. 4; Rheem, No. 54 at p. 8)
    DOE reviewed its manufacturer production cost estimates for the 
backward-inclined impeller technology option based on interested party 
comments. During manufacturer interviews, some manufacturers reiterated 
or echoed that DOE's estimated MPC for backward-inclined impellers is 
too low, but they did not provide quantification of the total MPC of 
backward-inclined impellers or the incremental MPC associated with the 
changes needed to implement them. Other manufacturers did quantify the 
MPC of backward-inclined impeller solutions and their estimates were 
consistent with DOE's preliminary analysis estimate. Consequently, DOE 
did not modify its preliminary analysis estimated MPC for backward-
inclined impellers.

D. Markups Analysis

    DOE uses manufacturer-to-consumer markups to convert the 
manufacturer selling price estimates from the engineering analysis to 
consumer prices, which are then used in the LCC and PBP analysis and in 
the manufacturer impact analysis. Before developing markups, DOE 
defines key market participants and identifies distribution channels. 
Generally, the furnace distribution chain (which is relevant to the 
residential furnace fan distribution chain) includes distributors, 
dealers, general contractors, mechanical contractors, installers, and 
builders. For the markups analysis, DOE combined mechanical 
contractors, dealers, and installers in a single category labeled 
``mechanical contractors,'' because these terms are used 
interchangeably by the industry. Because builders serve the same 
function in the HVAC market as general contractors, DOE included 
builders in the ``general contractors'' category.
    In the preliminary analysis, DOE used the same distribution 
channels for furnace fans as it used for furnaces in the recent energy 
conservation standards rulemaking for those products. 76 FR 37408, 
37464 (June 27, 2011). DOE believes that this is an appropriate 
approach, because the vast

[[Page 64093]]

majority of the furnace fans covered in this rulemaking is a component 
of a furnace. Manufactured housing furnace fans in new construction 
have a separate distribution channel in which the furnace (and fan) go 
directly from the furnace manufacturer to the producer of manufactured 
homes.
    In the preliminary analysis, DOE requested comment on whether the 
market for replacement fans is large enough to merit a separate 
distribution channel, and, if so, what would be an appropriate 
assumption for its market share. Goodman expressed their belief that 
there is no market for replacing and/or upgrading only the furnace fan 
component of the furnace. (Goodman, No. 50 at p. 3) Goodman and AHRI 
commented that they are opposed to field replacements and retrofits of 
motors and blowers because such practices could have product safety 
implications. (Goodman, No. 50 at p. 3; AHRI, No. 48 at p. 4) In 
contrast, Nidec recommended that DOE should consider a distribution 
channel for replacing furnace fans in already installed equipment. 
(Nidec, No. 60 at pp. 2-3)
    DOE has tentatively concluded that there is insufficient evidence 
of a replacement market for furnace fans.
    DOE develops baseline and incremental markups to transform the 
manufacturer selling price into a consumer product price. DOE uses the 
baseline markups, which cover all of a distributor's or contractor's 
costs, to determine the sales price of baseline models. Incremental 
markups are separate coefficients that DOE applies to reflect the 
incremental cost of higher-efficiency models.
    AHRI and Morrison voiced concerns with DOE's approach to 
incremental markups. (AHRI, No. 48 at p. 6; Morrison, No. 58, at p. 7) 
These commenters stated that while the concept of profits constrained 
to the long-run cost of capital is a basic tenet of microeconomics, it 
has not been validated empirically and that there are enough exceptions 
and alternative concepts to question the use of that concept in a 
normative manner. AHRI also stated that DOE's basic theoretical 
framework requires that the relevant industry must be highly 
competitive, and AHRI believes that there are reasons to question this 
assumption in the context of residential furnace fans. Goodman 
concurred with the concerns noted by AHRI in regards to the markups 
analysis. (Goodman, No. 50 at p. 5)
    DOE acknowledges that detailed information on actual distributor 
and contractor practices would be helpful in evaluating their markups 
on furnaces. However, DOE finds it implausible that profit per unit 
would increase in the medium and long run if the cost of goods sold 
increases due to efficiency standards. Thus, in the absence of evidence 
to the contrary, DOE continues to assume that markups would decline 
slightly, leaving profit unchanged, and, thus, it uses lower markups on 
incremental costs of higher-efficiency products. Regarding the 
competitiveness of the HVAC distribution industry and the HVAC 
contractor industry, DOE does not have any empirical measures of 
competitiveness, but its impression, based on experience with these 
industries, is that there is sufficient competition to validate DOE's 
assumptions with respect to the difficulty of distributors and 
contractors increasing profits as a result of standards.
    AHRI and Morrison disagreed with DOE's prediction that margins 
should be going up over time as equipment prices decrease. (AHRI, No. 
48 at p. 6; Morrison, No. 58, at p. 7) DOE did not project a decrease 
in furnace fan prices in the preliminary analysis, and the markups are 
assumed to remain the same over time.
    Lennox believes that DOE's claim that incremental costs will be 
discounted on markups through the distribution chain by approximately 
50 percent understates the amount of increased costs that manufacturers 
will seek to pass through to consumers. (Lennox, No. 47 at p. 1) DOE 
does not apply a separate markup on the incremental manufacturer 
selling price. DOE assumes that manufacturers will be able to pass on 
the full incremental costs of higher-efficiency furnace fans.
    Morrison stated that the markups analysis does not accurately 
calculate the costs for installers/contractors. Morrison noted that 
with increase in efficiency standards, there will be added labor and an 
associated cost to assure the buyer of the efficiency gains; the added 
labor of installation and commissioning is not included in the markups 
analysis, and, thus, the final markup is too small. (Morrison, No. 58, 
at p. 6) In response, the labor for installation and commissioning, 
including specific costs for higher-efficiency furnace fans, is 
included in the LCC and PBP analysis, as DOE assumes that this cost is 
not part of the consumer cost of the furnace itself.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of residential furnace fans in representative U.S. 
homes and to assess the energy savings potential of increased furnace 
fan efficiency. In general, DOE estimated the annual energy consumption 
of furnace fans at specified energy efficiency levels across a range of 
climate zones. The annual energy consumption includes the electricity 
use by the fan, as well as the change in natural gas, liquid petroleum 
gas (LPG), electricity, or oil use for heat production as result of the 
change in the amount of useful heat provided to the conditioned space 
as a result of the furnace fan. The annual energy consumption of 
furnace fans is used in subsequent analyses, including the LCC and PBP 
analysis and the national impact analysis.
    DOE used the existing DOE test procedures for furnaces and air 
conditioners to estimate heating and cooling mode operating hours for 
the furnace fan. The power consumption of the furnace fan is determined 
using the individual sample housing unit operating conditions (the 
pressure and airflow) at which a particular furnace fan will operate 
when performing heating, cooling, and constant-circulation functions. 
The methodology and the data are fully described in chapter 7 of the 
NOPR TSD.
    DOE used the Energy Information Administration's (EIA) Residential 
Energy Consumption Survey (RECS) \32\ to establish a sample of 
households using furnace fans for each furnace fan product class. RECS 
data provide information on the age of furnaces with furnace fans, as 
well as heating and cooling energy use in each household. The survey 
also includes household characteristics such as the physical 
characteristics of housing units, household demographics, information 
about other heating and cooling products, fuels used, energy 
consumption and expenditures, and other relevant data. DOE uses the 
household samples not only to determine furnace fan annual energy 
consumption, but also as the basis for conducting the LCC and PBP 
analysis.
---------------------------------------------------------------------------

    \32\ Energy Information Administration, 2009 Residential Energy 
Consumption Survey (Available at: https://www.eia.doe.gov/emeu/recs).
---------------------------------------------------------------------------

    For the NOPR, DOE used RECS 2009 \33\ heating and cooling energy 
use data to determine heating and cooling operating hours. DOE used 
data from RECS 2009, American Housing Survey (AHS) 2011,\34\ and the 
Census Bureau \35\ to project household weights in 2019, which is the 
anticipated compliance date of any new energy efficiency

[[Page 64094]]

standard for residential furnace fans. These adjustments account for 
housing market changes since 2009, as well as for projected product and 
demographic changes.
---------------------------------------------------------------------------

    \33\ See https://www.eia.gov/consumption/residential/data/2009/.
    \34\ See https://www.census.gov/housing/ahs/data/national.html.
    \35\ See https://www.census.gov/popest/.
---------------------------------------------------------------------------

    The power consumption (and overall efficiency) of a furnace fan 
depends on the speed at which the motor operates, the external static 
pressure difference across the fan, and the airflow through the fan. To 
calculate furnace fan electricity consumption, DOE determined the 
operating conditions (the pressure and airflow) at which a particular 
furnace fan will operate in each RECS housing unit when performing 
heating, cooling, and constant-circulation functions.
    DOE gathered field data from available studies and research reports 
to determine an appropriate distribution of external static pressure 
(ESP) values. DOE compiled over 1,300 field ESP measurements from 
several studies that included furnace fans in single-family and 
manufactured homes in different regions of the country. The average ESP 
value in the cooling operating mode from these studies results in an 
average 0.65 in. wc for single-family households and 0.30 in. wc for 
manufactured homes.
    DOE determined furnace fan operating hours in heating mode by 
calculating the furnace burner operating hours and adjusting them for 
delay times between burner and fan operation. Burner operating hours 
are a function of annual house heating load, furnace efficiency, and 
furnace input capacity.
    EEI stated that DOE should take into consideration the impact of 
more-stringent building energy codes when estimating energy use 
baselines and projected energy savings. (EEI, No. 65 at p. 4) In 
response, DOE's analysis accounts for the likelihood that, compared to 
recently-built homes in the RECS sample, new homes in the year of 
compliance will have both a lower heating load per square foot and more 
square footage using the building shell efficiency index from AEO 2012.
    In the preliminary analysis, to estimate use of constant 
circulation in the sample homes, DOE evaluated the available studies, 
which include a 2010 survey in Minnesota \36\ and a 2003 Wisconsin 
field monitoring of residential furnaces.\37\ DOE did not use these 
data directly, however, because it believes they are not representative 
of consumer practices for the U.S. as a whole. In these northern 
States, many homes have low air infiltration, and there is a high 
awareness of indoor air quality issues, which could lead to significant 
use of constant circulation. To develop appropriate assumptions for 
other regions, DOE modified the data from these States using 
information from manufacturer product literature (which suggests very 
little use in humid climates) and consideration of climate conditions 
in other regions.
---------------------------------------------------------------------------

    \36\ Provided in CEE, No. 22 at pp. 1-2.
    \37\ Pigg, S., ``Electricity Use by New Furnaces: A Wisconsin 
Field Study'' (October 2003) (Available at https://www.doa.state.wi.us/docview.asp?docid=1812).
---------------------------------------------------------------------------

    Several parties stated that DOE overestimated the use of constant-
circulation mode, thereby overcounting the energy savings from higher-
efficiency furnace fans. AHRI commented that continuous circulation is 
used significantly less than estimated in DOE's technical support 
document. In particular, AHRI pointed out that DOE's estimate of 
constant-circulation hours is based on surveys taken in only two 
States--Wisconsin and Minnesota--where there is high occurrence of 
indoor air quality issues that make use of the continuous fan feature 
more likely. To overcome this perceived deficiency, AHRI recommended a 
study of constant-circulation hours in areas of the country that do not 
have high occurrences of indoor air quality issues, leading to an 
allocation that is more representative of behavior in the U.S. (AHRI, 
No. 48 at p. 4) Ingersoll Rand also stated that Wisconsin is not a good 
representation of the full national population, noting that DOE 
partially acknowledges this by assuming that the North is different 
from the South in terms of the use of constant circulation. (Ingersoll 
Rand Residential Solutions, No. 57, at p. 8) Goodman concurred that the 
values proposed for constant-circulation hours are unrealistically 
high. Based on Goodman's experience, the commenter stated that a more 
typical value for the percentage of U.S. households that use the fan in 
constant-circulation mode would likely be in the low single digits. 
(Goodman, No. 50 at p. 3) Morrison also stated that allocation of a 
large percentage of furnace fan time in the circulatory mode (21 
percent of total time) is excessive. (Morrison, No. 58, at p. 7)
    In contrast, CA IOUs stated that constant-circulation mode on the 
air handler is a primary means for mechanical ventilation of homes. CA 
IOUs argued that as States increasingly adopt building codes that call 
for more airtight building envelopes, the need for mechanical 
ventilation increases as natural ventilation decreases. Based upon this 
reasoning, CA IOUs stated that 400 hours per year in constant-
circulation mode (approximately the average that DOE estimated for non-
weatherized gas furnace fans) would be a conservative estimate. (CA 
IOU's, No. 56, at p. 3) NEEA stated that based on recent trends in 
ventilation and in the sales of filtration systems, there is a 
substantial increase in the use of constant circulation, especially in 
new home construction. (Transcript, No. 43 at p. 193)
    DOE acknowledges that it would be desirable to have additional data 
on the use of constant circulation in other parts of the country, but 
DOE was not able to conduct a study as suggested by AHRI for the NOPR 
analysis, nor did any commenter provide such data. DOE concurs with the 
CA IOUs that the use of constant circulation may increase in new homes. 
For the NOPR, DOE used the same assumptions for use of constant 
circulation as it did in the preliminary analysis, which are also used 
in the proposed DOE test procedure for furnace fans. 77 FR 28674 (May 
15, 2012). The shares of homes using the various constant-circulation 
modes are presented in Table IV.8. However, DOE also performed a 
sensitivity analysis to estimate the effect on the LCC results if it 
assumed half as much use of constant circulation. These results are 
discussed in section V.B.1 of this notice.

           Table IV.8--Constant-Circulation Proposed Test Procedure Assumptions Used for NOPR Analysis
----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated
                                                                                  share of homes     Estimated
                                                                      Assumed      in north and   share of homes
                  Constant-circulation fan use                    average number   south-hot dry   in south-hot
                                                                     of hours         regions      humid region
                                                                                     (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
No constant fan.................................................               0              84              97
Year-round......................................................            7290               7               1

[[Page 64095]]

 
During heating season...........................................            1097               2             0.4
During cooling season...........................................             541               2             0.4
Other (some constant fan).......................................             365               5               1
                                                                 -----------------------------------------------
    Total.......................................................  ..............             100             100
----------------------------------------------------------------------------------------------------------------

    Commenting on the preliminary analysis, EEI stated that DOE should 
balance fan energy savings with the potential for additional fuel use 
of the HVAC product. (EEI, No. 65 at p. 3) With improved fan 
efficiency, there may be less heat from the motor, which means that the 
heating system needs to operate more and the cooling system needs to 
operate less. In response, DOE did account for the effect of improved 
furnace fan efficiency on the heating and cooling load of the sample 
homes. Goodman noted that DOE's assumptions are technically correct 
with regard to the effect on heating or cooling requirements from the 
change in fan energy consumption, and the adjustments appear to be 
appropriate. (Goodman, No. 50 at p. 4)
    In the preliminary analysis, DOE recognized that the energy savings 
in cooling mode from higher-efficiency furnace fans used in some 
higher-efficiency CAC and heat pumps was already accounted for in the 
analysis related to the energy conservation standards for those 
products. To avoid double-counting, the analysis for furnace fans does 
not include furnace fan electricity savings that were counted in DOE's 
analysis for CAC and heat pump products.
    AHRI and Morrison commented that the LCC analysis includes furnace 
fan operating hours and furnace fan power operation in the cooling mode 
in the total energy consumption calculation. AHRI and Morrison noted 
that regulated metrics such as SEER and Heating Seasonal Performance 
Factor (HSPF) already address fan energy consumption in air 
conditioners and heat pumps respectively. (AHRI, No. 48 at p. 6; 
Morrison, No. 58, at p. 8) Morrison commented that including this 
energy savings for this standard would result in the savings being 
counted under two regulatory standards. Mortex commented that: (1) The 
electricity used to circulate air in the summer is already being 
accounted for as part of the SEER metric for central air conditioners 
and heat pumps; (2) in the winter, the EAE metric for 
furnaces accounts for all electricity being used, including by the 
furnace fan; and (3) for heat pumps, the electricity used to circulate 
air is accounted for in the winter heating mode by the HSPF metric. 
(Mortex, No. 59, at pp. 1-2) Ingersoll Rand stated that heating and 
cooling should not be combined, as it does not accurately portray the 
cooling performance for all possible capacities and duplicates the 
furnace fan inclusion in the SEER determination. (Ingersoll Rand 
Residential Solutions, No. 57, at p. 1)
    The standards for CAC and heat pump products that will be effective 
in 2015 do not require a furnace with BPM motor-driven fan. However, 
DOE's rulemaking analysis for CAC and heat pump products included 
savings from those households purchasing a CAC or heat pump at SEER 15 
or above, that would need to have an BPM motor-driven fan in their 
furnace to achieve that efficiency level. The base-case efficiency 
distribution of fans used in the current analysis includes the presence 
of those BMP motor-driven fans in homes with the higher-efficiency CAC 
or heat pumps. Because the energy savings from the considered fan 
efficiency levels are measured relative to the base-case efficiencies, 
any savings reported here for furnace fans are over and above those 
counted in the CAC and heat pump rulemaking.
    Recognizing the possibility of consumers using higher-efficiency 
furnace fans more than baseline furnace fans, DOE included a rebound 
effect in its preliminary analysis. DOE used a 2009 program evaluation 
report from Wisconsin \38\ to estimate the extent to which increased 
use of constant circulation under a standard requiring ECM furnace fans 
is likely to cancel out some of the savings from such a fan.
---------------------------------------------------------------------------

    \38\ State of Wisconsin, Public Service Commission of Wisconsin, 
Focus on Energy Evaluation Semiannual Report, Final (April 8, 2009) 
(Available at: https://www.focusonenergy.com/files/document_management_system/evaluation/emcfurnaceimpactassessment_evaluationreport.pdf).
---------------------------------------------------------------------------

    Commenters presented differing views on the likelihood of a rebound 
effect for furnace fans. Rheem believes that the Wisconsin study is 
reasonable in its estimate of the fraction of households that may 
switch to continuous circulation use under a standard requiring ECM 
furnace fans. (Rheem, No. 54, at p. 13) Goodman does not believe there 
has been a significant shift in terms of increased usage of continuous 
fan with customers that have an ECM product versus an X13 product 
versus a PSC product. (Goodman, No. 50 at p. 4) Ingersoll Rand 
commented that if there were any comfort basis for the use of 
continuous fan mode, more use might lead to a lower heating set-point 
and a higher cooling set-point, offsetting the added energy consumption 
for continuous fan. Ingersoll Rand commented that the rebound effect, 
if it exists, is uncertain in direction and magnitude and should be 
deleted from the analysis. (Ingersoll Rand Residential Solutions, No. 
57, at p. 8)
    DOE acknowledges that the magnitude of a rebound effect for furnace 
fans across the country is uncertain. However, because there is some 
evidence for the existence of a rebound effect, DOE prefers to include 
such an effect rather than risk overstating the energy savings from 
higher-efficiency furnace fans. The specific assumptions are described 
in chapter 7 of the NOPR TSD.

F. Life-Cycle Cost and Payback Period Analysis

    In determining whether an energy conservation standard is 
economically justified, DOE considers the economic impact of potential 
standards on consumers. The effect of new or amended energy 
conservation standards on individual consumers usually involves a 
reduction in operating cost and an increase in purchase cost. DOE

[[Page 64096]]

uses the following two metrics to measure consumer impacts:
     Life-cycle cost (LCC) is the total consumer cost of an 
appliance or product, generally over the life of the appliance or 
product. The LCC calculation includes total installed cost (equipment 
manufacturer selling price, distribution chain markups, sales tax and 
installation cost), operating costs (energy, repair, and maintenance 
costs), equipment lifetime, and discount rate. Future operating costs 
are discounted to the time of purchase and summed over the lifetime of 
the product.
     Payback period (PBP) measures the amount of time it takes 
consumers to recover the assumed higher purchase price of a more 
energy-efficient product through reduced operating costs. Inputs to the 
payback period calculation include the installed cost to the consumer 
and first-year operating costs.
    DOE analyzed the net effect of potential residential furnace fan 
standards on consumers by calculating the LCC and PBP for each 
efficiency level for each sample household. DOE performed the LCC and 
PBP analyses using a spreadsheet model combined with Crystal Ball (a 
commercially-available software program used to conduct stochastic 
analysis using Monte Carlo simulation and probability distributions) to 
account for uncertainty and variability among the input variables 
(e.g., energy prices, installation costs, and repair and maintenance 
costs). It uses weighting factors to account for distributions of 
shipments to different building types and States to generate LCC 
savings by efficiency level. Each Monte Carlo simulation consists of 
10,000 LCC and PBP calculations. The model performs each calculation 
using input values that are either sampled from probability 
distributions and household samples or characterized with single-point 
values. The analytical results include a distribution of points showing 
the range of LCC savings and PBPs for a given efficiency level relative 
to the base-case efficiency forecast. The results of DOE's LCC and PBP 
analysis are summarized in section IV.F and described in detail in 
chapter 8 of the NOPR TSD.
1. Installed Cost
    The installed cost at each efficiency level is based on the MSP, 
distribution chain markups, sales tax, and installation cost.
    In the preliminary analysis, DOE found that the historic real 
(i.e., adjusted for inflation) producer price index (PPI) for integral 
horsepower electric motors has been relatively flat except for the last 
few years, and elected to use prices held constant at the 2011 level as 
the default price assumption to project future motor (and furnace fan) 
prices. Goodman commented that specifically looking at fractional motor 
(i.e., the type used in furnace fans) instead of integral horsepower 
motors would provide a better comparison for furnace fans, and that 
prices of such motors will not remain flat, but will continue to grow 
in the trend from the last five years. (Goodman, No. 50 at p. 5)
    For the NOPR, DOE evaluated the historic real PPI of fractional 
horsepower electric motors instead of integral horsepower electric 
motors. DOE found that this index has been decreasing except for the 
last few years, when it started to increase. Given the uncertainty 
about whether the recent trend will continue or instead revert to the 
historical mean, for the NOPR, DOE elected to continue using constant 
prices at the most recent level as the default price assumption to 
project future prices of furnace fans. Appendix 10-C of the NOPR TSD 
describes the historic PPI data.
    In the preliminary analysis, DOE assumed that a fraction of ECM 
furnace fan installations will require up to an hour of extra labor. 
Goodman commented that based on its experience, at least two hours of 
extra labor will be required in the majority of ECM furnace fan 
installations. It notes this is particularly true in light of the fact 
that many regulatory authorities, such as California Energy Commission 
via Title 24, are requiring more verification of proper airflow, which 
may be more challenging with advanced technologies such as ECM motors. 
(Goodman, No. 50 at p. 5)
    For the NOPR, DOE modified its approach and assumed that up to two 
hours of extra labor will be required for all ECM furnace fan 
installations. Details of the updated approach are available in chapter 
8 of the NOPR TSD.
2. Operating Costs
    In the preliminary analysis, DOE used the same maintenance costs 
for furnace fans at different efficiency levels. To estimate rates of 
fan motor failure, DOE developed a distribution of fan motor lifetime 
(expressed in operating hours) by motor size using data developed for 
DOE's small electric motors final rule (75 FR 10874 (March 9, 
2010)).\39\ DOE then paired these data with the calculated number of 
annual operating hours for each sample furnace, including constant 
circulation for some of the homes. Replacement motor costs were based 
on costs developed in the engineering analysis, and the labor time and 
costs were based on RS Means data.40 41 DOE had no 
information indicating the extent to which consumers would replace a 
fan PSC motor with an ECM, so it assumed that when replacement is 
necessary, consumers replace the failed motor with the same type of 
motor.
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    \39\ See: https://www1.eere.energy.gov/buildings/appliance_standards/commercial/sem_finalrule_tsd.html.
    \40\ RS Means Company Inc., RS Means Residential Cost Data 
(2012).
    \41\ RS Means Company Inc., Facilities Maintenance & Repair Cost 
Data (2012).
---------------------------------------------------------------------------

    Nidec estimated that three percent of the motors operating the 
furnace fan fail each year. (Nidec, No. 60 at pp. 2-3) DOE agrees that 
the fan motor may fail and included motor replacement in the LCC and 
PBP analysis.
    AHRI, Goodman, and Rheem commented that higher-efficiency motors 
have increased failure rates. AHRI and Rheem noted that the failure 
rate for a high-efficiency motor is typically higher than the failure 
rate of a PSC motor, because the electronics added to a high-efficiency 
motor introduce new failure modes associated with the life of 
electronic controls in damp, very cold, and very hot conditions. (AHRI, 
No. 48 at p. 6; Rheem, No. 54, at p. 14) Goodman commented that 
generally, more complex motors contain more components that can 
potentially break, which is true of the additional controls in X13 and 
ECM technologies. The commenter recommended that DOE estimate that 
service requirements will be 20 to 50 percent greater for higher-
efficiency motors and related controls, and that the cost of such 
service will be more for X13 and ECM than for PSC motors. Goodman also 
suggested that DOE should use a reduced lifetime (by five to ten 
percent) for X13 and ECM furnace fan motors, as PSC motor technologies 
are very mature and X13 and ECM are relatively young. (Goodman, No. 50 
at p. 6)
    DOE agrees that the electronics of higher-efficiency motors are 
likely to have increased failure rates. For the NOPR, DOE included 
repair to electronics for PSC motors with controls, constant-torque BPM 
motors, and especially constant-airflow BPM motors. DOE added an extra 
cost for the cases that require control updates for these efficiency 
levels. DOE also applied an additional labor hour to account for cases 
when it is necessary to replace the motors for the constant-torque BPM 
and constant-airflow BPM efficiency levels. See chapter 8 of the NOPR 
TSD for further details.

[[Page 64097]]

    DOE did not have a firm basis for quantifying the degree to which 
constant-torque BPM motors and constant-airflow BPM motors have a 
shorter lifetime than PSC motors. Although DOE used the same motor 
lifetime for each fan efficiency level in terms of total operating 
hours, the lifetime in terms of years is lower for constant-torque BPM 
and constant-airflow BPM motors, because they are more frequently used 
in multi-stage heating mode. In addition, DOE included additional labor 
hours to repair constant-torque BPM and constant-airflow BPM motors, as 
well as higher equipment cost for the BPM motors. Thus, on average, 
consumers with constant-torque BPM motors or constant-airflow BPM 
motors have higher life-cycle repair costs.
    Goodman commented that DOE excluded annual repair and maintenance 
costs from its payback analyses, and it believes those annualized costs 
should be included. (Goodman, No. 50 at p. 6) In response, DOE's 
rulemaking analysis, and this NOPR, use a simple payback period, which 
does not account for changes in operating expense over time. This 
payback period is the amount of time it takes the consumer to recover 
the additional installed cost of more-efficient products, compared to 
baseline products, through energy cost savings. Repair costs are 
generally most significant in the later years of a product's lifetime. 
Thus, they are not necessarily relevant to the payback periods that 
consumers actually experience.
3. Other Inputs
    DOE modeled furnace fan lifetime based on the distribution of 
furnace lifetimes developed for the recent energy conservation 
standards rulemaking for furnaces.\42\ 76 FR 37408, 37476-77 (June 27, 
2011). DOE used the same lifetime for furnace fans at different 
efficiency levels because there are no data that indicate variation of 
lifetime with efficiency. However, DOE modeled fan motor failure and 
replacement as a repair cost that affects a certain percentage of 
furnace fans, as discussed above. Ingersoll Rand commented that there 
should be no reason for an electric furnace to have a shorter lifetime 
than a fossil-fueled furnace. (Ingersoll Rand Residential Solutions, 
No. 57, at p. 9) For the NOPR analysis, DOE assumed that the lifetime 
for the fans installed in electric furnaces and gas furnaces is the 
same.
---------------------------------------------------------------------------

    \42\ Available at: https://www1.eere.energy.gov/buildings/appliance_standards/residential/residential_furnaces_central_ac_hp_direct_final_rule_tsd.html.
---------------------------------------------------------------------------

    DOE used the same distribution of discount rates for furnace fans 
as it used in the recent energy conservation standards rulemaking for 
furnaces. For replacement furnaces, the average rate is 5.0 percent.
4. Base-Case Efficiency Distribution
    To estimate the share of consumers that would be affected by an 
energy conservation standard at a particular efficiency level, DOE's 
LCC and PBP analysis considers the projected distribution (i.e., market 
shares) of product efficiencies in the first compliance year under the 
base case (i.e., the case without new or amended energy conservation 
standards). For the preliminary analysis, DOE found very limited data 
with which to estimate either current shares or recent trends. DOE 
requested comments on its estimate of the base-case efficiency 
distribution of furnace fans in 2019, as well as data that might 
support use of different assumptions.
    Several parties commented that DOE's estimates of constant-torque 
BPM motor and constant-airflow BPM motor market growth seem overly 
optimistic. Ingersoll Rand commented that DOE overestimated the future 
market share of these motors. (Ingersoll Rand Residential Solutions, 
No. 57, at p. 2) Lennox stated that the preliminary TSD's market growth 
assumptions are overstated for both constant-torque and variable-speed 
(ECM) motors. Lennox believes other factors increased adoption of 
higher-efficiency products between 2009 and 2011, namely, that was the 
period when a $1,500 Federal tax credit was available for furnaces with 
an AFUE rate of 95 percent or more. (Lennox, No. 47 at p. 2) Morrison 
commented that the projections for ECM market penetration are based on 
information from 2010 that presents an overly positive picture for the 
growth absent incentives. It stated that the market share of ECM motors 
has fallen in 2012 and will likely remain around that level without 
additional incentives, although it noted that regional furnace and air 
conditioner standards would likely increase market penetration of ECM 
and X13 motors. (Morrison, No. 58 at p. 8) AHRI and Morrison conceded 
that DOE's regional standards for central air conditioners, heat pumps 
and furnaces may slightly increase the usage of ECM and X13 motors, but 
such an increase would still not match DOE's projected ECM market 
share. (AHRI, No. 48 at p. 4; Morrison, No. 58 at p. 8) Rheem presented 
a forecast from its procurement group that shows the share of variable-
speed motors declining to the 20-25 percent range in 2012 and remaining 
at that level in 2013. (Rheem, No. 54, at p. 13) EEI stated that DOE 
should take into consideration the impact of tax incentives for the 
purchase of energy-efficient heating and cooling equipment when 
estimating energy use baselines and projected energy savings. (EEI, No. 
65 at p. 4) AHRI included a chart showing a declining trend in the 
usage of ECM and X13 motors after the expiration of the Federal tax 
credits. (AHRI, No. 48 at p. 4)
    AHRI commented that current trends suggest that the ECM and X13 
market shares will be 25-30 percent and 10-15 percent respectively by 
2019, assuming there are no further tax credit incentives in coming 
years. (AHRI, No. 48 at p. 4) Goodman commented that DOE's assumed 
market shares for X13 and ECM fans are significantly higher than 
Goodman's estimates, and that recent values are probably skewed as a 
result of Federal tax credits. Goodman estimates that about 70 percent 
of shipments in 2019 are expected to be PSC, and ECM motors are likely 
to be twice the volume of X13 motors (i.e., 20 percent ECM and 10 
percent X13). (Goodman, No. 50 at p. 4)
    For the NOPR, DOE reviewed the information provided by the 
manufacturers and modified its estimate of market shares in 2019. The 
NOPR analysis assumes that the combined market share of constant-torque 
BPM fans and constant-airflow BPM fans will be 35 percent in 2019. The 
shares are 13 percent for constant-torque BPM fans and 22 percent for 
constant-airflow BPM fans. DOE estimated separate shares for 
replacement and new home applications.
    The market shares of efficiency levels within the constant-torque 
BPM motor and constant-airflow BPM motor categories were derived from 
AHRI data on number of models.\43\ No such data were available for the 
PSC fan efficiency levels, so DOE used the number of models it tested 
or could measure using product literature to estimate that 40 percent 
of shipments are at the baseline level and 60 percent are improved PSC 
fans. There are currently no models of PSC with a controls design, so 
DOE assumed zero market share for such units. The details of DOE's 
approach are described in chapter 8 of the NOPR TSD.
---------------------------------------------------------------------------

    \43\ DOE used the AHRI Directory of Certified Furnace Equipment 
(Available at: https://www.ahridirectory.org/ahridirectory/pages/home.aspx) as well as manufacturer product literature.

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[[Page 64098]]

5. Rebuttable Presumption Payback Period
    As discussed in section III.E.2, EPCA provides that a rebuttable 
presumption is established that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. (42 U.S.C. 
6295(o)(2)(B)(i)) The calculation of this so-called rebuttable 
presumption payback period uses the same inputs as the calculation of 
the regular PBP for each sample household, but it uses average values 
instead of distributions, and the derivation of energy consumption and 
savings only uses the parameters specified by the proposed DOE test 
procedure for furnace fans rather than the method applied in the energy 
use analysis (described in section IV.E), which considers the 
characteristics of each sample household.
    DOE's LCC and PBP analyses generate values that calculate the 
payback period for consumers of potential energy conservation 
standards, which includes, but is not limited to, the three-year 
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 definitively evaluate the economic justification for a 
potential standard level (thereby supporting or rebutting the results 
of any preliminary determination of economic justification).

G. Shipments Analysis

    DOE uses forecasts of product shipments to calculate the national 
impacts of standards on energy use, NPV, and future manufacturer cash 
flows. DOE develops shipment projections based on historical data and 
an analysis of key market drivers for each product.
    The vast majority of furnace fans are shipped installed in 
furnaces, so DOE estimated furnace fan shipments by projecting furnace 
shipments in three market segments: (1) Replacements; (2) new housing; 
and (3) new owners in buildings that did not previously have a central 
furnace.
    To project furnace replacement shipments, DOE developed retirement 
functions for furnaces from the lifetime estimates and applied them to 
the existing products in the housing stock. The existing stock of 
products is tracked by vintage and developed from historical shipments 
data. The shipments analysis uses a distribution of furnace lifetimes 
to estimate furnace replacement shipments.
    To project shipments to the new housing market, DOE utilized 
projected new housing construction and historic saturation rates of 
various furnace and cooling product types in new housing. DOE used AEO 
2012 for projections of new housing. Furnace saturation rates in new 
housing are provided by the U.S. Census Bureau's Characteristics of New 
Housing.\44\
---------------------------------------------------------------------------

    \44\ Available at: https://www.census.gov/const/www/charindex.html.
---------------------------------------------------------------------------

    DOE also included a small market segment consisting of households 
that become ``new owners'' of a gas furnace. This segment consists of 
households that have central air conditioning and non-central heating 
or central air conditioning and electric heating and choose to install 
a gas furnace.
    Several parties stated that DOE's shipments estimates appear to be 
too high. (AHRI, No. 48 at p. 5; Goodman, No. 50 at p. 6; Rheem, No. 
54, at p. 15; Ingersoll Rand Residential Solutions, No. 57, at p. 2; 
Morrison, No. 58 at p. 6) Goodman stated that DOE projects growth from 
approximately 3 million units in 2011 to more than 4 million in 2020, 
whereas Goodman estimates about 3.7 million units in 2020, or less if 
new energy conservation standards affect sales. (Goodman, No. 50 at p. 
6) AHRI, Morrison, and Rheem stated that prior to 2006, the demand for 
large homes with multiple furnace systems was more common than it is 
today, and it is not clear that the demand for homes with multiple 
furnace systems can be projected into the future. These commenters also 
argued that the shipment projections do not show an echo effect loss in 
replacement sales for the drop in furnace sales in 2009-2013. (AHRI, 
No. 48 at p. 5; Morrison, No. 58 at p. 6; Rheem, No. 54 at p. 15) EEI 
stated that DOE's projected shipments of furnace fans do not appear 
consistent with other estimates of furnace shipments that EEI has 
observed. (EEI, No. 65 at p. 4) Lennox noted that DOE has projected 
significant market growth starting in 2012 and continuing forward, 
which does not appear to be supported by recent sales figures. (Lennox, 
No. 47 at p. 2)
    For the NOPR, DOE utilized more recent historical shipments data 
for gas-fired and oil-fired furnaces, which show a decline in 2012. DOE 
also reviewed and modified its projection of furnace shipments. The new 
projection (depicted in chapter 9 of the NOPR TSD) shows a lower level 
of replacement shipments in the 2025-30 period, which is a consequence 
(i.e., an echo) of the decline in historical shipments in 2007-2009. 
The NOPR projection for 2020 shows total shipments of 3.7 million, 
which is the same as the 3.7 million estimated by Goodman.
    Regarding the comment from AHRI, Morrison, and Rheem, DOE's 
methodology does not presume that past demand for homes with multiple 
furnace systems will continue in the future. However, it does assume 
that furnaces installed in the past will be replaced, so the 
installation of multiple furnaces in the past would contribute to 
future growth in shipments.
    In the preliminary analysis, DOE considered whether standards that 
require more-efficient furnace fans would have an impact on furnace 
shipments. Lennox stated that an overly-stringent standard for furnace 
fans would bring further increased costs to consumers, beyond the added 
product cost from tightened AFUE standards for furnaces, venting and 
drainage for condensing furnaces (required in northern States by 
regional standards), and standby mode and off mode power regulations. 
Lennox stated that higher purchase prices cause consumers to defer 
purchases, repair existing furnaces, and/or find less-efficient, 
higher-polluting alternate sources of heat. (Lennox, No. 47 at p. 3) 
Goodman commented that it would expect reduction in furnace sales after 
implementation of a new furnace fan standard, since many consumers will 
choose to repair instead of replacing products currently in their home, 
thereby avoiding the need to pay the initial cost of a more expensive, 
higher-efficiency product. (Goodman, No. 50 at p. 6) Morrison also 
commented that higher upfront costs could lead to consumer switching to 
less-efficient products and push consumers to repair rather than 
replace units. (Morrison, No. 58, at p. 9)
    DOE agrees that it is reasonable to expect that energy conservation 
standards for residential furnace fans that result in higher furnace 
prices would have some dampening effect on sales. Some consumers might 
choose to repair their existing furnace rather than purchase a new one, 
or perhaps install an alternative space heating product. To

[[Page 64099]]

estimate the impact on shipments of the price increase for the 
considered efficiency levels, DOE used the relative price elasticity 
approach that was applied in the 2011 furnace standards rulemaking.\45\ 
76 FR 37408, 37483 (June 27, 2011). This approach also gives some 
weight to the operating cost savings from higher-efficiency products. 
Chapter 9 in the NOPR TSD describes the method applied.
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    \45\ Available at: https://www1.eere.energy.gov/buildings/appliance_standards/residential/residential_furnaces_central_ac_hp_direct_final_rule_tsd.html.
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H. National Impact Analysis

    The NIA assesses the NES and the NPV from a national perspective of 
total consumer costs and savings expected to result from new or amended 
energy conservation standards at specific efficiency levels. DOE 
determined the NPV and NES for the potential standard levels considered 
for the furnace fan product classes analyzed. To make the analysis more 
accessible and transparent to all interested parties, DOE prepared a 
computer spreadsheet that uses typical values (as opposed to 
probability distributions) as inputs. To assess the effect of input 
uncertainty on NES and NPV results, DOE has developed its spreadsheet 
model to conduct sensitivity analyses by running scenarios on specific 
input variables.
    Analyzing impacts of potential energy conservation standards for 
residential furnace fans requires comparing projections of U.S. energy 
consumption with new or amended energy conservation standards against 
projections of energy consumption without the standards. The forecasts 
include projections of annual appliance shipments, the annual energy 
consumption of new appliances, and the purchase price of new 
appliances.
    A key component of DOE's NIA analysis is the energy efficiencies 
projected over time for the base case (without new standards) and each 
of the standards cases. The projected efficiencies represent the annual 
shipment-weighted energy efficiency of the products under consideration 
during the shipments projection period (i.e., from the assumed 
compliance date of a new standard to 30 years after compliance is 
required).
    In the preliminary analysis, DOE derived a growth rate in the 
market share of ECM fans by extrapolating the trend from 2005, when the 
ECM share was 10 percent, to 2010, when it was approximately 30 
percent. In so doing, DOE considered the favorable cost-effectiveness 
of ECM fans and assumed that their market share would peak and level 
off at 79 percent.
    AHRI and Rheem stated that DOE's assumption that the market share 
for furnace fans with ECM technology will increase to 75 percent is not 
supported by the industry data, especially since the Federal 
residential tax credits have expired. (AHRI, No. 48 at p 5; Rheem, No. 
54, at p. 15) Goodman also stated that a 75 percent peak market 
penetration of ECM motors as estimated by DOE seems high. Goodman 
estimates a value in the range of 40-50 percent by mid-century. 
(Goodman, No. 50 at p. 4)
    For the NOPR, DOE reviewed the information provided by the 
manufacturers and modified its estimate of the long-run trend in market 
shares of constant-torque BPM and constant-airflow BPM motor furnace 
fans. The NOPR analysis assumes a long-run trend that results in market 
share of the constant-torque BPM and constant-airflow BPM furnace fans 
reaching 45 percent in 2048.
    For the preliminary analysis, DOE used a ``roll up'' scenario for 
estimating the impacts of the potential energy conservation standards 
for residential furnace fans. Under the ``roll-up'' scenario, DOE 
assumes: (1) product efficiencies in the base case that do not meet the 
standard level under consideration would ``roll-up'' to meet the new 
standard level; and (2) product efficiencies above the standard level 
under consideration would not be affected. To be consistent with the 
assumption regarding base-case efficiency after the compliance year, 
DOE assumed that for each standards case, the efficiency distribution 
in each product class remains unchanged after 2019. DOE used the same 
approach for the NOPR.
1. National Energy Savings Analysis
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products in each 
potential standards case (TSL) with consumption in the base case with 
no new or amended energy conservation standards. DOE calculated the 
national energy consumption by multiplying the number of units (stock) 
of each product (by vintage or age) by the unit energy consumption 
(also by vintage). Vintage represents the age of the product. DOE 
calculated annual NES based on the difference in national energy 
consumption for the base case (without new efficiency standards) and 
for each higher efficiency standard. DOE estimated energy consumption 
and savings based on site energy and converted the electricity 
consumption and savings to primary energy using annual conversion 
factors derived from the AEO 2012 version of the NEMS. Cumulative 
energy savings are the sum of the NES for each year over the timeframe 
of the analysis.
    DOE has historically presented NES in terms of primary energy 
savings. In response to the recommendations of a committee on ``Point-
of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency 
Standards'' appointed by the National Academy of Science, DOE announced 
its intention to use full-fuel-cycle (FFC) measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (August 18, 2011). While DOE stated in that 
notice that it intended to use the Greenhouse Gases, Regulated 
Emissions, and Energy Use in Transportation (GREET) model to conduct 
the analysis, it also said it would review alternative methods, 
including the use of EIA's National Energy Modeling System (NEMS). 
After evaluating both models and the approaches discussed in the August 
18, 2011 notice, DOE published a statement of amended policy in the 
Federal Register in which DOE explained its determination that NEMS is 
a more appropriate tool for this specific use. 77 FR 49701 (August 17, 
2012). Therefore, DOE is using NEMS model to conduct FFC analyses.
    Goodman questioned the introduction of FFC measures of energy use. 
It noted that, under 42 U.S.C. 6291(4), ``energy use'' is defined as 
``the quantity of energy directly consumed by a consumer product at 
point of use . . .'' (Goodman, No. 50 at p. 4)
    The definition of ``energy use'' cited by Goodman is intended to 
apply at the product level. This is apparent from the complete 
definition: ``The term `energy use' means the quantity of energy 
directly consumed by a consumer product at point of use, determined in 
accordance with test procedures under section 6293 of this title.'' (42 
U.S.C. 6291(4)) The law also requires DOE, in determining the economic 
justification of a standard, to consider the total projected energy 
savings that are expected to result directly from the standard. (42 
U.S.C. 6295(o)(2)(B)(i)(III)) The term ``energy'' means electricity or 
fossil fuels. (42 U.S.C. 6291(3)) The FFC metric provides a more 
complete accounting of the fossil fuels saved by standards, and its use 
is in keeping with DOE's statutory authority. The approach used to 
derive FFC multipliers for this NOPR is described in appendix 10-B of 
the NOPR TSD. DOE requests comment

[[Page 64100]]

on the FCC multipliers and the assumptions made to derive the 
multipliers.
2. Net Present Value Analysis
    The inputs for determining NPV are: (1) Total annual installed 
cost; (2) total annual savings in operating costs; (3) a discount 
factor to calculate the present value of costs and savings; (4) present 
value of costs; and (5) present value of savings. DOE calculated net 
savings each year as the difference between the base case and each 
standards case in terms of total savings in operating costs versus 
total increases in installed costs. DOE calculated savings over the 
lifetime of products shipped in the forecast period. DOE calculated NPV 
as the difference between the present value of operating cost savings 
and the present value of total installed costs. DOE used a discount 
factor based on real discount rates of 3 and 7 percent to discount 
future costs and savings to present values.
    For the NPV analysis, DOE calculates increases in total installed 
costs as the difference in total installed cost between the base case 
and standards case (i.e., once the standards take effect).
    DOE assumed no change in residential furnace fan prices over the 
2019-2048 period. In addition, DOE conducted a sensitivity analysis 
using alternative price trends, specifically one in which prices 
decline over time, and another in which prices rise. These price trends 
are described in appendix 10-C of the NOPR TSD.
    DOE expresses savings in operating costs as decreases associated 
with the lower energy consumption of products bought in the standards 
case compared to the base efficiency case. Total savings in operating 
costs are the product of savings per unit and the number of units of 
each vintage that survive in a given year.
    DOE estimates the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of Management and 
Budget (OMB) to Federal agencies on the development of regulatory 
analysis.\46\ The NPV results for the residential furnace fan TSLs are 
presented in section V.B.3 of this notice.
---------------------------------------------------------------------------

    \46\ OMB Circular A-4 (Sept. 17, 2003), section E, ``Identifying 
and Measuring Benefits and Costs.''
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In the NOPR stage of a rulemaking, DOE conducts a consumer subgroup 
analysis. A consumer subgroup comprises a subset of the population that 
may be affected disproportionately by new or revised energy 
conservation standards (e.g., low-income consumers, seniors). The 
purpose of a subgroup analysis is to determine the extent of any such 
disproportional impacts.
    For this NOPR, DOE evaluated impacts of potential standards on two 
subgroups: (1) Senior-only households and (2) low-income households. 
DOE identified these households in the RECS sample and used the LCC 
spreadsheet model to estimate the impacts of the considered efficiency 
levels on these subgroups. The consumer subgroup results for the 
residential furnace fan TSLs are presented in section V.B.1 of this 
notice.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impact of new energy 
conservation standards on manufacturers of residential furnace fans and 
to calculate the potential impact of such standards on employment and 
manufacturing capacity. The MIA has both quantitative and qualitative 
aspects. The quantitative part of the MIA primarily relies on the 
Government Regulatory Impact Model (GRIM), an industry cash-flow model 
with inputs specific to this rulemaking. The key GRIM inputs are data 
on the industry cost structure, product costs, shipments, and 
assumptions about markups and conversion expenditures. The key output 
is the industry net present value (INPV). Different sets of assumptions 
(markup scenarios) will produce different results. The qualitative part 
of the MIA addresses factors such as product characteristics, impacts 
on particular subgroups of firms, and important market and product 
trends. The complete MIA is outlined in chapter 12 of the NOPR TSD.
    For this rulemaking, DOE considers the ``furnace fan industry'' to 
consist of manufacturers who assemble furnace fans as a component of 
the HVAC products addressed in this rulemaking.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared a profile of the residential furnace fans 
industry that includes a top-down cost analysis of manufacturers used 
to derive preliminary financial inputs for the GRIM (e.g., sales, 
general, and administration (SG&A) expenses; research and development 
(R&D) expenses; and tax rates). DOE used public sources of information, 
including company SEC 10-K filings,\47\ corporate annual reports, the 
U.S. Census Bureau's Economic Census,\48\ and Hoover's reports.\49\
---------------------------------------------------------------------------

    \47\ U.S. Securities and Exchange Commission, Annual 10-K 
Reports (Various Years) (Available at: https://sec.gov).
    \48\ U.S.Census Bureau, Annual Survey of Manufacturers: General 
Statistics: Statistics for Industry Groups and Industries (Available 
at: https://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.xhtml?refresh=t).
    \49\ Hoovers Inc. Company Profiles (Various Companies) 
(Available at: https://www.hoovers.com).
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    In Phase 2 of the MIA, DOE prepared an industry cash-flow analysis 
to quantify the potential impacts of a new energy conservation 
standard. In general, energy conservation standards can affect 
manufacturer cash flow in three distinct ways: (1) create a need for 
increased investment; (2) raise production costs per unit; and (3) 
alter revenue due to higher per-unit prices and possible changes in 
sales volumes.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with a representative cross-section of manufacturers. During 
these interviews, DOE discussed engineering, manufacturing, 
procurement, and financial topics to validate assumptions used in the 
GRIM and to identify key issues or concerns. See section IV.J.4 for a 
description of the key issues manufacturers raised during the 
interviews.
    Additionally, in Phase 3, DOE evaluated subgroups of manufacturers 
that may be disproportionately impacted by new standards or that may 
not be accurately represented by the average cost assumptions used to 
develop the industry cash-flow analysis. For example, small 
manufacturers, niche players, or manufacturers exhibiting a cost 
structure that largely differs from the industry average could be more 
negatively affected. DOE identified one subgroup (i.e., small 
manufacturers) for a separate impact analysis.
    DOE applied the small business size standards published by the 
Small Business Administration (SBA) to determine whether a company is 
considered a small business. 65 FR 30836, 30848 (May 15, 2000), as 
amended at 65 FR 53533, 53544 (Sept. 5, 2000) and codified at 13 CFR 
part 121. To be categorized as a small business under North American 
Industry Classification System (NAICS) code 333415, ``Air-Conditioning 
and Warm Air Heating Equipment and Commercial and Industrial 
Refrigeration Equipment Manufacturing,'' a residential furnace fan 
manufacturer and its affiliates may employ a

[[Page 64101]]

maximum of 750 employees. The 750-employee threshold includes all 
employees in a business's parent company and any other subsidiaries. 
Based on this classification, DOE identified at least 14 residential 
furnace fan manufacturers that qualify as small businesses. The 
residential furnace fan small manufacturer subgroup is discussed in 
chapter 12 of the NOPR TSD and in section V.B.2.d of this notice.
2. Government Regulatory Impact Model
    DOE uses the GRIM to quantify the changes in cash flow due to new 
standards that result in a higher or lower industry value. The GRIM 
analysis uses a standard, annual cash-flow analysis that incorporates 
manufacturer costs, markups, shipments, and industry financial 
information as inputs. The GRIM models changes in costs, distribution 
of shipments, investments, and manufacturer margins that could result 
from new energy conservation standards. The GRIM spreadsheet uses the 
inputs to arrive at a series of annual cash flows, beginning in 2013 
(the base year of the analysis) and continuing to 2048. DOE calculated 
INPVs by summing the stream of annual discounted cash flows during this 
period. For residential furnace fan manufacturers, DOE used a real 
discount rate of 7.8 percent, which was derived from industry 
financials and then modified according to feedback received during 
manufacturer interviews.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between a base case and each standards 
case. The difference in INPV between the base case and a standards case 
represents the financial impact of the new energy conservation standard 
on manufacturers. As discussed previously, DOE collected this 
information on the critical GRIM inputs from a number of sources, 
including publicly-available data and interviews with a number of 
manufacturers (described in the next section). The GRIM results are 
shown in section V.B.2.a. Additional details about the GRIM, the 
discount rate, and other financial parameters can be found in chapter 
12 of the NOPR TSD.
a. Government Regulatory Impact Model Key Inputs
Manufacturer Production Costs
    Manufacturing a higher-efficiency product is typically more 
expensive than manufacturing a baseline product due to the use of more 
complex components, which are typically more costly than baseline 
components. The changes in the MPCs of the analyzed products can affect 
the revenues, gross margins, and cash flow of the industry, making 
these product cost data key GRIM inputs for DOE's analysis.
    In the MIA, DOE used the MPCs for each considered efficiency level 
calculated in the engineering analysis, as described in section IV.C 
and further detailed in chapter 5 of the NOPR TSD. In addition, DOE 
used information from its teardown analysis, described in chapter 5 of 
the TSD, to disaggregate the MPCs into material, labor, and overhead 
costs. To calculate the MPCs for equipment above the baseline, DOE 
added the incremental material, labor, and overhead costs from the 
engineering cost-efficiency curves to the baseline MPCs. These cost 
breakdowns and product markups were validated and revised with 
manufacturers during manufacturer interviews.
Shipments Forecast
    The GRIM estimates manufacturer revenues based on total unit 
shipment forecasts and the distribution of these values by efficiency 
level. Changes in sales volumes and efficiency mix over time can 
significantly affect manufacturer finances. For this analysis, the GRIM 
uses the NIA's annual shipment forecasts derived from the shipments 
analysis from 2013 (the base year) to 2048 (the end year of the 
analysis period). See chapter 9 of the NOPR TSD for additional details.
    For the standards-case shipment forecast, the GRIM uses the NIA 
standards-case shipment forecasts. DOE assumes a new efficiency 
distribution in the standards case, in which product efficiencies in 
the base case that did not meet the standard under consideration would 
``roll up'' to meet the new standard in the year that compliance is 
required.
Product and Capital Conversion Costs
    New energy conservation standards would cause manufacturers to 
incur one-time conversion costs to bring their production facilities 
and product designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each product class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Product conversion costs; and (2) capital conversion costs. Product 
conversion costs are one-time investments in research, development, 
testing, marketing, and other non-capitalized costs necessary to make 
product designs comply with the new energy conservation standard. 
Capital conversion costs are one-time investments in property, plant, 
and equipment necessary to adapt or change existing production 
facilities such that new product designs can be fabricated and 
assembled.
    To evaluate the level of capital conversion expenditures 
manufacturers would likely incur to comply with new energy conservation 
standards, DOE used manufacturer interviews to gather data on the 
anticipated level of capital investment that would be required at each 
efficiency level. DOE validated manufacturer comments through estimates 
of capital expenditure requirements derived from the product teardown 
analysis and engineering analysis described in chapter 5 of the TSD.
    DOE assessed the product conversion costs at each considered 
efficiency level by integrating data from quantitative and qualitative 
sources. DOE considered market-share-weighted feedback regarding the 
potential costs of each efficiency level from multiple manufacturers to 
determine conversion costs such as R&D expenditures and certification 
costs. Manufacturer data were aggregated to better reflect the industry 
as a whole and to protect confidential information.
    In general, DOE assumes that all conversion-related investments 
occur between the year of publication of the final rule and the year by 
which manufacturers must comply with the new standard. The investment 
figures used in the GRIM can be found in section IV.J.2 of this notice. 
For additional information on the estimated product and capital 
conversion costs, see chapter 12 of the NOPR TSD.
b. Government Regulatory Impact Model Scenarios
Shipment Scenarios
    In the NIA, DOE modeled shipments with a roll-up scenario to 
represent possible standards-case efficiency distributions for the 
years beginning 2019 (the year that compliance with new standards is 
proposed to be required) through 2048 (the end of the analysis period). 
The roll-up scenario represents the case in which all shipments in the 
base case that do not meet the new standard would roll up to meet the 
new standard level, with the efficiency of products already at the new 
standard level remaining unchanged. Consumers in the base case who 
purchase products above the standard level are not affected as they are 
assumed to continue to purchase the

[[Page 64102]]

same product in the standards case. See chapter 9 of the NOPR TSD for 
more information.
Markup Scenarios
    As discussed above, MSPs include direct manufacturing production 
costs (i.e., labor, materials, and overhead estimated in DOE's MPCs) 
and all non-production costs (i.e., SG&A, R&D, and interest), along 
with profit. To calculate the MSPs in the GRIM, DOE applied non-
production cost markups to the MPCs estimated in the engineering 
analysis for each product class and efficiency level. Modifying these 
markups in the standards case yields different sets of impacts on 
manufacturers. For the MIA, DOE modeled two standards-case markup 
scenarios to represent the uncertainty regarding the potential impacts 
on prices and profitability for manufacturers following the 
implementation of new energy conservation standards: (1) a preservation 
of gross margin percentage markup scenario; and (2) a preservation of 
operating profit markup scenario. These scenarios lead to different 
markups values that, when applied to the inputted MPCs, result in 
varying revenue and cash flow impacts.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' markup across all 
efficiency levels, which assumes that manufacturers would be able to 
maintain the same amount of profit as a percentage of revenues at all 
efficiency levels within a product class. As production costs increase 
with efficiency, this scenario implies that the absolute dollar markup 
will increase as well. Based on publicly-available financial 
information for manufacturers of residential furnace fans and comments 
from manufacturer interviews, DOE assumed the non-production cost 
markup--which includes SG&A expenses, R&D expenses, interest, and 
profit--to be the following for each residential furnace fan product 
class:

Table IV.9--Manufacturer Markup by Residential Furnace Fan Product Class
------------------------------------------------------------------------
                      Product class                           Markup
------------------------------------------------------------------------
NWG-NC..................................................            1.30
NWG-C...................................................            1.31
WG-NC...................................................            1.27
NWO-NC..................................................            1.35
EF/MB...................................................            1.19
MH-NWG-NC...............................................            1.25
MH-NWG-C................................................            1.25
MH-EF/MB................................................            1.15
------------------------------------------------------------------------

    Because this markup scenario assumes that manufacturers would be 
able to maintain their gross margin percentage markups as production 
costs increase in response to a new energy conservation standard, it 
represents a high bound to industry profitability.
    In the preservation of operating profit scenario, manufacturer 
markups are set so that operating profit one year after the compliance 
date of the new energy conservation standard is the same as in the base 
case. Under this scenario, as the costs of production increase under a 
standards case, manufacturers are generally required to reduce their 
markups to a level that maintains base-case operating profit. The 
implicit assumption behind this markup scenario is that the industry 
can only maintain its operating profit in absolute dollars after 
compliance with the new standard is required. Therefore, operating 
margin in percentage terms is squeezed (reduced) between the base case 
and standards case. DOE adjusted the manufacturer markups in the GRIM 
at each TSL to yield approximately the same earnings before interest 
and taxes in the standards case as in the base case. This markup 
scenario represents a low bound to industry profitability under a new 
energy conservation standard.
3. Discussion of Comments
    During the preliminary analysis public meeting, interested parties 
commented on the assumptions and results of the preliminary analysis 
TSD. Oral and written comments addressed several topics, including 
testing and certification burdens, cumulative regulatory burdens, 
compliance date, impacts on small businesses, and conversion costs.
a. Testing and Certification Burdens
    Manufacturers expressed concerns about the potential testing and 
certification burdens that may be associated with a new furnace fan 
energy conservation standard. Ingersoll Rand commented that the 
rulemaking would result in additional burden from testing, 
certification, and compliance, leading to an increased cost for 
consumers. (Ingersoll Rand, No. 57 at p. 2) Rheem stated that, in the 
past, there has been no requirement for manufacturers to test and 
report furnace airflow data according to any industry or governmental 
standard. In addition, Rheem added that there have been no 
certification requirements that require the testing of multiple 
samples. Therefore, Rheem concluded that it is not reasonable to assume 
that manufacturers already have the data available to rate hundreds of 
current furnace models. For companies like Rheem, which have a large 
number of basic models, the commenter lamented that compliance with new 
testing requirements would create a significant burden. (Rheem, No. 54 
at p. 3) In order to relieve some of the testing burden, Mortex 
recommended that DOE should allow manufacturers to use Alternative 
Efficiency Determination Methods (AEDMs). (Mortex, No. 43 at p. 25) 
Mortex also recommended that DOE should use an alternative test 
procedure that is integrated with AFUE testing so that all models do 
not have to be tested separately under the residential furnace fan test 
procedure. (Mortex, No. 59 at p. 3) Manufacturers were also concerned 
that the time needed to certify all their products would reduce 
investment in innovative technologies, because fewer resources would be 
available for R&D. (Rheem, No. 54 at p. 16)
    DOE recognizes the concerns that manufacturers have regarding test 
burden. As discussed in section III.A, DOE proposed in the April 2, 
2013 test procedure SNOPR to adopt a modified version of an alternative 
test method recommended by AHRI and other furnace fan manufacturers 
that aligns the residential furnace fan test procedure with the DOE 
test procedure for residential furnaces to significantly reduce burden 
on industry. 78 FR 19606. DOE also estimated the capital expenditure, 
time to test, and cost to test according to the proposed residential 
furnace fan test procedure in the SNOPR. DOE found that the proposed 
test procedure would not result in significant capital expenditures for 
manufacturers, because they would not have to acquire or use any test 
equipment beyond the equipment already used to conduct the test method 
specified in the DOE residential furnace test procedure (i.e., the AFUE 
test setup). DOE also found that the time to conduct a single furnace 
fan test according to its proposed furnace fan test procedure would be 
less than 3 hours and cost less than one percent of the manufacturer 
selling price of the product into which the furnace fan is integrated. 
Consequently, DOE does not find that testing furnace fans according to 
this proposed test procedure would be unduly burdensome. Id. at 19619-
21

[[Page 64103]]

b. Cumulative Regulatory Burden
    Interested parties expressed concern over the cumulative regulatory 
burden that would result from a residential furnace fan energy 
conservation standard. Morrison commented that the energy conservation 
standards that already apply to residential HVAC products, in 
combination with a standard for furnace fans, would significantly 
increase manufacturer burden. (Morrison, No. 43 at p. 23) Both AHRI and 
Morrison stated that DOE's current estimation of the incremental cost 
of testing furnace fans (at less than 2 percent of the manufacturer 
selling price) does not account for the additional burden placed on 
furnace manufacturers that must now also certify standby mode and off 
mode energy consumption, along with AFUE. (AHRI, No. 48 at p. 7; 
Morrison, No. 58 at p. 10) Furthermore, Morrison commented that several 
of the manufacturers who are impacted by this residential furnace fans 
rulemaking face even greater cumulative regulatory burden, because they 
also produce other products regulated by DOE. (Morrison, No. 58 at p. 
10)
    Instead of creating a set of residential furnace fan standards 
through a separate energy conservation rulemaking, manufacturers and 
efficiency experts advocated for combining all furnace-related 
standards into one rulemaking or to have only one metric for all 
furnace-related products. CA IOU recommended that DOE should, in future 
iterations of furnace-related standards, combine CAC/HP, furnaces, and 
furnace fans into a single rulemaking, given their interrelated 
performance and energy consumption. (CA IOU, No. 56 at p. 2) Morrison 
and Rheem were also concerned that the cost of certifying furnace fan 
efficiency ratings would increase upfront costs for consumers and 
therefore lead them to choose less-efficient products (e.g., space 
heaters) or repair HVAC units instead of replacing them. (Morrison, No. 
58 at p. 9; Rheem, No. 54 at p. 16) Furthermore, Morrison believes a 
single combined metric would prevent consumer confusion that can arise 
from having multiple metrics assigned to a single product, and Morrison 
opined that such approach would also reduce the regulatory burden 
imposed on manufacturers. (Morrison, No. 43 at p. 24)
    DOE realizes that the cumulative effect of multiple regulations on 
an industry may significantly increase the burden faced by 
manufacturers that need to comply with regulations and testing 
requirements from different organizations and levels of government. DOE 
takes into account the cumulative cost of multiple regulations on 
manufacturers in the cumulative regulatory burden section of its 
analysis. Additionally, DOE considers the cumulative regulatory burden 
as part of its decision process in setting proposed standards. Further 
information on cumulative regulatory burden can be found in section 
V.B.2.e of this notice and in chapter 12 of the NOPR TSD.
c. Compliance Date and Implementation Period
    Efficiency advocates expressed support for a compliance date sooner 
than five years after publication of the final rule, because it would 
result in additional energy savings. Earthjustice commented that EPCA 
does not mandate a lead time of five years for furnace fans because 
furnace fans are not listed in section 325(m) (42 U.S.C. 
6295(m)(4)(A)(ii)) as a product to which a 5-year lead time applies. 
(Earthjustice, No. 49 at p. 2) In a joint comment (hereinafter referred 
to as the joint comment), the Appliance Standards Awareness Project, 
American Council for an Energy-Efficient Economy, National Consumer Law 
Center, Natural Resources Defense Council, and Northwest Energy 
Efficiency Alliance encouraged DOE to consider a compliance date three 
years after publication of the final rule. According to the joint 
commenters, a three-year lead time for manufacturers is feasible, 
because the efficiency levels that DOE evaluated for the preliminary 
analysis are based on technologies that are already widely employed in 
current HVAC products--namely ECM and X13 motors. (ACEEE, et al., No. 
55 at p. 3) NEEP also recommended a compliance date three years after 
publication of the final rule. (NEEP, No. 51 at p. 3)
    However, according to Goodman, EPCA mandates a lead time of greater 
than five years. Goodman commented that EPCA prohibits a manufacturer 
from being forced to apply new standards to a product that has had 
other new standards applied to it within a 6-year period. (42 U.S.C. 
6295(m)(4)(B)) Therefore, the earliest effective date for new energy 
conservation standards for residential furnace fans, pursuant to EPCA, 
would be January 1, 2021 because a new AFUE standard will become 
effective on May 1, 2013 and a new SEER/HSPF standard will become 
effective January 1, 2015. (Goodman, No. 50 at p. 8)
    In response to these comments regarding the appropriate compliance 
date for residential furnace fan standards, DOE agrees with the joint 
commenters' observation that under 42 U.S.C. 6295(m)(4)(A)(ii), EPCA 
does not specify furnace fans as a product with a 5-year lead time. DOE 
does not agree with Goodman's interpretation of 42 U.S.C. 6295(m)(4) as 
prohibiting a compliance date prior to January 2021. DOE has 
tentatively concluded that 42 U.S.C. 6295(m)(4) is only applicable to 
amendments to existing standards, and residential furnace fans are 
covered products that have not been previously regulated. Furnace fans 
are explicitly addressed only at 42 U.S.C. 6295(f)(4)(D), which does 
not specify any compliance dates. Therefore, since EPCA does not 
mandate a specific lead time for furnace fans, DOE considered the 
actions required by manufacturers to comply with the proposed standard 
to determine an appropriate lead-time. During manufacturer interviews, 
DOE found that standards would result in manufacturers' extending R&D 
beyond the furnace fan assembly to understand the impacts on the design 
and performance of the furnace or modular blower in which the furnace 
fan is integrated. To comply with the proposed standard, manufacturers 
may have to alter not only the designs and fabrication processes for 
the furnace fan assembly, but also for the furnace or modular blower 
into which the furnace fan is integrated. Similar products that require 
similar actions for compliance typically have lead times of five years. 
For these reasons, DOE selected a 5-year compliance date.
d. Small Businesses
    DOE received comments regarding its analysis of small businesses. 
Mortex formally requested that DOE prepare a regulatory flexibility 
analysis since it believes that DOE has not certified that the 
amendments in the test procedure proposed rule do not have a 
significant economic impact on a substantial number of small entities. 
(Mortex, No. 59 at p. 3) During the preliminary analysis public 
meeting, Unico asked whether small manufacturers will be included in 
DOE's cost-benefit analysis. (Unico, No. 43 at p. 56) However, 
Ingersoll Rand is concerned that DOE limits the manufacturer analysis 
to only small manufacturers. (Ingersoll Rand, No. 57 at p. 2)
    For the manufacturer impact analysis, DOE determined the impact of 
a new standard on the entire residential furnace fans industry, 
including manufacturers of all sizes. However, DOE also evaluated 
subgroups of manufacturers that may be disproportionately impacted by 
new standards. For this rulemaking, DOE identified small businesses as 
a subgroup and discusses the impacts on

[[Page 64104]]

this subgroup in the initial regulatory flexibility analysis, which can 
be found in section VI.B of this notice. DOE's decision to prepare a 
regulatory flexibility analysis for the residential furnace fans 
standards rulemaking NOPR is separate from its decision to not prepare 
a regulatory flexibility analysis for the residential furnace fans test 
procedures NOPR. DOE did previously certify to SBA that its proposed 
test procedure for residential furnace fans would not have a 
significant economic impact on a substantial number of small entities.
e. Conversion Costs
    Several manufacturers expressed concern as to the capital 
conversion costs that may be associated with a new standard. Rheem 
stated that stringent standards may require significant capital 
conversion costs and that this is a key issue for the MIA. (Rheem, No. 
54 at p. 16) Morrison expressed a similar concern, stating that 
manufacturers may incur significant capital conversion costs at 
``overly burdensome'' regulation levels. (Morrison, No. 58 at p. 9)
    DOE acknowledges manufacturers' concerns regarding capital 
conversion costs and carefully took this matter into account in 
developing its proposal. During manufacturer interviews, DOE requested 
information about potential conversion costs at each efficiency level 
for each product class. DOE evaluated the information gathered during 
the interviews, as well as data from the engineering analysis, to 
determine capital conversion costs. Conversion costs are discussed in 
detail in section V.B.2.a of this notice and in chapter 12 of the TSD.
4. Manufacturer Interviews
    DOE considers the manufacturer of the HVAC product in which the 
residential furnace fan is integrated to be the furnace fan 
manufacturer. DOE is aware that HVAC product manufacturers purchase 
many of the components in the furnace fan assembly (e.g., the motor and 
impeller) from separate component manufacturers. However, the HVAC 
product manufacturer determines the design requirements, selects the 
purchased components based on these requirements, and performs the 
final assembly and integration of the fan assembly into the HVAC 
product. For these reasons, DOE considers the HVAC product manufacturer 
to be the furnace fan manufacturer. Accordingly, DOE interviewed 
manufacturers representing approximately 90 percent of residential gas 
furnace and central air conditioner sales, approximately 15 percent of 
residential oil furnace sales, \50\ over 85 percent of electric 
furnace/modular blower sales, and approximately 90 percent of 
manufactured home furnace sales. These interviews were in addition to 
those DOE conducted as part of the engineering analysis. The 
information gathered during these interviews enabled DOE to tailor the 
GRIM to reflect the unique financial characteristics of the residential 
furnace fan industry. All interviews provided information that DOE used 
to evaluate the impacts of potential new energy conservation standards 
on manufacturer cash flows, manufacturing capacities, and employment 
levels.
---------------------------------------------------------------------------

    \50\ DOE did reach out to a number of residential oil-fired 
furnace manufacturers, but most declined to be interviewed. However, 
DOE notes that fan assemblies and the processes by which they are 
fabricated do not change significantly across furnace type.
---------------------------------------------------------------------------

    During the manufacturer interviews, DOE asked manufacturers to 
describe their major concerns about this rulemaking. The following 
sections describe the most significant issues identified by 
manufacturers. DOE also considered all other concerns expressed by 
manufacturers in its analyses. However, manufacturer interviews are 
conducted under non-disclosure agreements (NDAs), so DOE does not 
document these discussions in the same way that it does public comments 
in the comment summaries and DOE's responses throughout the rest of 
this notice.
a. Testing and Certification Burdens
    All interviewed manufacturers expressed concerns about testing and 
certification burdens. In particular, manufacturers were concerned 
about the additional time required to test products for compliance with 
the new standard. Because the test procedure proposed in the May 15, 
2012 furnace fan test procedure NOPR (77 FR 28674) is different from 
testing methods that are currently being used for residential furnaces, 
manufacturers argued that a significant amount of time would need to be 
invested. Some manufacturers suggested that the testing burden could be 
reduced if the testing for FER could be coordinated with testing for 
AFUE. In general, manufacturers were more concerned about the 
additional time and labor required to conduct the testing rather than 
the cost of testing equipment and stations, which were expected to be 
minimal.
    As explained in section IV.K.3.a, DOE recognizes the concerns that 
manufacturers have regarding test burden and has issued a test 
procedure SNOPR that would align the proposed residential furnace fan 
test procedure with the DOE test procedure for residential furnaces, 
thereby reducing the burden on manufacturers. 78 FR 19606 (April 2, 
2013).
b. Market Size
    During interviews, manufacturers raised concerns about the 
potential of new furnace fan energy conservations standards to cause 
the residential furnace fan market to contract. Manufacturers claimed 
that an increase in overall product costs, resulting from component 
changes or increased test burden, would lead to a reduced volume of 
furnace sales. They stated that higher costs could drive consumers to 
purchase refurbished or repaired units instead of new products. Higher 
costs might also push consumers towards using alternative heating 
technologies (e.g., space heaters or radiant heat) which may be less 
efficient. One manufacturer also noted that the market for residential 
furnace fan products has already shrunk 6-7 percent and is expected to 
have slow growth over the next few years. Given that manufacturers 
expect slow or no growth in the near future for most of the product 
classes even without new energy conservation standards, the addition of 
new standards could lead to further market contraction.
    Although the production costs for furnace fans are estimated to 
increase with higher efficiency levels, DOE does not expect overall 
shipments of furnaces to decrease due to an increase in standards. On 
the contrary, based on the shipments analysis, total shipments for the 
furnace fan industry are not expected to decrease in the years 
following the standards compliance year. Chapter 9 of the NOPR TSD 
provides more information on shipment estimates during the analysis 
period.
c. Cumulative Regulatory Burden
    DOE identified a number of cumulative regulations that may affect 
residential furnace fan manufacturers. Interviewed manufacturers 
mentioned the following regulations as potentially having an impact and 
contributing to burden: (1) DOE Energy Conservation Standards for 
Furnaces and Central Air Conditioners and Heat Pumps; (2) DOE's 
Certification, Compliance, and Enforcement rulemaking; (3) DOE's 
Alternative Efficiency Determination Methods and Alternate Rating 
Methods rulemaking; (4) EPA's phaseout of Hydrochlorofluorocarbons 
(HCFCs); (5) EPA's Energy Star program; (6) State regulations such as 
California Title 24; (7) the South Coast Air Quality Management 
District Rule 1111; (8) Canadian energy efficiency regulations;

[[Page 64105]]

and (9) ASHRAE Standard 90.1. Some manufacturers indicated that the 
largest portion of their research and development budget goes toward 
meeting the various DOE standards. One manufacturer also recommended 
that DOE standards should be spread apart by at least five year periods 
so that manufacturers can allocate appropriate time to meet standards 
and develop new products.
    DOE also asked manufacturers under what circumstances they would be 
able to coordinate expenditures related to other regulations. 
Manufacturers emphasized the benefits of having fewer metrics to 
evaluate and limiting the scope of coverage for residential furnace 
fans to strictly those units housed in furnaces. In addition, 
manufacturers requested that DOE consider harmonizing with 
international standards to lessen the cumulative burden. Manufacturers 
also requested that the compliance date for some standards be pushed 
out to allow enough time for product development and limit stranded 
assets.
    DOE recognizes and takes into account the cumulative cost of 
multiple regulations on manufacturers in the cumulative regulatory 
burden section of its analysis. Further information on cumulative 
regulatory burden can be found in section V.B.2.e of this notice and in 
chapter 12 of the NOPR TSD.
d. Consumer Confusion
    In addition to the regulatory burden imposed by multiple standards, 
manufacturers were concerned with issues arising from multiple metrics 
that all apply to a single product. Furnaces alone already have energy 
efficiency rating metrics for AFUE and standby power, so with an 
additional FER metric, furnaces would be labeled with three different 
metrics. Manufacturers stated during interviews that three metrics are 
too many for a single product, and that consumers who use these rating 
metrics to evaluate and compare product performance may get confused if 
multiple metrics are labeled on one furnace. Manufacturers recommended 
that DOE should focus on the thermal performance of the furnace and not 
the fan energy consumption, which is a small fraction of a furnace's 
overall energy use.
    In response, DOE is required by EPCA to consider and establish 
energy conservation standards for residential furnace fans by December 
31, 2013. (42 U.S.C. 6295(f)(4)(D)) DOE is also required to develop 
test procedures to measure the energy efficiency, energy use, or 
estimated annual operating cost of each covered product prior to the 
adoption of an energy conservation standard. (42 U.S.C. 6295(o)(3)(A) 
and (r)) Pursuant to these statutory requirements in EPCA, DOE proposes 
new energy conservation standards in this notice, based on its proposed 
rating metric (FER). DOE requests comment and information on the 
potential for significant consumer confusion regarding the FER metric 
for residential furnace fans.
e. Motors
    Manufacturers questioned the use of X13 and ECM motors as a design 
option to improve furnace fan efficiency. As these motors employ more 
complex controls and have higher maintenance costs than PSC motors, it 
was suggested that long-term reliability may be an issue. Manufacturers 
expect that the number of warranty claims, as well as warranty-
associated costs, would increase if use of X13s and ECMs increased. 
X13s and ECMs are also more-expensive components that would increase 
the initial cost of the products in which they are used. Since these 
motors would increase product price but reduce reliability, 
manufacturers anticipate more consumers seeking to repair or refurbish 
existing products rather than purchase new ones. Furthermore, 
manufacturers may face challenges in obtaining a sufficient supply of 
motors due to the potential supply limitations of ECMs.
    DOE recognizes the concerns that manufacturers have about the 
reliability of ECM motors. However, DOE did not receive sufficient 
quantitative data from manufacturers regarding the failure rates and 
number of warranty claims for the different motor types to make any 
firm conclusions about their reliability. Consequently, DOE retained 
X13 and ECM motors as a design option for consideration.

K. Emissions Analysis

    In the emissions analysis, DOE estimates the reduction in power 
sector emissions of carbon dioxide (CO2), nitrogen oxides 
(NOX), sulfur dioxide (SO2), and mercury (Hg) 
from potential energy conservation standards for the considered 
products. In addition to estimating impacts of standards on power 
sector emissions, DOE estimated emissions impacts in production 
activities (extracting, processing, and transporting fuels) that 
provide the energy inputs to power plants. These are referred to as 
``upstream'' emissions. Together, these emissions account for the full-
fuel-cycle. In accordance with DOE's FFC Statement of Policy (76 FR 
51281 (August 18, 2011)), this FFC analysis also includes impacts on 
emissions of methane (CH4) and nitrous oxide 
(N2O), both of which are recognized as greenhouse gases.
    DOE conducted the emissions analysis using emissions factors that 
were derived from data in EIA's AEO 2012, supplemented by data from 
other sources. DOE developed separate emissions factors for power 
sector emissions and upstream emissions. For residential furnace fans, 
DOE also calculated site and upstream emissions from the additional use 
of natural gas associated with some of the efficiency levels. The 
method that DOE used to derive emissions factors is described in 
chapter 13 of the NOPR TSD.
    For CH4 and N2O, DOE calculated emissions 
reduction in tons and also in terms of units of carbon dioxide 
equivalent (CO2eq). Gases are converted to CO2eq 
by multiplying the tons of the gas by the gas's global warming 
potential (GWP) over a 100-year time horizon. Based on the Fourth 
Assessment Report of the Intergovernmental Panel on Climate Change,\51\ 
DOE used GWP values of 25 for CH4 and 298 for 
N2O.
---------------------------------------------------------------------------

    \51\ Forster, P., V. Ramaswamy, P. Artaxo, T. Berntsen, R. 
Betts, D. W. Fahey, J. Haywood, J. Lean, D.C. Lowe, G. Myhre, J. 
Nganga, R. Prinn, G. Raga, M. Schulz and R. Van Dorland. 2007: 
Changes in Atmospheric Constituents and in Radiative Forcing. In 
Climate Change 2007: The Physical Science Basis. Contribution of 
Working Group I to the Fourth Assessment Report of the 
Intergovernmental Panel on Climate Change. S. Solomon, D. Qin, M. 
Manning, Z. Chen, M. Marquis, K. B. Averyt, M.Tignor and H. L. 
Miller, Editors. 2007. Cambridge University Press, Cambridge, United 
Kingdom and New York, NY, USA. p. 212.
---------------------------------------------------------------------------

    EIA prepares the Annual Energy Outlook using NEMS. Each annual 
version of NEMS incorporates the projected impacts of existing air 
quality regulations on emissions. AEO 2012 generally represents current 
legislation and environmental regulations, including recent government 
actions, for which implementing regulations were available as of 
December 31, 2011.
    SO2 emissions from affected electric generating units 
(EGUs) are subject to nationwide and regional emissions cap-and-trade 
programs. Title IV of the Clean Air Act sets an annual emissions cap on 
SO2 for affected EGUs in the 48 contiguous States and the 
District of Columbia (D.C.). SO2 emissions from 28 eastern 
States and D.C. were also limited under the Clean Air Interstate Rule 
(CAIR; 70 FR 25162 (May 12, 2005)), which created an allowance-based 
trading program that operates along with the Title IV program.\52\ On

[[Page 64106]]

July 6, 2011, EPA issued a replacement for CAIR, the Cross-State Air 
Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 
2012, the D.C. Circuit issued a decision to vacate CSAPR, and ordered 
EPA to continue administering CAIR.\53\
---------------------------------------------------------------------------

    \52\ CAIR was remanded to the U.S. Environmental Protection 
Agency (EPA) by the U.S. Court of Appeals for the District of 
Columbia Circuit (D.C. Circuit) but it remained in effect. See North 
Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. 
EPA, 531 F.3d 896 (D.C. Cir. 2008).
    \53\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 
(D.C. Cir. 2012) cert. granted, 81 USLW 3567 (U.S. Jun. 24 2013) 
(No. 12-1182).
---------------------------------------------------------------------------

    AEO 2012 had been finalized prior to CSAPR being vacated. The AEO 
2012 emissions factors used for this NOPR assume the implementation of 
CSAPR. As a result, for the purpose of calculating emissions reductions 
of SO2 and NOX in this NOPR, DOE refers to 
impacts under CSAPR even though CSAPR is not currently in effect. This 
should not alter the accuracy of DOE's projections, however, because 
DOE expects that the impacts of energy conservation standards on 
SO2 and NOX emissions would be similar regardless 
of whether CAIR or CSAPR are in effect.\54\
---------------------------------------------------------------------------

    \54\ This is because SO2 emissions will be well below 
the cap under either rule, such that emissions reductions will be 
realized to the same extent; the caps on NOX emissions in 
the 22 states regulated under both rules will have the same effect 
such that reductions in electricity generation from efficiency 
standards would result in little change in NOX levels (as 
explained further below).
---------------------------------------------------------------------------

    The attainment of emissions caps is typically flexible among EGUs 
and is enforced through the use of emissions allowances and tradable 
permits. Under existing EPA regulations, any excess SO2 
emissions allowances resulting from the lower electricity demand caused 
by the adoption of an energy conservation standard could be used to 
permit offsetting increases in SO2 emissions by any 
regulated EGU. In past rulemakings, DOE recognized that there was 
uncertainty about the effects of efficiency standards on SO2 
emissions covered by the existing cap-and-trade system, but it 
concluded that negligible reductions in power sector SO2 
emissions would occur as a result of standards.
    Beginning in 2015, however, SO2 emissions will fall as a 
result of the Mercury and Air Toxics Standards (MATS) for power plants, 
which were announced by EPA on December 21, 2011. 77 FR 9304 (Feb. 16, 
2012). In the final MATS rule, EPA established a standard for hydrogen 
chloride as a surrogate for acid gas hazardous air pollutants (HAP), 
and also established a standard for SO2 (a non-HAP acid gas) 
as an alternative equivalent surrogate standard for acid gas HAP. The 
same controls are used to reduce HAP and non-HAP acid gas; thus, 
SO2 emissions will be reduced as a result of the control 
technologies installed on coal-fired power plants to comply with the 
MATS requirements for acid gas. AEO 2012 assumes that, in order to 
continue operating, coal plants must have either flue gas 
desulfurization or dry sorbent injection systems installed by 2015. 
Both technologies, which are used to reduce acid gas emissions, also 
reduce SO2 emissions. Under the MATS, NEMS shows a reduction 
in SO2 emissions when electricity demand decreases (e.g., as 
a result of energy efficiency standards). Emissions will be far below 
the cap established by CSAPR, so it is unlikely that excess 
SO2 emissions allowances resulting from the lower 
electricity demand would be needed or used to permit offsetting 
increases in SO2 emissions by any regulated EGU. Therefore, 
DOE believes that efficiency standards will reduce SO2 
emissions in 2015 and beyond.
    CSAPR established a cap on NOX emissions in 28 eastern 
States and the District of Columbia. Energy conservation standards are 
expected to have little effect on NOX emissions in those 
States covered by CSAPR because excess NOX emissions 
allowances resulting from the lower electricity demand could be used to 
permit offsetting increases in NOX emissions. However, 
standards would be expected to reduce NOX emissions in the 
States not affected by the caps, so DOE estimated NOX 
emissions reductions from the potential standards considered in this 
NOPR for these States where emissions are not capped.
    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps, and, as such, DOE's energy conservation 
standards would likely reduce Hg emissions. For this rulemaking, DOE 
estimated mercury emissions reduction using emissions factors based on 
AEO 2012, which incorporates the MATS.
    Power plants may emit particulates from the smoke stack, which are 
known as direct particulate matter (PM) emissions. NEMS does not 
account for direct p.m. emissions from power plants. DOE is 
investigating the possibility of using other methods to estimate 
reduction in p.m. emissions due to standards. The great majority of 
ambient p.m. associated with power plants is in the form of secondary 
sulfates and nitrates, which are produced at a significant distance 
from power plants by complex atmospheric chemical reactions that often 
involve the gaseous emissions of power plants, mainly SO2 
and NOX. The monetary benefits that DOE estimates for 
reductions in SO2 and NOX emissions resulting 
from standards are in fact primarily related to the health benefits of 
reduced ambient PM.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

    As part of the development of this NOPR, DOE considered the 
estimated monetary benefits from the reduced emissions of 
CO2 and NOX that are expected to result from each 
of the considered efficiency levels. In order to make this calculation 
similar to the calculation of the NPV of consumer benefit, DOE 
considered the reduced emissions expected to result over the lifetime 
of products shipped in the forecast period for each efficiency level. 
This section summarizes the basis for the monetary values used for 
CO2 and NOX emissions and presents the values 
considered in this rulemaking.
    For this NOPR, DOE is relying on a set of values for the social 
cost of carbon (SCC) that was developed by an interagency process. A 
summary of the basis for those values is provided below, and a more 
detailed description of the methodologies used is provided as an 
appendix to chapter 14 of the NOPR TSD.
1. Social Cost of Carbon
    The SCC is an estimate of the monetized damages associated with an 
incremental increase in carbon emissions in a given year. It is 
intended to include (but is not limited to) changes in net agricultural 
productivity, human health, property damages from increased flood risk, 
and the value of ecosystem services. Estimates of the SCC are provided 
in dollars per metric ton of carbon dioxide. A domestic SCC value is 
meant to reflect the value of damages in the United States resulting 
from a unit change in carbon dioxide emissions, while a global SCC 
value is meant to reflect the value of damages worldwide.
    Under section 1(b)(6) of Executive Order 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), agencies must, to 
the extent permitted by law, assess both the costs and the benefits of 
the intended regulation and, recognizing that some costs and benefits 
are difficult to quantify, propose or adopt a regulation only upon a 
reasoned determination that the benefits of the intended regulation 
justify its costs. The purpose of the SCC estimates presented here is 
to allow agencies to incorporate the monetized social benefits of 
reducing CO2 emissions into cost-benefit analyses of 
regulatory actions that have small, or ``marginal,'' impacts on 
cumulative global emissions. The

[[Page 64107]]

estimates are presented with an acknowledgement of the many 
uncertainties involved and with a clear understanding that they should 
be updated over time to reflect increasing knowledge of the science and 
economics of climate impacts.
    As part of the interagency process that developed the SCC 
estimates, technical experts from numerous agencies met on a regular 
basis to consider public comments, explore the technical literature in 
relevant fields, and discuss key model inputs and assumptions. The main 
objective of this process was to develop a range of SCC values using a 
defensible set of input assumptions grounded in the existing scientific 
and economic literatures. In this way, key uncertainties and model 
differences transparently and consistently inform the range of SCC 
estimates used in the rulemaking process.
a. Monetizing Carbon Dioxide Emissions
    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 Research Council points 
out that any assessment will suffer from uncertainty, speculation, and 
lack of information about: (1) Future emissions of greenhouse gases; 
(2) the effects of past and future emissions on the climate system; (3) 
the impact of changes in climate on the physical and biological 
environment; and (4) the translation of these environmental impacts 
into economic damages. As a result, any effort to quantify and monetize 
the harms associated with climate change will raise 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. Most Federal regulatory actions can 
be expected to have marginal impacts on global emissions. For such 
policies, the agency can estimate the benefits from reduced emissions 
in any future year by multiplying the change in emissions in that year 
by the SCC value appropriate for that year. The net present value of 
the benefits can then be calculated by multiplying the future benefits 
by an appropriate discount factor and summing across all affected 
years. 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. This concern is not applicable to this rulemaking, 
however.
    It is important to emphasize that the interagency process is 
committed to updating these estimates as the science and economic 
understanding of climate change and its impacts on society improves 
over time. In the meantime, the interagency group will continue to 
explore the issues raised by this analysis and consider public comments 
as part of the ongoing interagency process.
b. Social Cost of Carbon Values Used in Past Regulatory Analyses
    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 U.S. Department 
of Transportation (DOT) used both a ``domestic'' SCC value of $2 per 
metric ton of CO2 and a ``global'' SCC value of $33 per 
metric ton of CO2 for 2007 emission reductions (in 2007$), 
increasing both values at 2.4 percent per year. DOT also included a 
sensitivity analysis at $80 per metric ton of CO2.\55\ A 
2008 regulation proposed by DOT assumed a domestic SCC value of $7 per 
metric ton of CO2 (in 2006$) for 2011 emission reductions 
(with a range of $0-$14 for sensitivity analysis), also increasing at 
2.4 percent per year.\56\ A regulation for packaged terminal air 
conditioners and packaged terminal heat pumps finalized by DOE in 
October of 2008 used a domestic SCC range of $0 to $20 per metric ton 
CO2 for 2007 emission reductions (in 2007$). 73 FR 58772, 
58814 (Oct. 7, 2008). In addition, EPA's 2008 Advance Notice of 
Proposed Rulemaking on Regulating Greenhouse Gas Emissions Under the 
Clean Air Act identified what it described as ``very preliminary'' SCC 
estimates subject to revision. 73 FR 44354 (July 30, 2008). EPA's 
global mean values were $68 and $40 per metric ton CO2 for 
discount rates of approximately 2 percent and 3 percent, respectively 
(in 2006$ for 2007 emissions).
---------------------------------------------------------------------------

    \55\ See Average Fuel Economy Standards Passenger Cars and Light 
Trucks Model Year 2011, 74 FR 14196 (March 30, 2009) (Final Rule); 
Final Environmental Impact Statement Corporate Average Fuel Economy 
Standards, Passenger Cars and Light Trucks, Model Years 2011-2015 at 
3-90 (Oct. 2008) (Available at: https://www.nhtsa.gov/fuel-economy) 
(Last accessed December 2012).
    \56\ See Average Fuel Economy Standards, Passenger Cars and 
Light Trucks, Model Years 2011-2015, 73 FR 24352 (May 2, 2008) 
(Proposed Rule); Draft Environmental Impact Statement Corporate 
Average Fuel Economy Standards, Passenger Cars and Light Trucks, 
Model Years 2011-2015 at 3-58 (June 2008) (Available at: https://www.nhtsa.gov/fuel-economy) (Last accessed December 2012).
---------------------------------------------------------------------------

    In 2009, an interagency process was initiated to offer a 
preliminary assessment of how best to quantify the benefits from 
reducing carbon dioxide emissions. To ensure consistency in how 
benefits are evaluated across agencies, the Administration sought to 
develop a transparent and defensible method, specifically designed for 
the rulemaking process, to quantify avoided climate change damages from 
reduced CO2 emissions. The interagency group did not 
undertake any original analysis. Instead, it combined SCC estimates 
from the existing literature to use as interim values until a more 
comprehensive analysis could be conducted. The outcome of the 
preliminary assessment by the interagency group was a set of five 
interim values: global SCC estimates for 2007 (in 2006$) of $55, $33, 
$19, $10, and $5 per metric ton of CO2. These interim values 
represented the first sustained interagency effort within the U.S. 
government to develop an SCC for use in regulatory analysis. The 
results of this preliminary effort were presented in several proposed 
and final rules.
c. Current Approach and Key Assumptions
    Since the release of the interim values, the interagency group 
reconvened on a regular basis to generate improved SCC estimates. 
Specifically, the group considered public comments and further explored 
the technical literature in relevant fields. The interagency group 
relied on three integrated assessment models commonly used to estimate 
the SCC: the FUND, DICE, and PAGE models. These models are frequently 
cited in the peer-reviewed literature and were used in the last 
assessment of the Intergovernmental Panel on Climate Change. Each model 
was given equal weight in the SCC values that were developed.
    Each model takes a slightly different approach to model how changes 
in emissions result in changes in economic damages. A key objective of 
the interagency process was to enable a consistent exploration of the 
three models while respecting the different approaches to quantifying 
damages taken by the key modelers in the field. An extensive review of 
the literature was conducted to select three sets of input parameters 
for these models: Climate sensitivity, socio-economic and emissions 
trajectories, and discount

[[Page 64108]]

rates. A probability distribution for climate sensitivity was specified 
as an input into all three models. In addition, the interagency group 
used a range of scenarios for the socio-economic parameters and a range 
of values for the discount rate. All other model features were left 
unchanged, relying on the model developers' best estimates and 
judgments.
    The interagency group selected four sets of SCC values for use in 
regulatory analyses. Three sets of values are based on the average SCC 
from three integrated assessment models, at discount rates of 2.5 
percent, 3 percent, and 5 percent. The fourth set, which represents the 
95th-percentile SCC estimate across all three models at a 3-percent 
discount rate, is included to represent higher-than-expected impacts 
from climate change further out in the tails of the SCC distribution. 
The values grow in real terms over time. Additionally, the interagency 
group determined that a range of values from 7 percent to 23 percent 
should be used to adjust the global SCC to calculate domestic effects, 
although preference is given to consideration of the global benefits of 
reducing CO2 emissions. Table IV.10 presents the values in 
the 2010 interagency group report,\57\ which is reproduced in appendix 
14-A of the NOPR TSD.
---------------------------------------------------------------------------

    \57\ Social Cost of Carbon for Regulatory Impact Analysis Under 
Executive Order 12866. Interagency Working Group on Social Cost of 
Carbon, United States Government, February 2010. https://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf.

                     Table IV.10--Annual SCC Values From 2010 Interagency Report, 2010-2050
                                   [In 2007 Dollars per Metric Ton CO[ihel2]]
----------------------------------------------------------------------------------------------------------------
                                                                          Discount rate %
                                                 ---------------------------------------------------------------
                                                         5               3              2.5              3
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       Percentile
----------------------------------------------------------------------------------------------------------------
2010............................................             4.7            21.4            35.1            64.9
2015............................................             5.7            23.8            38.4            72.8
2020............................................             6.8            26.3            41.7            80.7
2025............................................             8.2            29.6            45.9            90.4
2030............................................             9.7            32.8            50.0           100.0
2035............................................            11.2            36.0            54.2           109.7
2040............................................            12.7            39.2            58.4           119.3
2045............................................            14.2            42.1            61.7           127.8
2050............................................            15.7            44.9            65.0           136.2
----------------------------------------------------------------------------------------------------------------

    The SCC values used for this notice were generated using the most 
recent versions of the three integrated assessment models that have 
been published in the peer-reviewed literature.\58\ Table IV.11 shows 
the updated sets of SCC estimates in five-year increments from 2010 to 
2050. Appendix 14-B of the NOPR TSD provides the full set of SCC 
estimates, as well as the 2013 report from the interagency group. The 
central value that emerges is the average SCC across models at the 3-
percent discount rate. However, for purposes of capturing the 
uncertainties involved in regulatory impact analysis, the interagency 
group emphasizes the importance of including all four sets of SCC 
values.
---------------------------------------------------------------------------

    \58\ Technical Update of the Social Cost of Carbon for 
Regulatory Impact Analysis Under Executive Order 12866. Interagency 
Working Group on Social Cost of Carbon, United States Government. 
May 2013. https://www.whitehouse.gov/sites/default/files/omb/inforeg/social_cost_of_carbon_for_ria_2013_update.pdf.

                     Table IV.11--Annual SCC Values From 2013 Interagency Update, 2010-2050
                                      [In 2007 Dollars per Metric Ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                          Discount rate %
                                                 ---------------------------------------------------------------
                                                         5               3              2.5              3
                      Year                       ---------------------------------------------------------------
                                                                                                       95th
                                                      Average         Average         Average       Percentile
----------------------------------------------------------------------------------------------------------------
2010............................................              11              33              52              90
2015............................................              12              38              58             109
2020............................................              12              43              65             129
2025............................................              14              48              70             144
2030............................................              16              52              76             159
2035............................................              19              57              81             176
2040............................................              21              62              87             192
2045............................................              24              66              92             206
2050............................................              27              71              98             221
----------------------------------------------------------------------------------------------------------------

    It is important to recognize that a number of key uncertainties 
remain, and that current SCC estimates should be treated as provisional 
and revisable since they will evolve with improved scientific and 
economic understanding. The interagency group also recognizes that the 
existing models are imperfect and incomplete. The National Research 
Council report mentioned above points out that there is tension between 
the goal of producing quantified estimates of the economic damages from 
an incremental ton of carbon and the limits of existing efforts to 
model these effects.

[[Page 64109]]

There are a number of concerns and problems that should be addressed by 
the research community, including research programs housed in many of 
the Federal agencies participating in the interagency process to 
estimate the SCC. The interagency group intends to periodically review 
and reconsider those estimates to reflect increasing knowledge of the 
science and economics of climate impacts, as well as improvements in 
modeling.
    In summary, in considering the potential global benefits resulting 
from reduced CO2 emissions, DOE used the values from the 
2013 interagency report, adjusted to 2012$ using the Gross Domestic 
Product price deflator. For each of the four cases specified, the 
values used for emissions in 2015 were $12.9, $40.8, $62.2, and $117 
per metric ton avoided (values expressed in 2012$). DOE derived values 
after 2050 using the relevant growth rates for the 2040-2050 period in 
the interagency update.
    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SCC value for that year in each of the four cases. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the four cases using the specific 
discount rate that had been used to obtain the SCC values in each case.
    AHRI agreed that the monetization of emission reductions is an 
important factor to consider, but it stated that DOE has no statutory 
responsibility to establish a monetary value for potential 
environmental benefits of appliance and equipment standards. It added 
that there is currently no consensus on any single estimate of the 
value of CO2 emissions, and, therefore, DOE should not 
indulge in speculation to determine a value when it has no statutory 
obligation to do so. (AHRI, No. 48 at p. 7)
    In response, it is noted that EPCA directs DOE to achieve the 
maximum improvement in energy efficiency that is technologically 
feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) DOE 
determines whether a standard is economically justified by considering, 
to the greatest extent practicable, a number of factors. (42 U.S.C. 
6295(o)(2)(B)(i)(I)-(VII)) Among these factors is ``other factors the 
Secretary [of Energy] considers relevant.'' The Secretary considers the 
economic benefits that may accrue to society from reduction of 
CO2 emissions a relevant factor. DOE further notes that the 
incorporation of environmental externalities, such as damage from 
climate change, is a well-established principle in cost-benefit 
analysis by Federal agencies. DOE acknowledges that the value to place 
on a ton of avoided CO2 emissions in future years is very 
uncertain, and for this reason it uses a wide range of monetary values 
(from $12.9 per ton to $117 per ton for emissions avoided in 2015).
    AHRI also stated that DOE should not allow evaluation of 
environmental impacts to negate or make moot what has always been, and 
should remain, the core analysis in appliance and equipment standards 
rulemakings: The consumer payback period and life-cycle cost analysis. 
(AHRI, No. 48 at p. 7) In response, DOE notes that environmental and 
other impacts associated with reduced emissions are but one of the 
factors that DOE considers in determining whether a standard is 
economically justified.
2. Valuation of Other Emissions Reductions
    DOE investigated the potential monetary benefit of reduced 
NOX emissions from the potential standards it considered. As 
noted above, DOE has taken into account how new energy conservation 
standards would reduce NOX emissions in those 22 States not 
affected by the CSAPR. DOE estimated the monetized value of 
NOX emissions reductions resulting from each of the TSLs 
considered for this NOPR based on estimates found in the relevant 
scientific literature. Available estimates suggest a wide range of 
benefit per ton values for NOX from stationary sources, 
ranging from $468 to $4,809 per ton in 2012$.\59\ DOE calculated the 
monetary benefits from NOX reductions using an average 
benefit per ton value for NOX and discount rates of 3 
percent and 7 percent.\60\
---------------------------------------------------------------------------

    \59\ U.S. Office of Management and Budget, Office of Information 
and Regulatory Affairs, 2006 Report to Congress on the Costs and 
Benefits of Federal Regulations and Unfunded Mandates on State, 
Local, and Tribal Entities (2006).
    \60\ OMB, Circular A-4: Regulatory Analysis (Sept. 17, 2003).
---------------------------------------------------------------------------

    DOE did not monetize Hg or SO2 emission reductions for 
this NOPR because it is currently evaluating appropriate valuation of 
reduction in these emissions.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the power 
generation industry that would result from the adoption of new or 
amended energy conservation standards. In the utility impact analysis, 
DOE analyzes the changes in electric installed capacity and generation 
that result for each trial standard level. The utility impact analysis 
uses a variant of NEMS, which is a public domain, multi-sectored, 
partial equilibrium model of the U.S. energy sector. DOE uses a variant 
of this model, referred to as NEMS-BT,\61\ to account for selected 
utility impacts of new or amended energy conservation standards. DOE's 
analysis consists of a comparison between model results for the most 
recent AEO Reference Case and for cases in which energy use is 
decremented to reflect the impact of potential standards. The energy 
savings inputs associated with each TSL come from the NIA. Chapter 15 
of the NOPR TSD describes the utility impact analysis in further 
detail.
---------------------------------------------------------------------------

    \61\ DOE/EIA approves use of the name NEMS to describe only an 
official version of the model without any modification to code or 
data. Because this analysis entails some minor code modifications 
and the model is run under various policy scenarios that are 
variations on DOE/EIA assumptions, DOE refers to it by the name 
``NEMS-BT'' (``BT'' is DOE's Building Technologies Program, under 
whose aegis this work has been performed).
---------------------------------------------------------------------------

    NEEP recommended estimating the value of capacity reduction due to 
appliance standards as part of the NOPR, because reducing the need for 
electricity capacity is an important benefit that minimum efficiency 
standards bring to the country and various regions. Noting that the 
NOPR provides estimates of the expected reduction in electricity 
capacity due to residential furnace fan standards, NEEP urged the 
Department to also include a financial benefit estimate associated with 
these capacity reductions. (NEEP, No. 51 at p. 3)
    For the NOPR, DOE used NEMS-BT, along with EIA data on the capital 
cost of various power plant types, to estimate the reduction in 
national expenditures for electricity generating capacity due to 
potential residential furnace fan standards. The method used and the 
results are described in chapter 15 of the NOPR TSD.
    DOE is evaluating whether parts of the cost reduction are a 
transfer and thus, according to guidance provided by OMB to Federal 
agencies, should not be included in the estimates of the benefits and 
costs of a regulation.\62\ Transfer payments are monetary payments from 
one group to another that do not affect total resources available to 
society (i.e., exchanges that neither decrease nor increase total 
welfare). Benefits occur when savings to consumers result from real 
savings to producers, which increases societal benefits. Cost savings 
from reduced or delayed capital expenditure on power plants are a 
benefit, and not a transfer, to the extent that the reduced expenditure 
provides savings to both producers and consumers without affecting 
other

[[Page 64110]]

groups. There would be a transfer to the extent that the delayed 
construction caused some other group (e.g., equipment suppliers or 
landowners who might have assets committed to the projects) to realize 
a lower return on those assets. DOE is evaluating these issues to 
determine the extent to which the cost savings from delayed capital 
expenditure on power plants are a benefit to society.\63\
---------------------------------------------------------------------------

    \62\ OMB Circular A-4 (Sept. 17, 2003), p. 38.
    \63\ Although delayed investment implies a savings in total 
cost, the savings may be less than the savings in capital cost 
because the delay may also cause increases in other costs. For 
example, if the delayed investment was the replacement of an 
existing facility with a larger, more-efficient facility, the 
increased cost of operating the old facility during the period of 
delay might offset much of the savings from delayed investment. That 
the project was delayed is evidence that doing so decreased overall 
cost, but it does not indicate that the decrease was equal to the 
entire savings in capital cost.
---------------------------------------------------------------------------

    EEI stated that as part of its analysis on the potential impact of 
new residential furnace fan efficiency standards on utilities, DOE 
should consider the impacts of increased demands on gas and oil 
systems, especially during peak fossil fuel demand days. (EEI, No. 65 
at p. 2) In response, DOE has tentatively concluded that the increase 
in gas and oil use associated with higher furnace fan efficiency levels 
is expected to be very small in the context of overall gas and oil 
demand, and as such, DOE believes that the impact on gas and oil 
systems would be insignificant.
    EEI stated that with respect to electric utilities, DOE should 
ensure that it does not overestimate the potential for residential 
furnace fan energy conservation standards to reduce peak load demand. 
According to EEI, the vast majority of electric utilities in the U.S. 
reach peak demand during the summer air conditioning season. (EEI, No. 
65 at p. 2) In response, DOE's analysis with NEMS uses a demand load 
shape that approximates the daily and seasonal load of residential 
furnace fans. Thus, the resulting estimates of changes in generating 
capacity due to higher residential furnace fan efficiency are 
reasonable.

N. Employment Impact Analysis

    Employment impacts from new or amended energy conservation 
standards include direct and indirect impacts. Direct employment 
impacts are any changes in the number of employees of manufacturers of 
the products subject to standards; the MIA addresses those impacts. 
Indirect employment impacts are changes in national employment that 
occur due to the shift in expenditures and capital investment caused by 
the purchase and operation of more-efficient appliances. Indirect 
employment impacts from standards consist of the jobs created or 
eliminated in the national economy due to: (1) Reduced spending by end 
users on energy; (2) reduced spending on new energy supply by the 
utility industry; (3) increased consumer spending on the purchase of 
new products; and (4) the effects of those three factors throughout the 
economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's Bureau of 
Labor Statistics (BLS). BLS regularly publishes its estimates of the 
number of jobs per million dollars of economic activity in different 
sectors of the economy, as well as the jobs created elsewhere in the 
economy by this same economic activity. Data from BLS indicate that 
expenditures in the utility sector generally create fewer jobs (both 
directly and indirectly) than expenditures in other sectors of the 
economy.\64\ There are many reasons for these differences, including 
wage differences and the fact that the utility sector is more capital-
intensive and less labor-intensive than other sectors. Energy 
conservation standards have the effect of reducing 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 service sectors). Thus, based 
on the BLS data alone, DOE believes net national employment may 
increase because of shifts in economic activity resulting from energy 
conservation standards for residential furnace fans.
---------------------------------------------------------------------------

    \64\ See Bureau of Economic Analysis, ``Regional Multipliers: A 
User Handbook for the Regional Input-Output Modeling System (RIMS 
II),'' U.S. Department of Commerce (1992).
---------------------------------------------------------------------------

    For the standard levels considered in this NOPR, DOE estimated 
indirect national employment impacts using an input/output model of the 
U.S. economy called Impact of Sector Energy Technologies version 3.1.1 
(ImSET).\65\ ImSET is a special-purpose version of the ``U.S. Benchmark 
National Input-Output'' (I-O) model, which was designed to estimate the 
national employment and income effects of energy-saving technologies. 
The ImSET software includes a computer-based I-O model having 
structural coefficients that characterize economic flows among the 187 
sectors. ImSET's national economic I-O structure is based on a 2002 
U.S. benchmark table, specially aggregated to the 187 sectors most 
relevant to industrial, commercial, and residential building energy 
use. DOE notes that ImSET is not a general equilibrium forecasting 
model, and understands the uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Because ImSET does not incorporate price changes, the 
employment effects predicted by ImSET may over-estimate actual job 
impacts over the long run. For the NOPR, DOE used ImSET only to 
estimate short-term (2019 and 2024) employment impacts.
---------------------------------------------------------------------------

    \65\ J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 3.1: Impact 
of Sector Energy Technologies, PNNL-18412, Pacific Northwest 
National Laboratory (2009) (Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf).
---------------------------------------------------------------------------

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

V. Analytical Results and Conclusions

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

A. Trial Standard Levels

    DOE developed trial standard levels (TSLs) that combine efficiency 
levels for each product class of residential furnace fans. Table V.1 
presents the efficiency levels for each product class in each TSL. TSL 
6 consists of the max-tech efficiency levels. TSL 5 consists of those 
efficiency levels that provide the maximum NPV using a 7-percent 
discount rate (see section V.B.3 for NPV results). TSL 4 consists of 
those efficiency levels that provide the highest NPV using a 7-percent 
discount rate, and that also result in a higher percentage of consumers 
that receive an LCC benefit than experience an LCC loss (see section 
V.B.1 for LCC results). TSL 3 uses efficiency level 3 for all product 
classes. TSL 2 consists of efficiency levels that are the same as TSL 3 
for non-weatherized gas furnace fans, weatherized gas furnace fans, and 
electric furnace fans, but are at efficiency level 1 for oil-fired 
furnace fans and manufactured home furnace fans. TSL 1 consists of the 
most common efficiency levels in the current

[[Page 64111]]

market. In summary, Table V.1 presents the six TSLs which DOE has 
identified for residential furnace fans, including the efficiency level 
associated with each TSL, the technology options anticipated to achieve 
those levels, and the expected resulting percentage reduction in FER 
from the baseline corresponding to each efficiency level.

                          Table V.1--Trial Standard Levels for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
                                                           Trial standard levels  (Efficiency Level)*
                 Product class                 -----------------------------------------------------------------
                                                    1          2          3          4          5          6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace             1          3          3          4          4          6
 Fan..........................................
Non-weatherized, Condensing Gas Furnace Fan...          1          3          3          4          4          6
Weatherized Non-Condensing Gas Furnace Fan....          1          3          3          4          4          6
Non-Weatherized, Non-Condensing Oil Furnace             1          1          3          1          3          6
 Fan..........................................
Non-weatherized Electric Furnace/Modular                1          3          3          4          4          6
 Blower Fan...................................
Manufactured Home Non-Weatherized, Non-                 1          1          3          1          3          6
 Condensing Gas Furnace Fan...................
Manufactured Home Non-Weatherized, Condensing           1          1          3          1          3          6
 Gas Furnace Fan..............................
Manufactured Home Electric Furnace/Modular              1          1          3          4          4          6
 Blower Fan...................................
----------------------------------------------------------------------------------------------------------------
* Efficiency level (EL) 1 = Improved PSC (12 percent). (For each EL, the percentages given refer to percent
  reduction in FER from the baseline level.) EL 2 = Inverter-driven PSC (25 percent). EL 3 = Constant-torque BPM
  motor (38 percent). EL 4 = Constant-torque BPM motor + Multi-Staging (51 percent). EL 5 = Constant-airflow BPM
  motor (57 percent). EL 6 = Constant-airflow BPM motor + Multi-Staging (61 percent).

B. Economic Justification and Energy Savings

1. Economic Impacts on Consumers
a. Life-Cycle Cost and Payback Period
    To evaluate the economic impact of the considered efficiency levels 
on consumers, DOE conducted an LCC analysis for each efficiency level. 
More-efficient residential furnace fans would affect these consumers in 
two ways: (1) Annual operating expense would decrease; and (2) purchase 
price would increase. Inputs used for calculating the LCC include total 
installed costs (i.e., equipment price plus installation costs), 
operating expenses (i.e., energy costs, repair costs, and maintenance 
costs), product lifetime, and discount rates.
    The output of the LCC model is a mean LCC savings (or cost) for 
each product class, relative to the base case efficiency distribution 
for residential furnace fans. The LCC analysis also provides 
information on the percentage of consumers for whom an increase in the 
minimum efficiency standard would have a positive impact (net benefit), 
a negative impact (net cost), or no impact.
    DOE also performed a PBP analysis as part of the LCC analysis. The 
PBP is the number of years it would take for the consumer to recover 
the increased costs of higher-efficiency products as a result of energy 
savings based on the operating cost savings. The PBP is an economic 
benefit-cost measure that uses benefits and costs without discounting. 
Chapter 8 of the NOPR TSD provides detailed information on the LCC and 
PBP analyses.
    DOE's LCC and PBP analyses provide five key outputs for each 
efficiency level above the baseline, as reported in Table V.2 through 
Table V.9 for the considered TSLs. (Results for all efficiency levels 
are reported in chapter 8 of the NOPR TSD.) These outputs include the 
proportion of residential furnace fan purchases in which the purchase 
of a furnace fan compliant with the new energy conservation standard 
creates a net LCC increase, no impact, or a net LCC savings for the 
consumer. Another output is the average LCC savings from standards-
compliant products, as well as the median PBP for the consumer 
investment in standards-compliant products. Savings are measured 
relative to the base case efficiency distribution (see section IV.F.4), 
not the baseline efficiency level.

                                   Table V.2--LCC and PBP Results for Non-Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Life-cycle cost 2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   Period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $343      $2,146      $2,489          $0           0         100           0  ..........
1...........................................           1         354       1,943       2,297          64           2          68          30        1.34
2...........................................  ..........         403       1,649       2,052         253          25          25          50        3.98
3...........................................        2, 3         414       1,389       1,803         442          18          25          57        2.69
4...........................................        4, 5         496       1,273       1,769         474          33          14          53        5.38
5...........................................  ..........         662       1,333       1,995         275          53          12          35       11.53
6...........................................           6         697       1,260       1,957         313          58           0          42       11.20
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 64112]]


                                     Table V.3--LCC and PBP Results for Non-Weatherized, Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Life-cycle cost 2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $339      $2,259      $2,598          $0           0         100           0  ..........
1...........................................           1         351       2,066       2,417          49           1          75          24        1.35
2...........................................  ..........         398       1,775       2,173         203          21          41          38        4.13
3...........................................        2, 3         408       1,506       1,914         361          10          41          49        2.73
4...........................................        4, 5         490       1,414       1,904         371          24          34          42        5.39
5...........................................  ..........         658       1,488       2,146         199          45          29          27       11.73
6...........................................           6         692       1,415       2,107         238          57           0          43       11.03
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                     Table V.4--LCC and PBP Results for Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Life-cycle cost 2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $329      $1,944      $2,273          $0           0         100           0  ..........
1...........................................           1         340       1,759       2,099          35           0          81          18        1.27
2...........................................  ..........         387       1,549       1,936         104          13          56          31        4.94
3...........................................        2, 3         397       1,276       1,673         228           7          56          37        2.65
4...........................................        4, 5         476       1,170       1,645         247          25          33          41        6.39
5...........................................  ..........         636       1,290       1,926          39          51          27          22       15.53
6...........................................           6         670       1,228       1,898          67          63           0          37       13.32
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   Table V.5--LCC and PBP Results for Non-Weatherized, Non-Condensing Oil Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost  2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $387      $2,540      $2,927          $0           0         100           0  ..........
1...........................................     1, 2, 4         404       2,389       2,794          40          12          71          18        5.49
2...........................................  ..........         470       2,042       2,512         245          46          28          26       12.33
3...........................................        3, 5         482       1,896       2,378         344          43          28          29        6.97
4...........................................  ..........         570       1,833       2,402         326          49          28          23       12.07
5...........................................  ..........         798       1,887       2,685         120          58          28          14       27.47
6...........................................           6         833       1,840       2,673         132          79           0          21       25.41
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                 Table V.6--LCC and PBP Results for Non-Weatherized Electric Furnace/Modular Blower Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost  2012$                    Life-Cycle Cost Savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $241      $1,198      $1,439          $0           0         100           0  ..........
1...........................................           1         252       1,100       1,352          21           5          73          21        2.39
2...........................................  ..........         295         954       1,249          84          28          37          34        6.16
3...........................................        2, 3         294         830       1,124         160          20          37          42        3.15
4...........................................        4, 5         315         771       1,086         185          27          25          48        3.55
5...........................................  ..........         450         855       1,305          18          52          25          23       12.83
6...........................................           6         482         824       1,306          17          68           0          32       13.45
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 64113]]


                          Table V.7--LCC and PBP Results for Manufactured Home Non-Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost  2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $254      $1,144      $1,398          $0           0         100           0  ..........
1...........................................     1, 2, 4         265       1,070       1,335          26          13          56          32        3.35
2...........................................  ..........         310         955       1,265          97          62           0          38       10.74
3...........................................        3, 5         315         901       1,216         146          58           0          42        7.02
4...........................................  ..........         391         876       1,267          95          70           0          30       13.10
5...........................................  ..........         537         927       1,464       (102)          85           0          15       26.22
6...........................................           6         569         909       1,478       (116)          85           0          15       26.73
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Parentheses indicate negative values.


                            Table V.8--LCC and PBP Results for Manufactured Home Non-Weatherized, Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Life-cycle cost  2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                    2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $271      $1,355      $1,626          $0           0         100           0  ..........
1...........................................     1, 2, 4         282       1,261       1,543          27           7          68          26        2.73
2...........................................  ..........         326       1,123       1,449          96          43          29          28       10.47
3...........................................        3, 5         334       1,039       1,373         152          38          29          32        6.46
4...........................................  ..........         410       1,005       1,416         111          68           4          27       14.82
5...........................................  ..........         564       1,053       1,618        (82)          82           4          14       34.31
6...........................................           6         597       1,025       1,622        (86)          84           0          16       32.23
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


                                Table V.9--LCC and PBP Results for Manufactured Home Electric Furnace/Modular Blower Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Life-cycle cost 2012$                    Life-cycle cost savings
                                                         ------------------------------------------------------------------------------------   Median
                                                                                                            % of Consumers that experience      payback
              Efficiency level                    TSL      Installed  Discounted                Average  ------------------------------------   period
                                                             cost      operating      LCC       savings                               Net        years
                                                                         cost                   2012$*     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline....................................  ..........        $192        $663        $855          $0           0         100           0  ..........
1...........................................        1, 2         202         608         810          14           8          71          21        2.49
2...........................................  ..........         243         561         804          20          37          38          25        9.99
3...........................................           3         241         499         739          64          28          38          34        4.35
4...........................................        4, 5         259         464         723          78          34          26          40        4.61
5...........................................  ..........         382         539         921        (70)          59          26          15       16.75
6...........................................           6         412         525         937        (86)          82           0          18       17.11
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

    The results in the above tables reflect the assumptions for use of 
constant circulation in the proposed DOE test procedure for furnace 
fans. As discussed in section IV.E, DOE also performed a sensitivity 
analysis for non-weatherized gas furnace fans to estimate the effect on 
the LCC results if it assumed half as much use of continuous 
circulation.\66\ Under this revised assumption, for non-weatherized, 
non-condensing gas furnace fans, the average LCC savings decline 
somewhat in the sensitivity analysis, and the share of consumers that 
experience an LCC benefit declines slightly (see Table V.10). The same 
changes occur for non-weatherized, condensing gas furnace fans, but the 
magnitude of the effect is somewhat larger than for non-condensing gas 
furnace fans (see Table V.11).
---------------------------------------------------------------------------

    \66\ Non-weatherized gas furnace fans account for the vast 
majority of furnace fans used in constant-circulation mode.

[[Page 64114]]



          Table V.10--LCC and PBP Results for Non-Weatherized, Non-Condensing Gas Furnace Fans Under Alternative Constant-Circulation Scenarios
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Constant-circulation scenario
                                                         -----------------------------------------------------------------------------------------------
                                                                Current test procedure assumptions          Half of current test procedure assumptions
                                                         -----------------------------------------------------------------------------------------------
              Efficiency level                    TSL       Average     % of Consumers that experience      Average     % of Consumers that experience
                                                              LCC    ------------------------------------     LCC    -----------------------------------
                                                            savings                               Net       savings                               Net
                                                             2012$     Net cost    No impact    benefit      2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...........................................           1          64           2          68          30          59           2          68          29
2...........................................  ..........         253          25          25          50         189          27          25          48
3...........................................        2, 3         442          18          25          57         362          19          25          56
4...........................................        4, 5         474          33          14          53         376          34          14          51
5...........................................  ..........         275          53          12          35         173          55          12          33
6...........................................           6         313          58           0          42         204          60           0          40
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table V.11--LCC and PBP Results for Non-Weatherized, Condensing Gas Furnace Fans Under Alternative Constant-Circulation Scenarios
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Constant-circulation scenario
                                                         -----------------------------------------------------------------------------------------------
                                                                Current test procedure assumptions          Half of current test procedure assumptions
                                                         -----------------------------------------------------------------------------------------------
              Efficiency level                    TSL       Average     % of Consumers that experience      Average     % of Consumers that experience
                                                              LCC    ------------------------------------     LCC    -----------------------------------
                                                            savings                               Net       savings                               Net
                                                             2012$     Net cost    No impact    benefit      2012$     Net cost    No impact    benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...........................................           1          49           1          75          24          41           1          75          24
2...........................................  ..........         203          21          41          38         127          22          41          37
3...........................................        2, 3         361          10          41          49         266          11          41          48
4...........................................        4, 5         371          24          34          42         256          25          34          40
5...........................................  ..........         199          45          29          27          78          47          29          24
6...........................................           6         238          57           0          43         107          60           0          40
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Consumer Subgroup Analysis
    DOE estimated the impacts of the considered efficiency levels 
(TSLs) on the following consumer subgroups: (1) Senior-only households; 
and (2) low-income households. The results of the consumer subgroup 
analysis indicate that for residential furnace fans, senior-only 
households and low-income households experience lower average LCC 
savings and longer payback periods than consumers overall, with the 
difference being larger for low-income households. The difference 
between the two subgroups and all consumers is larger for non-
weatherized, non-condensing gas furnace fans (see Table V.12) than for 
non-weatherized, condensing gas furnace fans (see Table V.13). Chapter 
11 of the NOPR TSD provides more detailed discussion on the consumer 
subgroup analysis and results for the other product classes.

              Table V.12--Comparison of Impacts for Consumer Subgroups With All Consumers, Non-Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Average life-cycle cost savings 2012$                             Median payback period years
                                ---------------------------------------------------------------------------------------------------------------------------
        Efficiency level                                                                                                                            All
                                       TSL         Senior-only     Low income     All consumers   All consumers    Senior-only     Low-income    consumers
----------------------------------------------------------------------------------------------------------------------------------------------- -----------
1..............................               1              47              35              64             1.8             2.1             1.3
2..............................  ..............             200             123             253             5.4             6.3             4.0
3..............................            2, 3             344             232             442             3.7             3.8             2.7
4..............................            4, 5             343             206             474             7.2             7.8             5.4
5..............................  ..............             142               7             275            15.6            17.2            11.5
6..............................               6             164              14             313            15.3            16.5            11.2
--------------------------------------------------------------------------------------------------------------------------------------------------------


                Table V.13--Comparison of Impacts for Consumer Subgroups With All Consumers, Non-Weatherized, Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Average life-cycle cost savings 2012$                        Median payback period years
            Efficiency Level             ---------------------------------------------------------------------------------------------------------------
                                                TSL         Senior-only     Low-income     All consumers    Senior-only     Low-income     All consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................               1              41              32              49             1.6             2.2             1.4
2.......................................  ..............             173             129             203             5.1             6.6             4.1
3.......................................            2, 3             313             245             361             3.2             4.0             2.7
4.......................................            4, 5             301             212             371             6.6             8.5             5.4

[[Page 64115]]

 
5.......................................  ..............             121              35             199            14.5            18.3            11.7
6.......................................               6             151              52             238            12.2            16.4            11.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Rebuttable Presumption Payback
    As discussed in section IV.F.5, EPCA provides a rebuttable 
presumption that, in essence, an energy conservation standard is 
economically justified if the increased purchase cost for a product 
that meets the standard is less than three times the value of the 
first-year energy savings resulting from the standard. 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. For comparison with the more 
detailed analytical results, DOE calculated a rebuttable presumption 
payback period for each TSL. Table V.14 shows the rebuttable 
presumption payback periods for the residential furnace fans product 
classes.

         Table V.14--Rebuttable Presumption Payback Periods for Residential Furnace Fan Product Classes
----------------------------------------------------------------------------------------------------------------
                                                              Rebuttable presumption payback years
                 Product class                 -----------------------------------------------------------------
                                                  TSL 1      TSL 2      TSL 3      TSL 4      TSL 5      TSL 6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace          1.13       1.65       1.65       3.08       3.08       6.21
 Fan..........................................
Non-weatherized, Condensing Gas Furnace Fan...       1.06       1.49       1.49       2.82       2.82       5.72
Weatherized Non-Condensing Gas Furnace Fan....       1.41       2.02       2.02       3.78       3.78       7.62
Non-Weatherized, Non-Condensing Oil Furnace          1.84       1.84       2.46       1.84       2.46       8.16
 Fan..........................................
Non-weatherized Electric Furnace/Modular             1.14       1.60       1.60       1.80       1.80       4.97
 Blower Fan...................................
Manufactured Home Non-Weatherized, Non-              1.33       1.33       1.91       1.33       1.91       7.26
 Condensing Gas Furnace Fan...................
Manufactured Home Non-Weatherized, Condensing        1.25       1.25       1.79       1.25       1.79       6.85
 Gas Furnace Fan..............................
Manufactured Home Electric Furnace/Modular           1.51       1.51       2.13       2.39       2.39       6.59
 Blower Fan...................................
----------------------------------------------------------------------------------------------------------------

2. Economic Impact on Manufacturers
    As noted above, DOE performed an MIA to estimate the impact of new 
energy conservation standards on manufacturers of residential furnace 
fans. The following section describes the expected impacts on 
manufacturers at each considered TSL. Chapter 12 of the NOPR TSD 
explains the analysis in further detail.
a. Industry Cash-Flow Analysis Results
    Table V.15 and Table V.16 depict the financial impacts (represented 
by changes in INPV) of new energy standards on manufacturers of 
residential furnace fans, as well as the conversion costs that DOE 
expects manufacturers would incur for all product classes at each TSL. 
To evaluate the range of cash flow impacts on the residential furnace 
fans industry, DOE modeled two different mark-up scenarios using 
different assumptions that correspond to the range of anticipated 
market responses to potential new energy conservation standards: (1) 
The preservation of gross margin percentage; and (2) the preservation 
of operating profit. Each of these scenarios is discussed immediately 
below.
    To assess the lower (less severe) end of the range of potential 
impacts, DOE modeled a preservation of gross margin percentage markup 
scenario, in which a uniform ``gross margin percentage'' markup is 
applied across all potential efficiency levels. In this scenario, DOE 
assumed that a manufacturer's absolute dollar markup would increase as 
production costs increase in the standards case.
    To assess the higher (more severe) end of the range of potential 
impacts, DOE modeled the preservation of operating profit markup 
scenario, which assumes that manufacturers would be able to earn the 
same operating margin in absolute dollars in the standards case as in 
the base case. In this scenario, while manufacturers make the necessary 
investments required to convert their facilities to produce new 
standards-compliant products, operating profit does not change in 
absolute dollars and decreases as a percentage of revenue.
    The set of results below shows potential INPV impacts for 
residential furnace fan manufacturers; Table V.15 reflects the lower 
bound of impacts, and Table V.16 represents the upper bound.
    Each of the modeled scenarios results in a unique set of cash flows 
and corresponding industry values at each TSL. In the following 
discussion, the INPV results refer to the difference in industry value 
between the base case and each standards case that results from the sum 
of discounted cash flows from the base year 2013 through 2048, the end 
of the analysis period. To provide perspective on the short-run cash 
flow impact, DOE includes in the discussion of the results below a 
comparison of free cash flow between the base case and the standards 
case at each TSL in the year before new standards would take effect. 
This figure provides an understanding of the magnitude of the required 
conversion costs relative to the cash flow generated by the industry in 
the base case.

[[Page 64116]]



            Table V.15--Manufacturer Impact Analysis for Residential Furnace Fans--Preservation of Gross Margin Percentage Markup Scenario *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Trial standard level
                                               Units            Base case  -----------------------------------------------------------------------------
                                                                                 1            2            3            4            5            6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................  2012$ Millions.........        252.2        252.9        265.7        265.1        286.0        286.5        310.4
Change in INPV......................  2012$ Millions.........  ...........          0.7         13.5         12.9         33.8         34.2         58.2
                                      (%)....................  ...........          0.3          5.3          5.1         13.4         13.6         23.1
Product Conversion Costs............  2012$ Millions.........  ...........          1.1          2.8          2.9          3.1          3.2          9.3
Capital Conversion Costs............  2012$ Millions.........  ...........  ...........  ...........  ...........  ...........  ...........        155.0
Total Conversion Costs..............  2012$ Millions.........  ...........          1.1          2.8          2.9          3.1          3.2        164.3
Free Cash Flow......................  2012$ Millions.........        12.12        11.78        11.28        11.25        11.17        11.15      (60.44)
Free Cash Flow (change from Base      %......................          0.0       (2.82)       (6.94)       (7.21)       (7.85)       (8.02)     (598.66)
 Case).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values.


                Table V.16--Manufacturer Impact Analysis for Residential Furnace Fans--Preservation of Operating Profit Markup Scenario*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Trial standard level
                                               Units            Base case  -----------------------------------------------------------------------------
                                                                                 1            2            3            4            5            6
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV................................  2012$ Millions.........        252.2        249.2        225.5        223.6        197.8        196.7         82.1
Change in INPV......................  2012$ Millions.........  ...........        (3.0)       (26.7)       (28.6)       (54.4)       (55.5)      (170.1)
                                      (%)....................  ...........        (1.2)       (10.6)       (11.3)       (21.6)       (22.0)       (67.5)
Product Conversion Costs............  2012$ Millions.........  ...........          1.1          2.8          2.9          3.1          3.2          9.3
Capital Conversion Costs............  2012$ Millions.........  ...........  ...........  ...........  ...........  ...........  ...........        155.0
Total Conversion Costs..............  2012$ Millions.........  ...........          1.1          2.8          2.9          3.1          3.2        164.3
Free Cash Flow......................  2012$ Millions.........        12.12        11.78        11.28        11.25        11.17        11.15      (60.44)
Free Cash Flow (change from Base      %......................          0.0       (2.82)       (6.94)       (7.21)       (7.85)       (8.02)     (598.66)
 Case).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values.

    TSL 1 represents the most common efficiency levels in the current 
market for all product classes. At TSL 1, DOE estimates impacts on INPV 
for residential furnace fan manufacturers to range from -$3.0 million 
to $0.7 million, or a change in INPV of -1.2 percent to 0.3 percent. At 
this potential standard level, industry free cash flow is estimated to 
decrease by approximately 2.8 percent to $11.78 million, compared to 
the base-case value of $12.12 million in the year before the compliance 
date (2018).
    DOE anticipates no capital conversion costs at TSL 1, because 
manufacturers would be able to use a different motor type without 
making significant changes to their manufacturing equipment or 
production processes. DOE anticipates minor product conversion costs 
associated with redesigning products that are currently below the 
proposed efficiency level and updating product literature.
    TSL 2 represents EL 1 for the oil and manufactured home product 
classes, and EL 3 for all other product classes. At TSL 2, DOE 
estimates impacts on INPV for residential furnace fan manufacturers to 
range from -$26.7 million to $13.5 million, or a change in INPV of -
10.6 percent to 5.3 percent. At this potential standard level, industry 
free cash flow is estimated to decrease by approximately 6.9 percent to 
$11.28 million, compared to the base-case value of $12.12 million in 
the year before the compliance date (2018).
    DOE anticipates no capital conversion costs at TSL 2, because 
manufacturers would be able to use a different motor type without 
making significant changes to their manufacturing equipment or 
production processes. DOE anticipates product conversion costs at TSL 2 
to be higher than those at TSL 1, because more products in the market 
(with the exception of oil furnaces and manufactured housing products) 
would need to be redesigned in order to meet the higher proposed 
efficiency levels. Additional product literature would also need to be 
updated for the redesigned products.
    TSL 3 represents EL 3 for all product classes. At TSL 3, DOE 
estimates impacts on INPV for residential furnace fan manufacturers to 
range from -$28.6 million to $12.9 million, or a change in INPV of -
11.3 percent to 5.1 percent. At this potential standard level, industry 
free cash flow is estimated to decrease by approximately 7.2 percent to 
$11.25 million, compared to the base-case value of $12.12 million in 
the year before the compliance date (2018).
    DOE anticipates no capital conversion costs at TSL 3, because 
manufacturers would be able to use a different motor type without 
making significant changes to their manufacturing equipment or 
production processes. DOE anticipates product conversion costs at TSL 3 
to be slightly higher than those at TSL 2 because more manufactured 
housing products in the market would need to be

[[Page 64117]]

redesigned in order to meet the higher proposed efficiency levels. 
Additional product literature would also need to be updated for the 
redesigned products.
    TSL 4 represents the efficiency levels that provide the highest NPV 
using a 7-percent discount rate, and that also result in a higher 
percentage of consumers receiving an LCC benefit rather than an LCC 
loss. At TSL 4, DOE estimates impacts on INPV for residential furnace 
fan manufacturers to range from -$54.4 million to $33.8 million, or a 
change in INPV of -21.6 percent to 13.4 percent. At this potential 
standard level, industry free cash flow is estimated to decrease by 
approximately 7.9 percent to $11.17 million, compared to the base-case 
value of $12.12 million in the year before the compliance date (2018).
    DOE anticipates no capital conversion costs at TSL 4, because 
manufacturers would be able to use a different motor type without 
making significant changes to their manufacturing equipment or 
production processes. DOE anticipates product conversion costs at TSL 4 
to be higher than those at TSL 3, because more products in the market 
(with the exception of oil furnaces) would need to be redesigned in 
order to meet the higher proposed efficiency levels. Additional product 
literature would also need to be updated for the redesigned products.
    TSL 5 represents the efficiency levels that provide the maximum NPV 
using a 7-percent discount rate. At TSL 5, DOE estimates impacts on 
INPV for residential furnace fan manufacturers to range from -$55.5 
million to $34.2 million, or a change in INPV of -22.0 percent to 13.6 
percent. At this potential standard level, industry free cash flow is 
estimated to decrease by approximately 8.0 percent to $11.15 million, 
compared to the base-case value of $12.12 million in the year before 
the compliance date (2018).
    DOE anticipates no capital conversion costs at TSL 5, because 
manufacturers would be able to use a different motor type without 
making significant changes to their manufacturing equipment or 
production processes. DOE anticipates product conversion costs at TSL 5 
to be slightly higher than those at TSL 4, because more oil furnaces 
and manufactured housing electric furnaces in the market would need to 
be redesigned in order to meet the higher proposed efficiency levels. 
Additional product literature would also need to be updated for the 
redesigned products.
    TSL 6 represents the max-tech efficiency level for all product 
classes. At TSL 6, DOE estimates impacts on INPV for residential 
furnace fan manufacturers to range from -$170.1 million to $58.2 
million, or a change in INPV of -67.5 percent to 23.1 percent. At this 
potential standard level, industry free cash flow is estimated to 
decrease by approximately 598.7 percent to -$60.44 million, compared to 
the base-case value of $12.12 million in the year before the compliance 
date (2018).
    DOE anticipates very high capital conversion costs at TSL 6 because 
manufacturers would need to make significant changes to their 
manufacturing equipment and production processes in order to 
accommodate the use of backward-inclined impellers. This design option 
would require modifying, or potentially eliminating, current fan 
housings. DOE also anticipates high product conversion costs to develop 
new designs with backward-inclined impellers for all their products. 
Some manufacturers may also have stranded assets from specialized 
machines for building fan housing that can no longer be used.
b. Impacts on Employment
    To quantitatively assess the impacts of energy conservation 
standards on direct employment in the residential furnace fan industry, 
DOE used the GRIM to estimate the domestic labor expenditures and 
number of employees in the base case and at each TSL from 2013 through 
2048. DOE used statistical data from the U.S. Census Bureau's 2011 
Annual Survey of Manufacturers (ASM),\67\ the results of the 
engineering analysis, and interviews with manufacturers to determine 
the inputs necessary to calculate industry-wide labor expenditures and 
domestic employment levels. Labor expenditures related to manufacturing 
of the product are a function of the labor intensity of the product, 
the sales volume, and an assumption that wages remain fixed in real 
terms over time. The total labor expenditures in each year are 
calculated by multiplying the MPCs by the labor percentage of MPCs.
---------------------------------------------------------------------------

    \67\ ``Annual Survey of Manufactures (ASM),'' U.S. Census Bureau 
(2011) (Available at: https://www.census.gov/manufacturing/asm/).
---------------------------------------------------------------------------

    The total labor expenditures in the GRIM were then converted to 
domestic production employment levels by dividing production labor 
expenditures by the annual payment per production worker (production 
worker hours times the labor rate found in the U.S. Census Bureau's 
2011 ASM). The estimates of production workers in this section cover 
workers, including line-supervisors who are directly involved in 
fabricating and assembling a product within the manufacturing facility. 
Workers performing services that are closely associated with production 
operations, such as materials handling tasks using forklifts, are also 
included as production labor. DOE's estimates only account for 
production workers who manufacture the specific products covered by 
this rulemaking.
    The total direct employment impacts calculated in the GRIM are the 
sum of the changes in the number of production workers resulting from 
the new energy conservation standards for residential furnace fans, as 
compared to the base case.
    For residential furnace fans, DOE does not expect significant 
changes in domestic employment levels from baseline to EL 5. One 
manufacturer commented during interviews that employment may be 
affected if their profit margins decreased due to a new standard, in 
which case consideration may be given to moving production facilities 
to another country, but changes in employment due to standards are 
generally not a major concern for manufacturers of residential furnace 
fans, because all efficiency levels from baseline to EL 5 can be 
achieved by substituting a higher-efficiency component for an existing 
component. DOE found during manufacturer interviews that the assembly 
processes for integrating the higher-efficiency components do not 
differ significantly from those used for existing components. For 
instance, manufacturers design their housings and motor mounts to be 
compatible with all motor types. Consequently, no additional labor is 
required to integrate higher-efficiency motors and controls to reach EL 
1 through EL 3, and labor costs will be equivalent to the baseline at 
those levels. The same is true for integration of components that 
enable multi-stage heating capabilities (in addition to higher-
efficiency motors) to reach EL 4 and EL 5.
    The only standard level at which significant changes in employment 
would possibly be expected to occur is at EL6, the max-tech level. At 
EL 6, DOE estimates increases in labor costs because backwards-inclined 
impeller assemblies are heavier and require more robust mounting 
approaches than are currently used for forward-curved impeller 
assemblies. The alternate mounting approaches needed to integrate 
backward-inclined impeller assemblies could require manufacturers to 
modify their current assembly processes, resulting in increased labor. 
However, DOE received limited feedback from manufacturers regarding the 
labor required to produce furnace

[[Page 64118]]

fans with backward-curved impellers, because they generally do not have 
any experience in working with this design option.
    DOE notes that the employment impacts discussed here are 
independent of the indirect employment impacts to the broader U.S. 
economy, which are documented in chapter 15 of the NOPR TSD.
c. Impacts on Manufacturing Capacity
    According to the residential furnace fan manufacturers interviewed, 
the new energy conservation standards proposed in this NOPR would not 
significantly affect manufacturers' production capacities. Some 
manufacturers mentioned that capacity could potentially be impacted by 
additional testing requirements and bottlenecks with sourcing if motor 
suppliers cannot keep up with demand, but concerns were not generally 
expressed about manufacturing capacity until max-tech levels. Thus, at 
the proposed TSL, DOE believes manufacturers would be able to maintain 
manufacturing capacity levels and continue to meet market demand under 
new energy conservation standards.
d. Impacts on Subgroups of Manufacturers
    Small manufacturers, niche equipment manufacturers, and 
manufacturers exhibiting a cost structure substantially different from 
the industry average could be affected disproportionately. As discussed 
in section IV.J using average cost assumptions developed for an 
industry cash-flow estimate is inadequate to assess differential 
impacts among manufacturer subgroups.
    For the residential furnace fans industry, DOE identified and 
evaluated the impact of new energy conservation standards on one 
subgroup, specifically small manufacturers. The SBA defines a ``small 
business'' as having 750 employees or less for NAICS 333415, ``Air-
Conditioning and Warm Air Heating Equipment and Commercial and 
Industrial Refrigeration Equipment Manufacturing.'' Based on this 
definition, DOE identified 14 manufacturers in the residential furnace 
fans industry that qualify as small businesses. For a discussion of the 
impacts on the small manufacturer subgroup, see the regulatory 
flexibility analysis in section VI.B of this notice and chapter 12 of 
the NOPR TSD.
e. Cumulative Regulatory Burden
    While any one regulation may not impose a significant burden on 
manufacturers, the combined effects of recent or 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. Multiple regulations 
affecting the same manufacturer can strain profits and lead companies 
to abandon product lines or markets with lower expected future returns 
than competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
appliance efficiency.
    During previous stages of this rulemaking, DOE identified a number 
of requirements in addition to new energy conservation standards for 
residential furnace fans. The following section briefly summarizes 
those identified regulatory requirements and addresses comments DOE 
received with respect to cumulative regulatory burden, as well as other 
key related concerns that manufacturers raised during interviews.
DOE Certification, Compliance, and Enforcement (CC&E) Rule
    This notice proposes CC&E requirements for residential furnace 
fans. In addition, the April 2, 2013 test procedure SNOPR included 
proposed sampling requirements for CC&E testing of residential furnace 
fans that mandate that, unless otherwise specified, a minimum of two 
units need to be tested for each basic model. 78 FR 19606, 19625.
    Manufacturers indicated during interviews that the regulatory 
burden from certification and compliance testing is one of the biggest 
problems they face. One manufacturer stated that it could potentially 
shut down the industry due to the large number of basic models that 
need to be tested. DOE recognizes that the CC&E requirements contribute 
to cumulative regulatory burden. However, for the reasons discussed in 
section IV.J.3, DOE does not find that testing furnace fans according 
to its proposed test procedure would be unduly burdensome.
DOE Energy Conservation Standards for Furnaces and Central Air 
Conditioners and Heat Pumps
    On June 27, 2011, DOE published a direct final rule in the Federal 
Register to amend the energy conservation standards for residential 
furnaces, central air conditioners, and heat pumps (the ``HVAC rule''). 
76 FR 37408. In addition to setting a base national standard, the June 
27, 2011 direct final rule also implemented regional standard levels, 
where the minimum efficiency level for a product is determined by the 
geographic region in which it is sold. (DOE subsequently confirmed 
adoption of these standards through publication of a notice of 
effective date and compliance dates for this rulemaking in the Federal 
Register on October 31, 2011. 76 FR 67037.) Compliance with these 
standards was required on May 1, 2013 for non-weatherized furnaces and 
will be required on January 1, 2015 for weatherized furnaces, central 
air conditioners, and heat pumps.\68\
---------------------------------------------------------------------------

    \68\ DOE notes that the American Public Gas Association (APGA) 
brought a lawsuit challenging the energy conservation standards 
pertaining to non-weatherized gas furnaces, and that lawsuit is 
currently pending before the U.S. Court of Appeals for the District 
of Columbia Circuit (D.C. Circuit). There is also a settlement 
agreement before the Court regarding this matter. On May 1, 2013, 
the D.C. Circuit granted a motion requesting a stay of the May 1, 
2013 compliance date for non-weatherized gas furnaces. In its order, 
the Court stayed the compliance deadline for six months following 
the issuance of any opinion by the Court in this case upholding the 
standards.
---------------------------------------------------------------------------

    Since furnace fan manufacturers are also manufacturers of the HVAC 
product in which the furnace fan is used, furnace fan manufacturers are 
subject to the amended energy conservation standards for residential 
furnaces, central air conditioners, and heat pumps. At the minimum 
energy efficiency levels selected for the direct final rule, DOE 
estimated that the total industry investment required to meet the 
amended energy conservation standards would be $28 million (in 2009$). 
At the minimum energy efficiency levels selected for this notice of 
proposed rulemaking, DOE estimates that the total industry investment 
would be $3.1 million. Manufacturers of furnace fans face product 
conversion costs related to standards for furnace fans, as well as 
product and capital conversion costs related to standards for 
residential furnaces, central air conditioners, and heat pumps.
    The direct final rule for energy conservation standards for 
residential furnaces, central air conditioners, and heat pumps includes 
standards for energy efficiency as well as standards for standby mode 
and off mode energy consumption. DOE has completed a test procedure 
final rule for standby mode and off mode energy consumption in 
residential furnaces. 77 FR 76831 (Dec. 31, 2012). DOE is also 
preparing a test procedure for standby mode and off mode energy 
consumption in residential central air conditioners and heat pumps.

[[Page 64119]]

EPA Phaseout of Hydrochlorofluorocarbons (HCFCs)
    The U.S. is obligated under the Montreal Protocol to limit 
production and consumption of HCFCs through incremental reductions, 
culminating in a complete phaseout of HCFCs by 2030. On December 15, 
2009, EPA published the ``2010 HCFC Allocation Rule,'' which allocates 
production and consumption allowances for HCFC-22 for each year between 
2010 and 2014. 74 FR 66412. On January 4. 2012, EPA published the 
``2012 HCFC Allocation Proposed Rule,'' which proposes to lift the 
regulatory ban on the production and consumption of HCFC-22 (following 
a court decision \69\ in August 2010 to vacate a portion of the ``2010 
HCFC Allocation Rule'') by establishing company-by-company HCFC-22 
baselines and allocating allowances for 2012-2014. 77 FR 237.
---------------------------------------------------------------------------

    \69\ See Arkema v. EPA, 618 F.3d 1 (D.C. Cir. 2010).
---------------------------------------------------------------------------

    HCFC-22, which is also known as R-22, is a popular refrigerant that 
is commonly used in air-conditioning products. Manufacturers of 
residential furnace fans who also manufacture residential central air 
conditioners must comply with the allowances established by the 
allocation rule, thereby facing a cumulative regulatory burden.
EPA ENERGY STAR
    During interviews, some manufacturers stated that ENERGY STAR 
specifications for residential furnaces, central air conditioners, and 
heat pumps would be a source of cumulative regulatory burden. ENERGY 
STAR specifications are as follows:

    Table V.17--ENERGY STAR Specifications for HVAC Products That Use
                              Furnace Fans
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Gas Furnaces.........................  Rating of 90% AFUE or greater for
                                        U.S. South gas furnaces.
                                       Rating of 95% AFUE or greater for
                                        U.S. North gas furnaces.
                                       Less than or equal to 2.0%
                                        furnace fan efficiency.*
Oil Furnaces.........................  Rating of 85% AFUE or greater.
                                       Less than or equal to 2.0%
                                        furnace fan efficiency.*
Air-Source Heat Pumps................  >= 8.2 HSPF/>=14.5 SEER/>=12 EER
                                        for split systems.
                                       >= 8.0 HSPF/>=14 SEER/>=11 EER
                                        for single-package equipment.
Central Air Conditioners.............  >=14.5 SEER/>=12 EER for split
                                        systems.
                                       >=14 SEER/>=11 EER for single-
                                        package equipment.
------------------------------------------------------------------------
* Furnace fan efficiency in this context is furnace fan electrical
  consumption as a percentage of total furnace energy consumption in
  heating mode.

    DOE realizes that the cumulative effect of several regulations on 
an industry may significantly increase the burden faced by 
manufacturers that need to comply with multiple regulations and 
certification programs from different organizations and levels of 
government. However, DOE notes that certain standards, such as ENERGY 
STAR, are optional for manufacturers. Furthermore, for certain products 
listed in the table above, ENERGY STAR standards are equivalent to the 
standards set in DOE's June 27, 2011 direct final rule for energy 
conservation standards for residential furnaces, central air 
conditioners, and heat pumps.
Canadian Energy Efficiency Regulations
    In June 2010, the Office of Energy Efficiency of National Resources 
Canada (NRCan) published a bulletin to announce the proposal of new 
electricity reporting requirements for air handlers used in residential 
central heating and cooling systems that are imported into Canada for 
sale or lease.\70\ In November 2011, NRCan published a regulatory 
update which stated that NRCan intends to apply reporting requirements 
to only air handlers used in residential gas furnaces, and that 
requirements for air handlers used in other heating and cooling systems 
would be expanded in a future regulatory amendment. \71\ In this 
update, NRCan proposed to use Canadian Standards Association (CSA) 
C823-11 (Performance of air handlers in residential space conditioning 
systems) as the test method for determining efficiency. Consequently, 
manufacturers of furnace fans used in residential gas furnaces may face 
additional reporting requirements if they sell their products in 
Canada.
---------------------------------------------------------------------------

    \70\ Air Handlers--June 2010, Natural Resources Canada 
(Available at: https://oee.nrcan.gc.ca/regulations/bulletins/14551) 
(Last accessed May 6, 2013).
    \71\ Regulatory Update--November 2011, Natural Resources Canada 
(Available at: https://oee.nrcan.gc.ca/regulations/bulletins/17839) 
(Last accessed May 6, 2013).
---------------------------------------------------------------------------

California Title 24
    Title 24, Part 6, of the California Code of Regulations includes 
building energy efficiency standards for residential and nonresidential 
buildings. The California Energy Commission (CEC) published new 
standards in 2008, which became effective January 1, 2010, that include 
watts per cubic foot per minute (W/CFM) limits for fans used in 
central, residential HVAC systems.\72\
---------------------------------------------------------------------------

    \72\ Building Energy Efficiency Program, California Energy 
Commission (Available at: https://www.energy.ca.gov/title24/) (Last 
accessed May 6, 2013).
---------------------------------------------------------------------------

ASHRAE Standard 90.1
    ASHRAE Standard 90.1, ``Energy Standard for Buildings Except Low-
Rise Residential Buildings,'' sets minimum efficiency standards for 
buildings, except low-rise residential buildings. On May 16, 2012, DOE 
published the final rule in the Federal Register for Energy 
Conservation Standards and Test Procedures for Commercial Heating, Air-
Conditioning, and Water-Heating Equipment, through which DOE adopted 
the efficiency levels specified in ASHRAE Standard 90.1-2010. 77 FR 
28928.
    Included in the ASHRAE standards are minimum efficiency levels for 
commercial heating, air-conditioning, and water-heating equipment. 
Several manufacturers of residential furnace fans also manufacture this 
equipment.
Low-NOX Requirements
    Rule 1111 of the South Coast Air Quality Management District (AQMD) 
currently requires residential furnaces installed in the District to 
meet a NOX emission limit of 40 nanograms per joule (ng/J) 
of heat output.\73\ The development of this rule is an ongoing process 
to evaluate low-NOX technologies for combustion equipment. 
In 1983, the rule was amended to limit applicability to furnaces with a 
heat input of less than 175,000 Btu per hour, or for combination 
heating and cooling units, a cooling rate of less than 65,000 Btu per 
hour.\74\ However, the rule was again amended in 2009 to establish a

[[Page 64120]]

new limit of 14 ng/J for non-condensing, condensing, weatherized, and 
mobile home furnaces, with the following compliance schedule: \75\
---------------------------------------------------------------------------

    \73\ South Coast AQMD List of Current Rules, California 
Environmental Protection Agency Air Resouorces Board (Available at: 
https://www.arb.ca.gov/drdb/sc/cur.htm) (Last accessed May 6, 2013).
    \74\ See https://aqmd.gov/hb/attachments/2011-2015/2013Mar/2013-Mar1-019.pdf.
    \75\ See https://www.arb.ca.gov/DRDB/SC/CURHTML/R1111.pdf.

                 Table V.18--Low NOX Compliance Schedule
------------------------------------------------------------------------
              Compliance date                       Furnace type
------------------------------------------------------------------------
Oct 1, 2014...............................  Condensing Furnace.
Oct 1, 2015...............................  Non-condensing Furnace.
Oct 1, 2016...............................  Weatherized Furnace.
Oct 1, 2018...............................  Mobile Home Furnace.
------------------------------------------------------------------------

    The Proposed Amended Rule (PAR) 1111 affects manufacturers, 
distributors, wholesalers, builders, and installers of residential 
furnaces. AHRI indicates that, although there are currently no 
manufacturers of fan-type gas-fired residential furnaces within the 
AQMD jurisdiction, some of these manufacturers do sell and distribute 
products installed in this District.
    PAR 1111 also provides manufacturers with an alternative compliance 
option. For any furnace type, a manufacturer may request a delayed 
compliance date of up to three years if they submit a plan and pay an 
emission mitigation fee.
    DOE discusses these and other requirements, and includes the full 
details of the cumulative regulatory burden analysis, in chapter 12 of 
the NOPR TSD. DOE also discusses the impacts on the small manufacturer 
subgroup in the regulatory flexibility analysis in section VI.B of this 
NOPR.
3. National Impact Analysis
a. Significance of Energy Savings
    For each TSL, DOE projected energy savings for residential furnace 
fans purchased in the 30-year period that begins in the first full year 
of compliance with amended standards (2019-2048). The savings are 
measured over the entire lifetime of products purchased in the 30-year 
period. DOE quantified the energy savings attributable to each TSL as 
the difference in energy consumption between each standards case and 
the base case. Table V.19 presents the estimated primary energy savings 
for each considered TSL, and Table V.20 presents the estimated FFC 
energy savings for each considered TSL. The energy savings in the 
tables below are net savings that reflect the subtraction of the 
additional gas or oil used by the furnace associated with higher-
efficiency furnace fans. With improved fan efficiency, there is less 
heat from the motor, which means that the furnace needs to operate 
more. The approach for estimating national energy savings is further 
described in section IV.H.1.
    The difference between primary energy savings and FFC energy 
savings for all TSLs is small (less than 1%), because the upstream 
energy savings associated with the electricity savings are partially 
(or fully, for TSL 2 and 3) offset by the upstream energy use from the 
additional gas or oil used by the furnace due to higher-efficiency 
furnace fans. The ranking of TSLs is not impacted by the use of FFC 
energy savings.

  Table V.19--Cumulative National Primary Energy Savings for Trial Standard Levels for Residential Furnace Fans
                                                Sold in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                   Trial standard level quads
                 Product class                 -----------------------------------------------------------------
                                                    1          2          3          4          5          6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace         0.254      1.021      1.021      1.861      1.861      2.404
 Fan..........................................
Non-weatherized, Condensing Gas Furnace Fan...      0.276      0.877      0.877      2.003      2.003      2.793
Weatherized Non-Condensing Gas Furnace Fan....      0.032      0.138      0.138      0.264      0.264      0.338
Non-Weatherized, Non-Condensing Oil Furnace         0.005      0.005      0.025      0.005      0.025      0.051
 Fan..........................................
Non-weatherized Electric Furnace/Modular            0.042      0.202      0.202      0.357      0.357      0.451
 Blower Fan...................................
Manufactured Home Non-Weatherized, Non-             0.010      0.010      0.039      0.010      0.039      0.089
 Condensing Gas Furnace Fan...................
Manufactured Home Non-Weatherized, Condensing       0.002      0.002      0.008      0.002      0.008      0.022
 Gas Furnace Fan..............................
Manufactured Home Electric Furnace/Modular          0.009      0.009      0.034      0.060      0.060      0.073
 Blower Fan...................................
                                               -----------------------------------------------------------------
    Total--All Classes........................      0.631      2.265      2.344      4.562      4.617      6.221
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.


Table V.20--Cumulative National Full-Fuel-Cycle Energy Savings for Trial Standard Levels for Residential Furnace
                                             Fans Sold in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                   Trial standard level quads
                 Product class                 -----------------------------------------------------------------
                                                    1          2          3          4          5          6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace         0.256      1.021      1.021      1.870      1.870      2.421
 Fan..........................................
Non-Weatherized, Condensing Gas Furnace Fan...      0.277      0.866      0.866      2.005      2.005      2.802
Weatherized Non-Condensing Gas Furnace Fan....      0.032      0.138      0.138      0.266      0.266      0.340
Non-Weatherized, Non-Condensing Oil Furnace         0.005      0.005      0.024      0.005      0.024      0.050
 Fan..........................................
Non-Weatherized Electric Furnace/Modular            0.042      0.202      0.202      0.357      0.357      0.452
 Blower Fan...................................
Manufactured Home Non-Weatherized, Non-             0.010      0.010      0.039      0.010      0.039      0.089
 Condensing Gas Furnace Fan...................
Manufactured Home Non-Weatherized, Condensing       0.002      0.002      0.008      0.002      0.008      0.022
 Gas Furnace Fan..............................
Manufactured Home Electric Furnace/Modular          0.010      0.010      0.034      0.061      0.061      0.074
 Blower Fan...................................
                                               -----------------------------------------------------------------

[[Page 64121]]

 
    Total--All Classes........................      0.635      2.254      2.332      4.576      4.629      6.250
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

    OMB Circular A-4 \76\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this rulemaking, 
DOE undertook a sensitivity analysis using 9 rather than 30 years of 
product shipments. The choice of a 9-year period is a proxy for the 
timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\77\ We would note that the review timeframe established in 
EPCA generally does not overlap with the product lifetime, product 
manufacturing cycles, or other factors specific to residential furnace 
fans. Thus, such results are presented for informational purposes only 
and are not indicative of any change in DOE's analytical methodology. 
The NES results based on a 9-year analytical period are presented in 
Table V.21. The impacts are counted over the lifetime of products 
purchased in 2019-2027.
---------------------------------------------------------------------------

    \76\ U.S. Office of Management and Budget, ``Circular A-4: 
Regulatory Analysis'' (Sept. 17, 2003) (Last accessed September 17, 
2013 from https://www.whitehouse.gov/omb/circulars_a004_a-4/).
    \77\ EPCA requires DOE to review its energy conservation 
standards at least once every 6 years, and requires, for certain 
products, a 3-year period after any new standard is promulgated 
before compliance is required, except that in no case may any new 
standards be required within 6 years of the compliance date of the 
previous standards. (42 U.S.C. 6295(m)) While adding a 6-year review 
to the 3-year compliance period adds up to 9 years, DOE notes that 
it may undertake reviews at any time within the 6-year period and 
that the 3-year compliance date may yield to the 6-year backstop. A 
9-year analysis period may not be appropriate given the variability 
that occurs in the timing of standards reviews and the fact that for 
some consumer products, the compliance period is 5 years rather than 
3 years.

  Table V.21--Cumulative National Primary Energy Savings for Trial Standard Levels for Residential Furnace Fans
                                                Sold in 2019-2027
----------------------------------------------------------------------------------------------------------------
                                                                   Trial standard level quads
                 Product class                 -----------------------------------------------------------------
                                                    1          2          3          4          5          6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace         0.085      0.348      0.348      0.642      0.642      0.846
 Fan..........................................
Non-Weatherized, Condensing Gas Furnace Fan...      0.076      0.239      0.239      0.545      0.545      0.755
Weatherized Non-Condensing Gas Furnace Fan....      0.010      0.046      0.046      0.086      0.086      0.111
Non-Weatherized, Non-Condensing Oil Furnace         0.002      0.002      0.009      0.002      0.009      0.021
 Fan..........................................
Non-Weatherized Electric Furnace/Modular            0.012      0.058      0.058      0.102      0.102      0.130
 Blower Fan...................................
Manufactured Home Non-Weatherized, Non-             0.003      0.003      0.013      0.003      0.013      0.030
 Condensing Gas Furnace Fan...................
Manufactured Home Non-Weatherized, Condensing       0.001      0.001      0.002      0.001      0.002      0.006
 Gas Furnace Fan..............................
Manufactured Home Electric Furnace/Modular          0.003      0.003      0.012      0.020      0.020      0.025
 Blower Fan...................................
                                               -----------------------------------------------------------------
    Total--All Classes........................      0.193      0.700      0.727      1.402      1.421      1.924
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for residential 
furnace fans. In accordance with OMB's guidelines on regulatory 
analysis,\78\ DOE calculated NPV using both a 7-percent and a 3-percent 
real discount rate. Table V.22 shows the consumer NPV results for each 
TSL considered for residential furnace fans. In each case, the impacts 
cover the lifetime of products purchased in 2019-2048.
---------------------------------------------------------------------------

    \78\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at: 
https://www.whitehouse.gov/omb/circulars_a004_a-4).

 Table V.22--Cumulative Net Present Value of Consumer Benefit for Trial Standard Levels for Residential Furnace
                                             Fans Sold in 2019-2048
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level
                                              ------------------------------------------------------------------
        Product class           Discount rate                           Billion 2012$ *
                                      %       ------------------------------------------------------------------
                                                   1          2          3          4          5           6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-                       3       1.46       9.86       9.86      11.09      11.09       8.28
 Condensing Gas Furnace Fan..
Non-Weatherized, Condensing    ..............       1.49      11.16      11.16      12.23      12.23       9.20
 Gas Furnace Fan.............

[[Page 64122]]

 
Weatherized Non-Condensing     ..............       0.17       1.12       1.12       1.30       1.30       0.49
 Gas Furnace Fan.............
Non-Weatherized, Non-          ..............       0.02       0.02       0.19       0.02       0.19       0.10
 Condensing Oil Furnace Fan..
Non-Weatherized Electric       ..............       0.15       1.05       1.05       1.29       1.29       0.12
 Furnace/Modular Blower Fan..
Manufactured Home Non-         ..............       0.04       0.04       0.25       0.04       0.25      (0.06)
 Weatherized, Non-Condensing
 Gas Furnace Fan.............
Manufactured Home Non-         ..............       0.01       0.01       0.05       0.01       0.05      (0.02)
 Weatherized, Condensing Gas
 Furnace Fan.................
Manufactured Home Electric     ..............       0.03       0.03       0.13       0.17       0.17      (0.17)
 Furnace/Modular Blower Fan..
                              ----------------------------------------------------------------------------------
    Total--All Classes.......  ..............       3.37      23.30      23.81      26.16      26.57      17.95
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-                       7       0.53       3.52       3.52       3.71       3.71       1.98
 Condensing Gas Furnace Fan..
Non-Weatherized, Condensing    ..............       0.51       3.78       3.78       3.91       3.91       2.11
 Gas Furnace Fan.............
Weatherized Non-Condensing     ..............       0.06       0.39       0.39       0.41       0.41      (0.01)
 Gas Furnace Fan.............
Non-Weatherized, Non-          ..............       0.01       0.01       0.07       0.01       0.07       0.01
 Condensing Oil Furnace Fan..
Non-Weatherized Electric       ..............       0.05       0.33       0.33       0.40       0.40      (0.20)
 Furnace/Modular Blower Fan..
Manufactured Home Non-         ..............       0.02       0.02       0.08       0.02       0.08      (0.09)
 Weatherized, Non-Condensing
 Gas Furnace Fan.............
Manufactured Home Non-         ..............       0.00       0.00       0.02       0.00       0.02      (0.02)
 Weatherized, Condensing Gas
 Furnace Fan.................
Manufactured Home Electric     ..............       0.01       0.01       0.04       0.05       0.05      (0.13)
 Furnace/Modular Blower Fan..
                              ----------------------------------------------------------------------------------
    Total--All Classes.......  ..............       1.19       8.07       8.23       8.51       8.64       3.65
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV.

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.23. The impacts are counted over the 
lifetime of products purchased in 2019-2027. As mentioned previously, 
this information is presented for informational purposes only and is 
not indicative of any change in DOE's analytical methodology or 
decision criteria.

 Table V.23--Cumulative Net Present Value of Consumer Benefit for Trial Standard Levels for Residential Furnace
                                             Fans Sold in 2019-2027
----------------------------------------------------------------------------------------------------------------
                                                                      Trial standard level
                                              ------------------------------------------------------------------
        Product class           Discount rate                           Billion 2012$ *
                                      %       ------------------------------------------------------------------
                                                   1          2          3          4          5           6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-                       3       0.63       4.32       4.32       4.88       4.88       3.75
 Condensing Gas Furnace Fan..
Non-Weatherized, Condensing    ..............       0.55       4.11       4.11       4.51       4.51       3.51
 Gas Furnace Fan.............
Weatherized Non-Condensing     ..............       0.07       0.48       0.48       0.56       0.56       0.27
 Gas Furnace Fan.............
Non-Weatherized, Non-          ..............       0.01       0.01       0.09       0.01       0.09       0.07
 Condensing Oil Furnace Fan..
Non-Weatherized Electric       ..............       0.05       0.39       0.39       0.48       0.48       0.04
 Furnace/Modular Blower Fan..
Manufactured Home Non-         ..............       0.02       0.02       0.11       0.02       0.11      (0.01)
 Weatherized, Non-Condensing
 Gas Furnace Fan.............
Manufactured Home Non-         ..............       0.00       0.00       0.02       0.00       0.02       0.00
 Weatherized, Condensing Gas
 Furnace Fan.................
Manufactured Home Electric     ..............       0.01       0.01       0.06       0.07       0.07      (0.07)
 Furnace/Modular Blower Fan..
                              ----------------------------------------------------------------------------------
Total--All Classes...........  ..............       1.35       9.36       9.59      10.53      10.72       7.55
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-                       7       0.29       1.98       1.98       2.09       2.09       1.17
 Condensing Gas Furnace Fan..
Non-Weatherized, Condensing    ..............       0.26       1.87       1.87       1.94       1.94       1.11
 Gas Furnace Fan.............
Weatherized Non-Condensing     ..............       0.03       0.22       0.22       0.23       0.23       0.02
 Gas Furnace Fan.............
Non-Weatherized, Non-          ..............       0.00       0.00       0.04       0.00       0.04       0.02
 Condensing Oil Furnace Fan..

[[Page 64123]]

 
Non-Weatherized Electric       ..............       0.02       0.17       0.17       0.20       0.20      (0.10)
 Furnace/Modular Blower Fan..
Manufactured Home Non-         ..............       0.01       0.01       0.05       0.01       0.05      (0.05)
 Weatherized, Non-Condensing
 Gas Furnace Fan.............
Manufactured Home Non-         ..............       0.00       0.00       0.01       0.00       0.01      (0.01)
 Weatherized, Condensing Gas
 Furnace Fan.................
Manufactured Home Electric     ..............       0.01       0.01       0.02       0.03       0.03      (0.07)
 Furnace/Modular Blower Fan..
                              ----------------------------------------------------------------------------------
    Total--All Classes.......  ..............       0.63       4.26       4.35       4.50       4.58       2.09
----------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV.

    As noted in section IV.H.2, DOE assumed no change in residential 
furnace fan prices over the 2019-2048 period. In addition, DOE 
conducted a sensitivity analysis using alternative price trends: One in 
which prices decline over time, and one in which prices increase over 
time. These price trends, and the NPV results from the associated 
sensitivity cases, are described in Appendix 10-C of the NOPR TSD.
c. Indirect Impacts on Employment
    DOE expects energy conservation standards for residential furnace 
fans to reduce energy costs for consumers, with the resulting net 
savings being redirected to other forms of economic activity. Those 
shifts in spending and economic activity could affect the demand for 
labor. As described in section IV.N, DOE used an input/output model of 
the U.S. economy to estimate indirect employment impacts of the TSLs 
that DOE considered in this rulemaking. DOE understands that there are 
uncertainties involved in projecting employment impacts, especially 
changes in the later years of the analysis. Therefore, DOE generated 
results for near-term time frames (2019 and 2024), where these 
uncertainties are reduced.
    The results suggest that the proposed standards would be likely to 
have negligible impact on the net demand for labor in the economy. The 
net change in jobs is so small that it would be imperceptible in 
national labor statistics and might be offset by other, unanticipated 
effects on employment. Chapter 16 of the NOPR TSD presents more 
detailed results about anticipated indirect employment impacts.
4. Impact on Product Utility or Performance
    DOE has tentatively concluded that the standards it is proposing in 
this NOPR would not lessen the utility or performance of residential 
furnace fans.
5. Impact of Any Lessening of Competition
    DOE has also considered any lessening of competition that is likely 
to result from new and amended standards. The Attorney General 
determines the impact, if any, of any lessening of competition likely 
to result from a proposed standard, and transmits such determination in 
writing to the Secretary, together with an analysis of the nature and 
extent of such impact. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (ii))
    To assist the Attorney General in making such a determination, DOE 
has provided DOJ with copies of this notice and the TSD for review. DOE 
will consider DOJ's comments on the proposed rule in preparing the 
final rule, and DOE will publish and respond to DOJ's comments in that 
document.
6. Need of the Nation to Conserve Energy
    An improvement in the energy efficiency of the products subject to 
this rule is likely to improve the security of the nation's energy 
system by reducing overall demand for energy. Reduction in the growth 
of electricity demand resulting from energy conservation standards may 
also improve the reliability of the electricity system. Reductions in 
national electric generating capacity estimated for each considered TSL 
are reported in chapter 15 of the NOPR TSD.
    Energy savings from standards for the residential furnace fan 
products covered in this NOPR could also produce environmental benefits 
in the form of reduced emissions of air pollutants and greenhouse gases 
associated with electricity production. Table V.24 provides DOE's 
estimate of cumulative emissions reductions projected to result from 
the TSLs considered in this rulemaking. The table includes both power 
sector emissions and upstream emissions. The emissions were calculated 
using the multipliers discussed in section IV.K. DOE reports annual 
emissions reductions for each TSL in chapter 13 of the NOPR TSD.
    As discussed in section IV.K, DOE did not include NOX 
emissions reduction from power plants in States subject to CSAPR, 
because an energy conservation standard would not affect the overall 
level of NOX emissions in those States due to the emissions 
caps mandated by CSAPR. For SO2, projected emissions will be 
far below the cap established by CSAPR, so it is unlikely that excess 
SO2 emissions allowances resulting from the lower 
electricity demand would be needed or used to permit offsetting 
increases in SO2 emissions by any regulated EGU. Therefore, 
DOE believes that efficiency standards will reduce SO2 
emissions.

[[Page 64124]]



                             Table V.24--Cumulative Emissions Reduction for Potential Standards for Residential Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        TSL
                                                         -----------------------------------------------------------------------------------------------
                                                                 1               2               3               4               5               6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Primary Energy Emissions *
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................           57.12          214.17          221.76          416.41          421.74          563.75
SO2 (thousand tons).....................................           31.17          117.04          121.28          227.23          230.23          307.77
NOX (thousand tons).....................................           30.66          122.38          126.31          227.18          229.86          303.72
Hg (tons)...............................................            0.24            0.95            0.98            1.76            1.79            2.36
N2O (thousand tons).....................................            0.67            2.65            2.75            4.96            5.03            6.66
CH4 (thousand tons).....................................            4.65           18.24           18.91           34.24           34.72           46.01
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Upstream Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................            1.88            5.99            6.11           13.37           13.42           18.50
SO2 (thousand tons).....................................           12.18           38.30           39.17           86.23           86.63          119.61
NOX (thousand tons).....................................            0.50            2.00            2.04            3.72            3.75            4.95
Hg (tons)...............................................            0.00            0.00            0.00            0.01            0.01            0.01
N2O (thousand tons).....................................            0.02            0.09            0.09            0.16            0.17            0.22
CH4 (thousand tons).....................................          127.91          352.80          365.71          879.41          887.59          1249.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Total Emissions
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...............................           59.01          220.16          227.87          429.78          435.16          582.25
SO2 (thousand tons).....................................           43.36          155.34          160.44          313.46          316.86          427.38
NOX (thousand tons).....................................           31.16          124.38          128.35          230.90          233.60          308.67
Hg (tons)...............................................            0.24            0.95            0.99            1.77            1.80            2.38
N2O (thousand tons).....................................            0.70            2.74            2.84            5.12            5.19            6.88
N2O thousand tons CO2eq**...............................           207.2           816.0           845.0          1527.0          1547.7          2049.3
CH4 (thousand tons).....................................          132.56          371.04          384.62          913.65          922.31          1295.3
CH4 million tons CO2eq**................................           3.314           9.276           9.616           22.84           23.06           32.38
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Includes emissions from additional gas use associated with more-efficient furnace fans.
** CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).

    As part of the analysis for this NOPR, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
and NOX estimated for each of the TSLs considered for 
residential furnace fans. As discussed in section IV.L, for 
CO2, DOE used four sets of values for the SCC developed by 
an interagency process. Three sets of values are based on the average 
SCC from three integrated assessment models, at discount rates of 2.5 
percent, 3 percent, and 5 percent. The fourth set represents the 95th-
percentile SCC estimate across all three models at a 3-percent discount 
rate. The SCC values for CO2 emissions reductions in 2015, 
expressed in 2012$, are $12.9/ton, $40.8/ton, $62.2/ton, and $117/ton. 
The values for later years are higher due to increasing damages as the 
magnitude of projected climate change increases. Table V.25 presents 
the global value of CO2 emissions reductions at each TSL. 
DOE calculated domestic values as a range from 7 percent to 23 percent 
of the global values, and these results are presented in chapter 14 of 
the NOPR TSD.

Table V.25--Global Present Value of CO2 Emissions Reduction for Potential Standards for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
                                                                            SCC Case *
                                                 ---------------------------------------------------------------
                                                                           Million 2012$
                       TSL                       ---------------------------------------------------------------
                                                                                                    3% discount
                                                    5% discount     3% discount    2.5% discount    rate, 95th
                                                   rate, average   rate, average   rate, average    percentile
----------------------------------------------------------------------------------------------------------------
                                           Primary Energy Emissions **
----------------------------------------------------------------------------------------------------------------
1...............................................           298.5          1531.1          2498.9          4724.6
2...............................................          1121.1          5746.8          9377.5         17732.7
3...............................................          1161.1          5951.3          9710.9         18363.5
4...............................................          2177.1         11165.3         18221.5         34451.9
5...............................................          2205.1         11308.6         18455.1         34893.8
6...............................................          2943.6         15103.4         24651.6         46603.0
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................             9.9            50.5            82.4           155.9
2...............................................            31.3           160.5           261.9           495.0
3...............................................            32.0           163.9           267.5           505.7
4...............................................            70.0           358.6           585.1          1106.2

[[Page 64125]]

 
5...............................................            70.3           360.1           587.6          1110.8
6...............................................            97.0           496.6           810.1          1531.5
----------------------------------------------------------------------------------------------------------------
                                                 Total Emissions
----------------------------------------------------------------------------------------------------------------
1...............................................           308.3          1581.7          2581.3          4880.5
2...............................................          1152.4          5907.3          9639.4         18227.7
3...............................................          1193.1          6115.2          9978.5         18869.2
4...............................................          2247.2         11524.0         18806.6         35558.1
5...............................................          2275.5         11668.7         19042.7         36004.6
6...............................................          3040.6         15599.9         25461.7         48134.5
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.9, $40.8, $62.2, and $117
  per metric ton (2012$). The values are for CO2 only (i.e., not CO2eq of other greenhouse gases).
** Includes site emissions from additional use of natural gas associated with more-efficient furnace fans.

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other greenhouse gas (GHG) emissions 
to changes in the future global climate and the potential resulting 
damages to the world economy continues to evolve rapidly. Thus, any 
value placed in this rulemaking on reducing CO2 emissions is 
subject to change. DOE, together with other Federal agencies, will 
continue to review various methodologies for estimating the monetary 
value of reductions in CO2 and other GHG emissions. This 
ongoing review will consider the comments on this subject that are part 
of the public record for this and other rulemakings, as well as other 
methodological assumptions and issues. However, consistent with DOE's 
legal obligations, and taking into account the uncertainty involved 
with this particular issue, DOE has included in this NOPR the most 
recent values and analyses resulting from the interagency review 
process.
    DOE also estimated a range for the cumulative monetary value of the 
economic benefits associated with NOX emissions reductions 
anticipated to result from standards for the residential furnace fan 
products that are the subject of this NOPR. The dollar-per-ton values 
that DOE used are discussed in section IV.L. Table V.26 presents the 
present value of cumulative NOX emissions reductions for 
each TSL calculated using the average dollar-per-ton values and 7-
percent and 3-percent discount rates.

   Table V.26--Present Value of NOX Emissions Reduction for Potential
                 Standards for Residential Furnace Fans
------------------------------------------------------------------------
                                                   million 2012$
                                         -------------------------------
                   TSL                      3% Discount     7% Discount
                                               rate            Rate
------------------------------------------------------------------------
                    Power Sector and Site Emissions *
------------------------------------------------------------------------
1.......................................            31.0            10.7
2.......................................           116.4            40.0
3.......................................           120.7            41.4
4.......................................           226.2            77.8
5.......................................           229.2            78.8
6.......................................           306.1           105.3
------------------------------------------------------------------------
                           Upstream Emissions
------------------------------------------------------------------------
1.......................................            12.4             4.4
2.......................................            39.0            13.9
3.......................................            39.9            14.3
4.......................................            88.0            31.6
5.......................................            88.4            31.7
6.......................................           122.3            44.0
------------------------------------------------------------------------
                           Total Emissions **
------------------------------------------------------------------------
1.......................................            43.4            15.1
2.......................................           155.4            53.9
3.......................................           160.5            55.7
4.......................................           314.2           109.4
5.......................................           317.6           110.6
6.......................................           428.3           149.3
------------------------------------------------------------------------
* Includes site emissions from additional use of natural gas associated
  with more-efficient furnace fans.
** Components may not sum to total due to rounding.

    The NPV of the monetized benefits associated with emissions 
reductions can be viewed as a complement to the NPV of the consumer 
savings calculated for each TSL considered in this rulemaking. Table 
V.27 presents the NPV values that result from adding the estimates of 
the potential economic benefits resulting from reduced full-fuel-cycle 
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 7-percent and a 3-percent 
discount rate. The CO2 values used in the columns of each 
table correspond to the four scenarios for the valuation of 
CO2 emission reductions discussed above.

[[Page 64126]]



  Table V.27--Potential Standards for Residential Furnace Fans: Net Present Value of Consumer Savings Combined
                 with Present Value of Monetized Benefits from CO2 and NOX Emissions Reductions
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 3% Discount Rate added with:
                                                 ---------------------------------------------------------------
                                                  SCC Case $12.9/ SCC Case $40.8/ SCC Case $62.2/ SCC Case $117/
                       TSL                          metric ton      metric ton      metric ton      metric ton
                                                   CO2* and Low      CO2* and        CO2* and      CO2* and High
                                                   Value for NOX   Medium Value    Medium Value    Value for NOX
                                                        **          for NOX **      for NOX **          **
----------------------------------------------------------------------------------------------------------------
                                                                           billion 2012$
                                                 ---------------------------------------------------------------
1...............................................             3.7             5.0             6.0             8.3
2...............................................            24.5            29.4            33.1            41.8
3...............................................            25.0            30.1            34.0            43.0
4...............................................            28.5            38.0            45.3            62.3
5...............................................            28.9            38.6            45.9            63.2
6...............................................            21.1            34.0            43.8            66.9
----------------------------------------------------------------------------------------------------------------
                                                           Consumer NPV at 7% Discount Rate added with:
                                                 ---------------------------------------------------------------
                       TSL                        SCC Case $12.9/ SCC Case $40.8/ SCC Case $62.2/ SCC Case $117/
                                                    metric ton      metric ton      metric ton      metric ton
                                                   CO2* and Low      CO2* and        CO2* and      CO2* and High
                                                   Value for NOX   Medium Value    Medium Value    Value for NOX
                                                        **          for NOX **      for NOX **          **
 
                                                                          sbillion 2012$
                                                 ---------------------------------------------------------------
1...............................................             1.5             2.8             3.8             6.1
2...............................................             9.2            14.0            17.8            26.4
3...............................................             9.4            14.4            18.3            27.2
4...............................................            10.8            20.1            27.4            44.3
5...............................................            10.9            20.4            27.8            44.8
6...............................................             6.7            19.4            29.3            52.1
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2012$.
** Low Value corresponds to $468 per ton of NOX emissions. Medium Value corresponds to $2,639 per ton, and High
  Value corresponds to $4,809 per ton.

    Although adding the value of consumer savings to the values of 
emission reductions provides a valuable perspective, two issues should 
be considered. First, the national operating cost savings are domestic 
U.S. consumer monetary savings that occur as a result of market 
transactions, while the value of CO2 reductions is based on 
a global value. Second, the assessments of operating cost savings and 
the SCC are performed with different methods that use quite different 
time frames for analysis. The national operating cost savings is 
measured for the lifetime of products shipped in 2019-2048. The SCC 
values, on the other hand, reflect the present value of future climate-
related impacts resulting from the emission of one metric ton of 
CO2 in each year. Because of the long residence time of 
CO2 in the atmosphere, these impacts continue well beyond 
2100.
7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) No 
other factors were considered in this analysis.

C. Proposed Standards

    When considering proposed standards, the new or amended energy 
conservation standard that DOE adopts for any type (or class) of 
covered product shall be designed to achieve the maximum improvement in 
energy efficiency that the Secretary determines is technologically 
feasible and 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 
by, to the greatest extent practicable, considering the seven statutory 
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or 
amended standard must also ``result in significant conservation of 
energy.'' (42 U.S.C. 6295(o)(3)(B))
    For this NOPR, DOE considered the impacts of standards at each TSL, 
beginning with the maximum technologically feasible level, to determine 
whether that level was economically justified. Where the max-tech level 
was not justified, DOE then considered the next most efficient level 
and undertook the same evaluation until it reached the highest 
efficiency level that is both technologically feasible and economically 
justified and saves a significant amount of energy.
    To aid the reader in understanding the benefits and/or burdens of 
each TSL, tables in this section summarize the quantitative analytical 
results for each TSL, based on the assumptions and methodology 
discussed herein. The efficiency levels contained in each TSL are 
described in section V.A. In addition to the quantitative results 
presented in the tables, DOE also considers other burdens and benefits 
that affect economic justification. These include the impacts on 
identifiable subgroups of consumers who may be disproportionately 
affected by a national standard, and impacts on employment. Section 
V.B.1.b presents the estimated impacts of each TSL for these subgroups. 
DOE discusses the impacts on direct employment in residential furnace 
fan manufacturing in section V.B.2.b, and discusses the indirect 
employment impacts in section V.B.3.c.
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off

[[Page 64127]]

upfront costs and energy savings in the absence of government 
intervention. Much of this literature attempts to explain why consumers 
appear to undervalue energy efficiency improvements. There is evidence 
that consumers undervalue future energy savings as a result of: (1) A 
lack of information; (2) a lack of sufficient salience of the long-term 
or aggregate benefits; (3) a lack of sufficient savings to warrant 
delaying or altering purchases; (4) excessive focus on the short term, 
in the form of inconsistent weighting of future energy cost savings 
relative to available returns on other investments; (5) computational 
or other difficulties associated with the evaluation of relevant 
tradeoffs; and (6) a divergence in incentives (for example, renter 
versus owner or builder versus purchaser). Other literature indicates 
that with less than perfect foresight and a high degree of uncertainty 
about the future, consumers may trade off at a higher than expected 
rate between current consumption and uncertain future energy cost 
savings. This undervaluation suggests that regulation that promotes 
energy efficiency can produce significant net private gains (as well as 
producing social gains by, for example, reducing pollution).
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego a 
purchase of a product in the standards case, this decreases sales for 
product manufacturers and the cost to manufacturers is included in the 
MIA. Second, DOE accounts for energy savings attributable only to 
products actually used by consumers in the standards case; if a 
standard decreases the number of products purchased by consumers, this 
decreases the potential energy savings from an energy conservation 
standard. DOE provides estimates of changes in the volume of product 
purchases in chapter 9 of the NOPR TSD. DOE's current analysis does not 
explicitly control for heterogeneity in consumer preferences, 
preferences across subcategories of products or specific features, or 
consumer price sensitivity variation according to household income 
(Reiss and White, 2005).\79\
---------------------------------------------------------------------------

    \79\ P.C. Reiss and M.W. White. Household Electricity Demand, 
Revisited. Review of Economic Studies (2005) 72, 853-883.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance standards, and 
potential enhancements to the methodology by which these impacts are 
defined and estimated in the regulatory process.\80\ DOE welcomes 
comments on how to more fully assess the potential impact of energy 
conservation standards on consumer choice and how to quantify this 
impact in its regulatory analysis.
---------------------------------------------------------------------------

    \80\ Alan Sanstad, Notes on the Economics of Household Energy 
Consumption and Technology Choice. Lawrence Berkeley National 
Laboratory (2010) (Available at: https://www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf (Last 
accessed May 3, 2013).
---------------------------------------------------------------------------

1. Benefits and Burdens of Trial Standard Levels Considered for 
Residential Furnace Fans
    Table V.28 through Table V.30 summarize the quantitative impacts 
estimated for each TSL for residential furnace fans. The national 
impacts are measured over the lifetime of furnace fans purchased in the 
30-year period that begins in the first full year of compliance with 
amended standards (2019-2048). The energy savings, emissions 
reductions, and value of emissions reductions refer to full-fuel-cycle 
results. Results that refer to primary energy savings are presented in 
chapter 10 of the NOPR TSD.

                            Table V.28--Summary of Analytical Results for Residential Furnace Fan Standards: National Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Category                          TSL 1             TSL 2             TSL 3             TSL 4             TSL 5             TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      National Full-Fuel-Cycle Energy Savings quads
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         0.635             2.254             2.332             4.576             4.629             6.250
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         NPV of Consumer Benefits 2012$ billion
--------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate............................              3.37             23.30             23.81             26.16             26.57             17.95
7% discount rate............................              1.19              8.07              8.23              8.51              8.64              3.65
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Cumulative Emissions Reduction (Total FFC Emissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 million metric tons.....................             59.01             220.2             227.9             429.8             435.2             582.3
SO2 thousand tons...........................             43.36             155.3             160.4             313.5             316.9             427.4
NOX thousand tons...........................             31.16             124.4             128.4             230.9             233.6             308.7
Hg tons.....................................              0.24              0.95              0.99              1.77              1.80              2.38
N2O thousand tons...........................              0.70              2.74              2.84              5.12              5.19              6.88
N2O thousand tons CO2eq*....................             207.2             816.0             845.0            1527.0            1547.7            2049.3
CH4 thousand tons...........................             132.6             371.0             384.6             913.7             922.3              1295
CH4 million tons CO2eq*.....................             3.314             9.276             9.616             22.84             23.06             32.38
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Value of Emissions Reduction (Total FFC Emissions) 2012$ billion
--------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 **......................................    0.308 to 4.880    1.152 to 18.23    1.193 to 18.87    2.247 to 35.56    2.275 to 36.01    3.041 to 48.13
NOX--3% discount rate.......................             0.043             0.155             0.161             0.314             0.318             0.428
NOX--7% discount rate.......................             0.015             0.054             0.056             0.109             0.111             0.149
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP).
** Range of the economic value of CO2 reductions is based on interagency estimates of the global benefit of reduced CO2 emissions.


[[Page 64128]]


          Table V.29--Summary of Analytical Results for Residential Furnace Fan Standards: Manufacturer and Average or Median Consumer Impacts*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Category                          TSL 1             TSL 2             TSL 3             TSL 4             TSL 5             TSL 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Manufacturer Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV 2012$ million..................      (3.0) to 0.7    (26.7) to 13.5    (28.6) to 12.9    (54.4) to 33.8    (55.5) to 34.2   (170.1) to 58.2
Industry NPV % change.......................      (1.2) to 0.3     (10.6) to 5.3     (11.3) to 5.1    (21.6) to 13.4    (22.0) to 13.6    (67.5) to 23.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Consumer Average LCC Savings 2012$
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace                $64              $442              $442              $474              $474              $313
 Fan........................................
Non-Weatherized, Condensing Gas Furnace Fan.                49               361               361               371               371               238
Weatherized Non-Condensing Gas Furnace Fan..                35               228               228               247               247                67
Non-Weatherized, Non-Condensing Oil Furnace                 40                40               344                40               344               132
 Fan........................................
Non-Weatherized Electric Furnace/Modular                    21               160               160               185               185                17
 Blower Fan.................................
Manufactured Home Non-Weatherized, Non-                     26                26               146                26               146             (116)
 Condensing Gas Furnace Fan.................
Manufactured Home Non-Weatherized,                          27                27               152                27               152              (86)
 Condensing Gas Furnace Fan.................
Manufactured Home Electric Furnace/Modular                  14                14                64                78                78              (86)
 Blower Fan.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Consumer Median PBP years
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace               1.34              2.69              2.69              5.38              5.38             11.20
 Fan........................................
Non-Weatherized, Condensing Gas Furnace Fan.              1.35              2.73              2.73              5.39              5.39             11.03
Weatherized Non-Condensing Gas Furnace Fan..              1.27              2.65              2.65              6.39              6.39             13.32
Non-Weatherized, Non-Condensing Oil Furnace               5.49              5.49              6.97              5.49              6.97             25.41
 Fan........................................
Non-Weatherized Electric Furnace/Modular                  2.39              3.15              3.15              3.55              3.55             13.45
 Blower Fan.................................
Manufactured Home Non-Weatherized, Non-                   3.35              3.35              7.02              3.35              7.02             26.73
 Condensing Gas Furnace Fan.................
Manufactured Home Non-Weatherized,                        2.73              2.73              6.46              2.73              6.46             32.23
 Condensing Gas Furnace Fan.................
Manufactured Home Electric Furnace/Modular                2.49              2.49              4.35              4.61              4.61             17.11
 Blower Fan.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.


[[Page 64129]]


                  Table V.30--Summary of Analytical Results for Residential Furnace Fan Standards: Distribution of Consumer LCC Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               TSL 1           TSL 2           TSL 3           TSL 4           TSL 5           TSL 6
                      Product Class                          (percent)       (percent)       (percent)       (percent)       (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Non-Weatherized, Non-Condensing Gas Furnace Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................               2              18              18              33              33              58
No Impact...............................................              68              25              25              14              14               0
Net Benefit.............................................              30              57              57              53              53              42
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Non-Weatherized, Condensing Gas Furnace Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................               1              10              10              24              24              57
No Impact...............................................              75              41              41              34              34               0
Net Benefit.............................................              24              49              49              42              42              43
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Weatherized Non-Condensing Gas Furnace Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................               0               7               7              25              25              63
No Impact...............................................              81              56              56              33              33               0
Net Benefit.............................................              18              37              37              41              41              37
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Non-Weatherized, Non-Condensing Oil Furnace Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................              12              12              43              12              43              79
No Impact...............................................              71              71              28              71              28               0
Net Benefit.............................................              18              18              29              18              29              21
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Non-Weatherized Electric Furnace/Modular Blower Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................               5              20              20              27              27              68
No Impact...............................................              73              37              37              25              25               0
Net Benefit.............................................              21              42              42              48              48              32
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Manufactured Home Non-Weatherized, Non-Condensing Gas Furnace Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................              13              13              58              13              58              85
No Impact...............................................              56              56               0              56               0               0
Net Benefit.............................................              32              32              42              32              42              15
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Manufactured Home Non-Weatherized, Condensing Gas Furnace Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................               7               7              38               7              38              84
No Impact...............................................              68              68              29              68              29               0
Net Benefit.............................................              26              26              32              26              32              16
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Manufactured Home Electric Furnace/Modular Blower Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Net Cost................................................               8               8              28              34              34              82
No Impact...............................................              71              71              38              26              26               0
Net Benefit.............................................              21              21              34              40              40              18
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

    First, DOE considered TSL 6, which would save an estimated total of 
6.25 quads of energy, an amount DOE considers significant. TSL 6 has an 
estimated NPV of consumer benefit of $3.65 billion using a 7-percent 
discount rate, and $17.95 billion using a 3-percent discount rate.
    The cumulative CO2 emissions reduction at TSL 6 is 582.3 
million metric tons. The estimated monetary value of the CO2 
emissions reductions ranges from $3.041 billion to $48.13 billion. The 
other emissions reductions are 427.4 thousand tons of SO2, 
308.7 thousand tons of NOX, 2.38 tons of Hg, 6.88 thousand 
tons of N2O, and 1.295 thousand tons of CH4.
    At TSL 6, the average LCC savings are positive for Non-weatherized, 
Non-condensing Gas Furnace Fans, Non-weatherized, Condensing Gas 
Furnace Fans, Weatherized Non-Condensing Gas Furnace Fan, Non-
Weatherized, Non-Condensing Oil Furnace Fan, and Non-weatherized 
Electric Furnace/Modular Blower Fans. The LCC savings are negative for 
Manufactured Home Non-weatherized, Non-condensing Gas Furnace Fans, 
Manufactured Home Non-weatherized, Condensing Gas Furnace Fans, and 
Manufactured Home Electric Furnace/Modular Blower Fans. The median 
payback period is lower than the median product lifetime (which is 22.6 
years for gas and electric furnace fans) for all of the product 
classes. The share of consumers experiencing an LCC cost (increase in 
LCC) is higher than the share experiencing an LCC benefit (decrease in 
LCC) for all of the product classes.
    At TSL 6, manufacturers may expect diminished profitability due to 
large increases in product costs, stranded assets, capital investments 
in equipment and tooling, and expenditures related to engineering and 
testing. The projected change in INPV ranges from a decrease of $170.1 
million to an increase of $58.2 million based on DOE's manufacturer 
markup scenarios. The upper bound of $58.2 million is considered an 
optimistic scenario for manufacturers

[[Page 64130]]

because it assumes manufacturers can fully pass on substantial 
increases in product costs. DOE recognizes the risk of large negative 
impacts on industry if manufacturers' expectations concerning reduced 
profit margins are realized. TSL 6 could reduce INPV in the residential 
furnace fan industry by up to 67.5 percent if impacts reach the lower 
bound of the range.
    Accordingly, the Secretary tentatively concludes that at TSL 6 for 
residential furnace fans, the benefits of significant energy savings, 
positive NPV of consumer benefit, emission reductions and the estimated 
monetary value of the CO2 emissions reductions, as well as 
positive average LCC savings for most product classes would be 
outweighed by the high percentage of consumers that would experience an 
LCC cost in all of the product classes, and the substantial reduction 
in INPV for manufacturers. Consequently, DOE has concluded that TSL 6 
is not economically justified.
    Next, DOE considered TSL 5, which would save an estimated total of 
4.629 quads of energy, an amount DOE considers significant. TSL 5 has 
an estimated NPV of consumer benefit of $8.64 billion using a 7-percent 
discount rate, and $26.57 billion using a 3-percent discount rate.
    The cumulative CO2 emissions reduction at TSL 5 is 435.2 
million metric tons. The estimated monetary value of the CO2 
emissions reductions ranges from $2.275 billion to $36.01 billion. The 
other emissions reductions are 316.9 thousand tons of SO2, 
233.6 thousand tons of NOX, 1.80 tons of Hg, 5.19 thousand 
tons of N2O, and 922.3 thousand tons of CH4.
    At TSL 5, the average LCC savings are positive for all of the 
product classes. The median payback period is lower than the average 
product lifetime for all of the product classes. The share of consumers 
experiencing an LCC benefit (decrease in LCC) is higher than the share 
experiencing an LCC cost (increase in LCC) for five of the product 
classes (Non-Weatherized, Non-Condensing Gas Furnace Fans, Non-
weatherized, Condensing Gas Furnace Fans, Weatherized Non-Condensing 
Gas Furnace Fans, Non-weatherized Electric Furnace/Modular Blower Fans, 
and Manufactured Home Electric Furnace/Modular Blower Fans), but lower 
for the other three product classes.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$55.5 million to an increase of $34.2 million. At TSL 5, DOE recognizes 
the risk of negative impacts if manufacturers' expectations concerning 
reduced profit margins are realized. If the lower bound of the range of 
impacts is reached, as DOE expects, TSL 5 could result in a net loss of 
22.0 percent in INPV for residential furnace fan manufacturers.
    Accordingly, the Secretary tentatively concludes that at TSL 5 for 
residential furnace fans, the benefits of significant energy savings, 
positive NPV of consumer benefit, positive average LCC savings for all 
of the product classes, emission reductions and the estimated monetary 
value of the CO2 emissions reductions, would be outweighed 
by the high percentage of consumers that would be negatively impacted 
for some of the product classes, and the substantial reduction in INPV 
for manufacturers. Consequently, DOE has concluded that TSL 5 is not 
economically justified.
    Next, DOE considered TSL 4, which would save an estimated total of 
4.576 quads of energy, an amount DOE considers significant. TSL 4 has 
an estimated NPV of consumer benefit of $8.51 billion using a 7-percent 
discount rate, and $26.16 billion using a 3-percent discount rate.
    The cumulative CO2 emissions reduction at TSL 4 is 429.8 
million metric tons. The estimated monetary value of the CO2 
emissions reductions ranges from $2.247 billion to $35.56 billion. The 
other emissions reductions are 313.5 thousand tons of SO2, 
230.9 thousand tons of NOX, 1.77 tons of Hg, 5.12 thousand 
tons of N2O, and 913.7 thousand tons of CH4.
    At TSL 4, the average LCC savings are positive for all of the 
product classes. The median payback period is lower than the average 
product lifetime for all of the product classes. The share of consumers 
experiencing an LCC benefit (decrease in LCC) is higher than the share 
experiencing an LCC cost (increase in LCC) for all of the product 
classes.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$54.4 million to an increase of $33.8 million. At TSL 4, DOE recognizes 
the risk of negative impacts if manufacturers' expectations concerning 
reduced profit margins are realized. If the lower bound of the range of 
impacts is reached, as DOE expects, TSL 4 could result in a net loss of 
21.6 percent in INPV for residential furnace fan manufacturers.
    After considering the analysis and weighing the benefits and the 
burdens, the Secretary tentatively concludes that at TSL 4 for 
residential furnace fans, the benefits of significant energy savings, 
positive NPV of consumer benefit, positive average LCC savings for all 
of the product classes, emission reductions and the estimated monetary 
value of the CO2 emissions reductions would outweigh the 
reduction in INPV for manufacturers. The Secretary has tentatively 
concluded that TSL 4 would save a significant amount of energy and is 
technologically feasible and economically justified. Therefore, DOE 
today proposes to adopt the energy conservation standards for 
residential furnace fans at TSL 4. Table V.31 presents the proposed 
energy conservation standards for residential furnace fans.

   Table V.31--Proposed Energy Conservation Standards for Residential
                              Furnace Fans
------------------------------------------------------------------------
          Product class            Proposed standard: FER * (W/1000 cfm)
------------------------------------------------------------------------
Non-Weatherized, Non-Condensing   FER = 0.029 x QMax + 180.
 Gas Furnace Fan.
Non-weatherized, Condensing Gas   FER = 0.029 x QMax + 196.
 Furnace Fan.
Weatherized Non-Condensing Gas    FER = 0.029 x QMax + 135.
 Furnace Fan.
Non-Weatherized, Non-Condensing   FER = 0.051 x QMax + 301.
 Oil Furnace Fan.
Non-weatherized Electric Furnace/ FER = 0.029 x QMax + 165.
 Modular Blower Fan.
Manufactured Home Non-            FER = 0.051 x QMax + 242.
 Weatherized, Non-Condensing Gas
 Furnace Fan.
Manufactured Home Non-            FER = 0.051 x QMax + 262.
 Weatherized, Condensing Gas
 Furnace Fan.
Manufactured Home Electric        FER = 0.029 x QMax + 105.
 Furnace/Modular Blower Fan.
Manufactured Home Weatherized     Reserved.
 Non-Condensing Gas Furnace Fan.
Manufactured Home Non-            Reserved.
 Weatherized Non-Condensing Oil
 Furnace Fan.
------------------------------------------------------------------------
* QMax is the airflow, in cfm, at the maximum airflow-control setting
  measured using the proposed DOE test procedure. 78 FR 19606, 19627
  (April 2, 2013).


[[Page 64131]]

2. Summary of Benefits and Costs (Annualized) of the Proposed Standards
    The benefits and costs of these proposed standards can also be 
expressed in terms of annualized values. The annualized monetary values 
are the sum of: (1) the annualized national economic value, expressed 
in 2012$, of the benefits from operating products that meet the 
proposed standards (consisting primarily of operating cost savings from 
using less energy, minus increases in equipment purchase costs, which 
is another way of representing consumer NPV), and (2) the monetary 
value of the benefits of emission reductions, including CO2 
emission reductions.\81\ The value of the CO2 reductions, 
otherwise known as the Social Cost of Carbon (SCC), is calculated using 
a range of values per metric ton of CO2 developed by a 
recent interagency process.
---------------------------------------------------------------------------

    \81\ DOE used a two-step calculation process to convert the 
time-series of costs and benefits into annualized values. First, DOE 
calculated a present value in 2013, the year used for discounting 
the NPV of total consumer costs and savings, for the time-series of 
costs and benefits using discount rates of 3 and 7 percent for all 
costs and benefits except for the value of CO2 
reductions. For the latter, DOE used a range of discount rates. From 
the present value, DOE then calculated the fixed annual payment over 
a 30-year period, starting in 2013, that yields the same present 
value. The fixed annual payment is the annualized value. Although 
DOE calculated annualized values, this does not imply that the time-
series of cost and benefits from which the annualized values were 
determined would be a steady stream of payments.
---------------------------------------------------------------------------

    Although combining the values of operating savings and 
CO2 reductions provides a useful perspective, two issues 
should be considered. First, the national operating savings are 
domestic U.S. consumer monetary savings that occur as a result of 
market transactions while the value of CO2 reductions is 
based on a global value. Second, the assessments of operating cost 
savings and SCC are performed with different methods that use different 
time frames for analysis. The national operating cost savings is 
measured for the lifetime of products shipped in 2019-2048. The SCC 
values, on the other hand, reflect the present value of future climate-
related impacts resulting from the emission of one metric ton of 
CO2 in each year over a very long period.
    Table V.32 shows the annualized values for the proposed standards 
for residential furnace fans. The results under the primary estimate 
are as follows. (All monetary values below are expressed in 2012$.) 
Using a 7-percent discount rate for benefits and costs other than 
CO2 reduction (for which DOE used a 3-percent discount rate 
along with the SCC series corresponding to a value of $40.8/ton in 
2015), the cost of the residential furnace fan standards proposed in 
this rule is $231 million per year in increased equipment costs, while 
the benefits are $872 million per year in reduced equipment operating 
costs, $571 million in CO2 reductions, and $8.24 million in 
reduced NOX emissions. In this case, the net benefit amounts 
to $1,220 million per year.
    Using a 3-percent discount rate for all benefits and costs and the 
SCC series corresponding to a value of $40.8/ton in 2015, Table V.32 
shows the cost of the residential furnace fans standards proposed in 
this rule is $290 million per year in increased equipment costs, while 
the benefits are $1585 million per year in reduced operating costs, 
$571 million in CO2 reductions, and $15.56 million in 
reduced NOX emissions. In this case, the net benefit amounts 
to $1,882 million per year.

      Table V.32--Annualized Benefits and Costs of Proposed Standards (TSL 4) for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
                                                                          million 2012$/year
                                                     -----------------------------------------------------------
                                     Discount Rate                         Low net benefits    High net benefits
                                                      Primary estimate *       estimate            estimate
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Operating Cost Savings..........  7%................  872...............  710...............  1082
                                  3%................  1585..............  1264..............  2011
CO2 Reduction Monetized Value     5%................  139...............  117...............  171
 ($12.9/t case) **.
CO2 Reduction Monetized Value     3%................  571...............  477...............  702
 ($40.8/t case)**.
CO2 Reduction Monetized Value     2.5%..............  877...............  732...............  1079
 ($62.2/t case)**.
CO2 Reduction Monetized Value     3%................  1761..............  1471..............  2167
 ($117/t case)**.
NOX Reduction Monetized Value     7%................  8.24..............  6.97..............  9.99
 (at $2,639/ton)**.
                                  3%................  15.56.............  13.03.............  19.09
Total Benefits [dagger].........  7% plus CO2 range.  1,019 to 2,641....  834 to 2,188......  1,263 to 3,259
                                  7%................  1,451.............  1,194.............  1,794
                                  3% plus CO2 range.  1,740 to 3,362....  1,394 to 2,748....  2,201 to 4,197
                                  3%................  2,172.............  1,754.............  2,732
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Incremental Product Costs.......  7%................  231...............  273...............  201
                                  3%................  290...............  346...............  250
----------------------------------------------------------------------------------------------------------------
                                                  Net Benefits
----------------------------------------------------------------------------------------------------------------
Total [dagger]..................  7% plus CO2 range.  788 to 2,410......  561 to 1,915......  1,062 to 3,058
                                  7%................  1,220.............  921...............  1,593
                                  3% plus CO2 range.  1,450 to 3,072....  1,047 to 2,402....  1,951 to 3,947

[[Page 64132]]

 
                                  3%................  1,882.............  1,407.............  2,482
----------------------------------------------------------------------------------------------------------------
* This table presents the annualized costs and benefits associated with residential furnace fans shipped in 2019-
  2048. These results include benefits to consumers which accrue after 2048 from the products purchased in 2019-
  2048. Costs incurred by manufacturers, some of which may be incurred in preparation for the rule, are not
  directly included, but are indirectly included as part of incremental equipment costs. The Primary, Low
  Benefits, and High Benefits Estimates utilize projections of energy prices and housing starts from the AEO
  2012 Reference case, Low Estimate, and High Estimate, respectively. Incremental product costs reflect a
  constant product price trend in the Primary Estimate, an increasing price trend in the Low Benefits Estimate,
  and a decreasing price trend in the High Benefits Estimate.
** The CO2 values represent global values of the SCC, in 2012$, in 2015 under several scenarios. The first three
  cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively.
  The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate.
  The SCC values increase over time. The value for NOX (in 2012$) is the average of the low and high values used
  in DOE's analysis.
[dagger] Total Benefits for both the 3% and 7% cases are derived using the series corresponding to SCC value of
  $40.8/t in 2015. In the rows labeled ``7% plus CO2 range'' and ``3% plus CO2 range,'' the operating cost and
  NOX benefits are calculated using the labeled discount rate, and those values are added to the full range of
  CO2 values.

VI. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency to identify 
the problem that it intends to address, including, where applicable, 
the failures of private markets or public institutions that warrant new 
agency action, as well as to assess the significance of that problem. 
The problems these proposed standards address are as follows:
    (1) There is a lack of consumer information and/or information 
processing capability about energy efficiency opportunities in the home 
appliance market.
    (2) There is asymmetric information (one party to a transaction has 
more and better information than the other) and/or high transactions 
costs (costs of gathering information and effecting exchanges of goods 
and services).
    (3) There are external benefits resulting from improved energy 
efficiency of residential furnace fans that are not captured by the 
users of such equipment. These benefits include externalities related 
to environmental protection and energy security that are not reflected 
in energy prices, such as reduced emissions of greenhouse gases.
    In addition, DOE has determined that this regulatory action is an 
``economically significant regulatory action'' under section 3(f)(1) of 
Executive Order 12866. Accordingly, section 6(a)(3) of the Executive 
Order requires that DOE prepare a regulatory impact analysis (RIA) on 
this rule and that the Office of Information and Regulatory Affairs 
(OIRA) in the Office of Management and Budget (OMB) review this rule. 
DOE presented to OIRA for review the draft rule and other documents 
prepared for this rulemaking, including the RIA, and has included these 
documents in the rulemaking record. The assessments prepared pursuant 
to Executive Order 12866 can be found in the technical support document 
for this rulemaking.
    DOE has also reviewed this regulation pursuant to Executive Order 
13563, issued on January 18, 2011 (76 FR 3281 (Jan. 21, 2011)). 
Executive Order 13563 is supplemental to and explicitly reaffirms the 
principles, structures, and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
agencies are required by Executive Order 13563 to: (1) Propose or adopt 
a regulation only upon a reasoned determination that its benefits 
justify its costs (recognizing that some benefits and costs are 
difficult to quantify); (2) tailor regulations to impose the least 
burden on society, consistent with obtaining regulatory objectives, 
taking into account, among other things, and to the extent practicable, 
the costs of cumulative regulations; (3) select, in choosing among 
alternative regulatory approaches, those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity); 
(4) to the extent feasible, specify performance objectives, rather than 
specifying the behavior or manner of compliance that regulated entities 
must adopt; and (5) identify and assess available alternatives to 
direct regulation, including providing economic incentives to encourage 
the desired behavior, such as user fees or marketable permits, or 
providing information upon which choices can be made by the public.
    DOE emphasizes as well that Executive Order 13563 requires agencies 
to use the best available techniques to quantify anticipated present 
and future benefits and costs as accurately as possible. In its 
guidance, the Office of Information and Regulatory Affairs has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. For the reasons stated in the preamble, 
DOE believes that this NOPR is consistent with these principles, 
including the requirement that, to the extent permitted by law, 
benefits justify costs and that net benefits are maximized.

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, 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://energy.gov/gc/office-general-counsel). DOE 
has prepared the following IRFA for the products that are the subject 
of this rulemaking.

[[Page 64133]]

1. Description and Estimated Number of Small Entities Regulated
a. Methodology for Estimating the Number of Small Entities
    For the manufacturers of residential furnace fans, the Small 
Business Administration (SBA) has set a size threshold, which defines 
those entities classified as ``small businesses'' for the purposes of 
the statute. DOE used the SBA's small business size standards to 
determine whether any small entities would be subject to the 
requirements of the rule. 65 FR 30836, 30848 (May 15, 2000), as amended 
at 65 FR 53533, 53544 (Sept. 5, 2000) and codified at 13 CFR part 121. 
The size standards are listed by NAICS code and industry description 
and are available at: www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf. Residential furnace fan 
manufacturing is classified under NAICS 333415, ``Air-Conditioning and 
Warm Air Heating Equipment and Commercial and Industrial Refrigeration 
Equipment Manufacturing.'' The SBA sets a threshold of 750 employees or 
less for an entity to be considered as a small business for this 
category.
    To estimate the number of companies that could be small business 
manufacturers of products covered by this rulemaking, DOE conducted a 
market survey using available public information to identify potential 
small manufacturers. DOE's research involved industry trade association 
membership directories (including AHRI), public databases (e.g., AHRI 
Directory,\82\ the SBA Database \83\), individual company Web sites, 
and market research tools (e.g., Hoovers reports) to create a list of 
companies that manufacture or sell products covered by this rulemaking. 
DOE also asked stakeholders and industry representatives if they were 
aware of any other small manufacturers during manufacturer interviews 
and at DOE public meetings. DOE reviewed publicly-available data and 
contacted select companies on its list, as necessary, to determine 
whether they met the SBA's definition of a small business manufacturer 
of covered residential furnace fans. DOE screened out companies that do 
not offer products covered by this rulemaking, do not meet the 
definition of a ``small business,'' or are foreign owned and operated.
---------------------------------------------------------------------------

    \82\ See www.ahridirectory.org/ahriDirectory/pages/home.aspx.
    \83\ See https://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
---------------------------------------------------------------------------

    DOE initially identified at least 40 potential manufacturers of 
residential furnace fan products sold in the U.S. DOE then determined 
that 26 were large manufacturers, manufacturers that are foreign owned 
and operated, or manufacturers that do not produce products covered by 
this rulemaking. DOE was able to determine that approximately 14 
manufacturers meet the SBA's definition of a ``small business'' and 
manufacture products covered by this rulemaking.
b. Manufacturer Participation
    Before issuing this NOPR, DOE attempted to contact all the small 
business manufacturers of residential furnace fans it had identified. 
One of the small businesses consented to being interviewed during the 
MIA interviews. DOE also obtained information about small business 
impacts while interviewing large manufacturers.
c. Industry Structure
    The 14 identified domestic manufacturers of residential furnace 
fans that qualify as small businesses under the SBA size standard 
account for a small fraction of industry shipments. Generally, 
manufacturers of furnaces are also manufacturers of furnace fan 
products. The market for domestic gas furnaces is almost completely 
held by seven large manufacturers, and small manufacturers in total 
account for only 1 percent of the market. These seven large 
manufacturers also control 97 percent of the market for central air 
conditioners. The market for manufactured home furnaces is primarily 
held by one large manufacturer. In contrast, the market for domestic 
oil furnaces is almost entirely comprised of small manufacturers.
d. Comparison Between Large and Small Entities
    The proposed standards for residential furnace fans could cause 
small manufacturers to be at a disadvantage relative to large 
manufacturers. One way in which small manufacturers could be at a 
disadvantage is that they may be disproportionately affected by product 
conversion costs. Product redesign, testing, and certification costs 
tend to be fixed and do not scale with sales volume. For each product 
model, small businesses must make investments in research and 
development to redesign their products, but because they have lower 
sales volumes, they must spread these costs across fewer units. In 
addition, because small manufacturers have fewer engineers than large 
manufacturers, they would need to allocate a greater portion of their 
available resources to meet a standard. Since engineers may need to 
spend more time redesigning and testing existing models as a result of 
the new standard, they may have less time to develop new products.
    Furthermore, smaller manufacturers may lack the purchasing power of 
larger manufacturers. For example, since motor suppliers give discounts 
to manufacturers based on the number of motors they purchase, larger 
manufacturers may have a pricing advantage because they have higher 
volume purchases. This purchasing power differential between high-
volume and low-volume orders applies to other furnace fan components as 
well, including the impeller fan blade, transformer, and capacitor.
2. Description and Estimate of Compliance Requirements
    Since the proposed standard for residential furnace fans could 
cause small manufacturers to be at a disadvantage relative to large 
manufacturers, DOE cannot certify that the proposed standards would not 
have a significant impact on a significant number of small businesses, 
and consequently, DOE has prepared this IRFA.
    At TSL 4, the level proposed in this notice, DOE estimates no 
capital conversion costs and product conversion costs of $0.014 million 
for a typical small manufacturer, compared to product conversion costs 
of $0.431 million for a typical large manufacturer. These costs and 
their impacts are described in detail below.
    To estimate how small manufacturers would be potentially impacted, 
DOE used the market share of small manufacturers to estimate the annual 
revenue, earnings before interest and tax (EBIT), and research and 
development (R&D) expense for a typical small manufacturer. DOE then 
compared these costs to the required product conversion costs at each 
TSL for both an average small manufacturer and an average large 
manufacturer (see Tables VI.1 and Table VI.2). In the following tables, 
TSL 4 represents the proposed standard.
    Although conversion costs can be considered substantial for all 
companies, the impacts could be relatively greater for a typical small 
manufacturer because of much lower production volumes and the 
relatively fixed nature of the R&D resources required per model. Small 
manufacturers also have less engineering staff and lower R&D budgets. 
As a result, the product conversion costs incurred by a small 
manufacturer would likely be a larger percentage of its revenues, R&D

[[Page 64134]]

expenses, and EBIT, than those for a large manufacturer. Table VI.1 
shows the product conversion costs for a typical large manufacturer 
versus those of a typical small manufacturer. Table VI.2 compares the 
total conversion costs of a typical large manufacturer as a percentage 
of annual R&D expense, annual revenue, and EBIT to those of a typical 
small manufacturer.

 Table VI.1--Comparison of a Typical Small and Large Residential Furnace
               Fan Manufacturer's Product Conversion Costs
------------------------------------------------------------------------
                                         Product            Product
                                     conversion costs   conversion costs
                                      for a typical      for a typical
                                          large              small
                                       manufacturer       manufacturer
                                     (2012$ millions)   (2012$ millions)
------------------------------------------------------------------------
Baseline..........................             $0.000             $0.000
TSL 1.............................              0.154              0.007
TSL 2.............................              0.378              0.012
TSL 3.............................              0.391              0.014
TSL 4.............................              0.431              0.014
TSL 5.............................              0.438              0.019
TSL 6.............................              1.261              0.045
------------------------------------------------------------------------


    Table VI.2--Comparison of a Typical Small and Large Residential Furnace Fan Manufacturer's Product Conversion Costs to Annual R&D Expense, Annual
                                                                    Revenue, and EBIT
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Large manufacturer                              Small manufacturer
                                                         -----------------------------------------------------------------------------------------------
                                                              Product         Product                         Product         Product
                                                            conversion      conversion        Product       conversion      conversion        Product
                                                            costs as a      costs as a      conversion      costs as a      costs as a      conversion
                                                          percentage  of  percentage  of    costs as a    percentage  of  percentage  of    costs as a
                                                            annual  R&D       annual      percentage  of    annual R&D        annual      percentage  of
                                                              expense         revenue      annual  EBIT       expense         revenue      annual  EBIT
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................             0.0             0.0             0.0             0.0             0.0             0.0
TSL 1...................................................            14.7             0.3             4.0           137.9             2.6            37.4
TSL 2...................................................            36.1             0.7             9.8           226.3             4.3            61.4
TSL 3...................................................            37.3             0.7            10.1           267.7             5.1            72.7
TSL 4...................................................            41.1             0.8            11.2           267.7             5.1            72.7
TSL 5...................................................            41.8             0.8            11.3           368.4             7.0           100.0
TSL 6...................................................           120.4             2.3            32.7           850.6            16.2           230.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on the results in Table VI.1 and Table VI.2, DOE understands 
that the potential product conversions costs faced by small 
manufacturers may be proportionally greater than those faced by larger 
manufacturers. However, the total cost at TSL 4 of approximately 
$14,000 per small manufacturer is still a small percentage of a small 
manufacturer's total annual revenues (5.1 percent) and product 
conversion costs would also only be a one-time expense. Furthermore, 
TSLs lower than the proposed TSL would not result in significantly 
lower product conversion costs for small manufacturers.
3. Duplication, Overlap, and Conflict With Other Rules and Regulations
    DOE is not aware of any rules or regulations that duplicate, 
overlap, or conflict with the rule being proposed today.
4. Significant Alternatives to the Rule
    The discussion above analyzes impacts on small businesses that 
would result from the other TSLs DOE considered. Although TSLs lower 
than the proposed TSLs would be expected to reduce the impacts on small 
entities, DOE is required by EPCA to establish standards that achieve 
the maximum improvement in energy efficiency that is technically 
feasible and economically justified, and result in a significant 
conservation of energy. Thus, DOE rejected the lower TSLs.
    In addition to the other TSLs being considered, the NOPR TSD 
includes a regulatory impact analysis in chapter 17. For residential 
furnace fans, this report discusses the following policy alternatives: 
(1) No standard, (2) consumer rebates, (3) consumer tax credits, (4) 
manufacturer tax credits, and (5) early replacement. DOE does not 
intend to consider these alternatives further because they are either 
not feasible to implement without authority and funding from Congress, 
or are expected to result in energy savings that are much smaller 
(ranging from less than 1 percent to approximately 33 percent) than 
those that would be achieved by the proposed energy conservation 
standards.
    DOE continues to seek input from small businesses that would be 
affected by this rulemaking and will consider comments received in the 
development of any final rule.

C. Review Under the Paperwork Reduction Act of 1995

1. Description of the Requirements
    DOE is developing regulations to implement reporting requirements 
for energy conservation, water conservation, and design standards, and 
to address other matters including compliance certification, prohibited 
actions, and enforcement procedures for covered consumer products and 
commercial and industrial equipment covered by EPCA, including furnace 
fans. DOE will send an information collection approval to OMB under 
Control Number 1910-1400.

[[Page 64135]]

2. Method of Collection
    DOE is proposing that respondents must submit electronic forms 
using DOE's on-line Compliance Certification Management System (CCMS) 
system.
3. Data
    The following are DOE estimates of the total annual reporting and 
recordkeeping burden imposed on manufacturers of residential furnace 
fans subject to the proposed certification provisions in this notice. 
These estimates take into account the time necessary to develop testing 
documentation, maintain all the documentation supporting the 
development of the certified rating for each basic model, complete the 
certification, and submit all required documents to DOE electronically.
    OMB Control Number: 1910-1400.
    Form Number: None.
    Type of Review: Regular submission.
    Affected Public: Manufacturers of residential furnace fans covered 
by this rulemaking.
    Estimated Number of Respondents: 37.
    Estimated Time per Response: Certification reports, 20 hours.
    Estimated Total Annual Burden Hours: 740.
    Estimated Total Annual Cost to the Manufacturers: $55,000 in 
recordkeeping/reporting costs.
    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.

D. Review Under the National Environmental Policy Act of 1969

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

E. Review Under Executive Order 13132

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (August 10, 
1999), imposes certain requirements on Federal 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 that it will follow in the 
development of such regulations. 65 FR 13735. DOE has examined this 
proposed rule and has tentatively determined that it would not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government. EPCA 
governs and prescribes Federal preemption of State regulations as to 
energy conservation for the products that are the subject of this 
proposed rule. States can petition DOE for exemption from such 
preemption to the extent, and based on criteria, set forth in EPCA. (42 
U.S.C. 6297) Therefore, Executive Order 13132 requires no further 
action.

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

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). 
For a proposed regulatory action likely to result in a rule that may 
cause the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year (adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a proposed ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at 
https://energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    Although this proposed rule, which proposes new energy conservation 
standards for residential furnace fans, does not contain a Federal 
intergovernmental mandate, it may require annual expenditures of $100 
million or more by the private sector. Specifically, the proposed rule 
would likely result in a final rule that could

[[Page 64136]]

require expenditures of $100 million or more, including: (1) Investment 
in research and development and in capital expenditures by residential 
furnace fans manufacturers in the years between the final rule and the 
compliance date for the new standards, and (2) incremental additional 
expenditures by consumers to purchase higher-efficiency residential 
furnace fans, starting at the compliance date for the applicable 
standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. 2 U.S.C. 1532(c). The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of the NOPR and the ``Regulatory 
Impact Analysis'' section of the TSD for this proposed rule respond to 
those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. 2 U.S.C. 1535(a). DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6295(f) 
and (o), this proposed rule would establish energy conservation 
standards for residential furnace fans that are designed to achieve the 
maximum improvement in energy efficiency that DOE has determined to be 
both technologically feasible and economically justified. A full 
discussion of the alternatives considered by DOE is presented in the 
``Regulatory Impact Analysis'' section of the TSD for this proposed 
rule.

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. 
This rule would not have any impact on the autonomy or integrity of the 
family as an institution. Accordingly, DOE has concluded that it is not 
necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

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

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 Federal agencies to review 
most disseminations of information to the public under information 
quality guidelines established by each agency pursuant to general 
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 
(Oct. 7, 2002). DOE has reviewed this NOPR under the OMB and DOE 
guidelines and has concluded that it is consistent with applicable 
policies in those guidelines.

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 OIRA 
at OMB, a Statement of Energy Effects for any proposed significant 
energy action. A ``significant energy action'' is defined as any action 
by an agency that promulgates or is expected to lead to promulgation of 
a final rule, and that: (1) Is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
sets forth proposed energy conservation standards for residential 
furnace fans, is not a significant energy action because the proposed 
standards are not likely to have a significant adverse effect on the 
supply, distribution, or use of energy, nor has it been designated as 
such by the Administrator at OIRA. Accordingly, DOE has not prepared a 
Statement of Energy Effects on this proposed rule.

L. Review Under the Information Quality Bulletin for Peer Review

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (OSTP), issued its Final Information 
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14, 
2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have or does have a clear and 
substantial impact on important public policies or private sector 
decisions.'' Id. at 2667.
    In response to OMB's Bulletin, DOE conducted formal in-progress 
peer reviews of the energy conservation standards development process 
and analyses and has prepared a Peer Review Report pertaining to the 
energy conservation standards rulemaking analyses. Generation of this 
report involved a rigorous, formal, and documented evaluation using 
objective criteria and qualified and independent reviewers to make a 
judgment as to the technical/scientific/business merit, the actual or 
anticipated results, and the productivity and management effectiveness 
of programs and/or projects. The ``Energy Conservation Standards 
Rulemaking Peer Review Report'' dated February 2007 has been 
disseminated and is available at the following Web site: 
www1.eere.energy.gov/buildings/appliance_standards/peer_review.html.

VII. Public Participation

A. Attendance at the Public Meeting

    The time, date, and location of the public meeting are listed in 
the DATES and ADDRESSES sections at the beginning of this notice. If 
you plan to attend the public meeting, please notify Ms. Brenda Edwards 
at (202) 586-2945 or Brenda.Edwards@ee.doe.gov. As explained in the 
ADDRESSES section, foreign nationals visiting DOE

[[Page 64137]]

Headquarters are subject to advance security screening procedures. Any 
foreign national wishing to participate in the meeting should advise 
DOE of this fact as soon as possible by contacting Ms. Brenda Edwards 
to initiate the necessary procedures.
    In addition, you can attend the public meeting via webinar. Webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants will be 
published on DOE's Web site at: https://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/42. Participants are 
responsible for ensuring their systems are compatible with the webinar 
software.

B. Procedure for Submitting Requests To Speak and Prepared General 
Statements for Distribution

    Any person who has an interest in the topics addressed in this 
notice, or who is representative of a group or class of persons that 
has an interest in these issues, may request an opportunity to make an 
oral presentation at the public meeting. Such persons may hand-deliver 
requests to speak to the address shown in the ADDRESSES section at the 
beginning of this notice between 9:00 a.m. and 4:00 p.m., Monday 
through Friday, except Federal holidays. Requests may also be sent by 
mail or email to: Ms. Brenda Edwards, U.S. Department of Energy, 
Building Technologies Program, Mailstop EE-2J, 1000 Independence Avenue 
SW., Washington, DC 20585-0121, or Brenda.Edwards@ee.doe.gov. Persons 
who wish to speak should include with their request a computer diskette 
or CD-ROM in WordPerfect, Microsoft Word, PDF, or text (ASCII) file 
format that briefly describes the nature of their interest in this 
rulemaking and the topics they wish to discuss. Such persons should 
also provide a daytime telephone number where they can be reached.
    DOE requests persons scheduled to make an oral presentation to 
submit an advance copy of their statements at least one week before the 
public meeting. DOE may permit persons who cannot supply an advance 
copy of their statement to participate, if those persons have made 
advance alternative arrangements with the Building Technologies 
Program. As necessary, requests to give an oral presentation should ask 
for such alternative arrangements.

C. Conduct of the Public Meeting

    DOE will designate a DOE official to preside at the public meeting 
and may also use a professional facilitator to aid discussion. The 
meeting will not be a judicial or evidentiary-type public hearing, but 
DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 
6306). A court reporter will be present to record the proceedings and 
prepare a transcript. DOE reserves the right to schedule the order of 
presentations and to establish the procedures governing the conduct of 
the public meeting. There shall not be discussion of proprietary 
information, costs or prices, market share, or other commercial matters 
regulated by U.S. anti-trust laws. After the public meeting, interested 
parties may submit further comments on the proceedings, as well as on 
any aspect of the rulemaking, until the end of the comment period.
    The public meeting will be conducted in an informal, conference 
style. DOE will present summaries of comments received before the 
public meeting, allow time for prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this rulemaking. Each participant will be allowed 
to make a general statement (within time limits determined by DOE), 
before the discussion of specific topics. DOE will allow, as time 
permits, other participants to comment briefly on any general 
statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly and comment on 
statements made by others. Participants should be prepared to answer 
questions by DOE and by other participants concerning these issues. DOE 
representatives may also ask questions of participants concerning other 
matters relevant to this rulemaking. The official conducting the public 
meeting will accept additional comments or questions from those 
attending, as time permits. The presiding official will announce any 
further procedural rules or modification of the above procedures that 
may be needed for the proper conduct of the public meeting.
    A transcript of the public meeting will be included in the docket, 
which can be viewed as described in the Docket section at the beginning 
of this notice and will be accessible on the DOE Web site. In addition, 
any person may buy a copy of the transcript from the transcribing 
reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this notice.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov Web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (CBI)). Comments submitted through 
www.regulations.gov cannot be claimed as CBI. Comments received through 
the Web site will waive any CBI claims for the information submitted. 
For information on submitting CBI, see the Confidential Business 
Information section below.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email, hand delivery/courier, or mail. 
Comments and documents submitted via email, hand delivery/courier, or 
mail also will be posted to www.regulations.gov. If you

[[Page 64138]]

do not want your personal contact information to be publicly viewable, 
do not include it in your comment or any accompanying documents. 
Instead, provide your contact information in a cover letter. Include 
your first and last names, email address, telephone number, and 
optional mailing address. The cover letter will not be publicly 
viewable as long as it does not include any comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. If you submit via mail or hand 
delivery/courier, please provide all items on a CD, if feasible, in 
which case it is not necessary to submit printed copies. No 
telefacsimiles (faxes) will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email, postal mail, or hand delivery/courier two well-marked copies: 
One copy of the document marked ``confidential'' including all the 
information believed to be confidential, and one copy of the document 
marked ``non-confidential'' with the information believed to be 
confidential deleted. Submit these documents via email or on a CD, if 
feasible. DOE will make its own determination about the confidential 
status of the information and treat it according to its determination.
    Factors of interest to DOE when evaluating requests to treat 
submitted information as confidential include: (1) A description of the 
items; (2) whether and why such items are customarily treated as 
confidential within the industry; (3) whether the information is 
generally known by or available from other sources; (4) whether the 
information has previously been made available to others without 
obligation concerning its confidentiality; (5) an explanation of the 
competitive injury to the submitting person which would result from 
public disclosure; (6) when such information might lose its 
confidential character due to the passage of time; and (7) why 
disclosure of the information would be contrary to the public interest.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    1. Additional FER value data that are generated using the DOE 
residential furnace fans test procedure proposed in the April 2, 2013 
SNOPR (78 FR 19606), as well as the product class, measured airflow 
capacity in the maximum airflow control setting, and technology options 
of the model for which each FER value is calculated.
    2. DOE's methodology for accounting for the relationship between 
FER and airflow capacity, and the resulting efficiency levels that are 
represented by equations for FER as a function of airflow capacity. 
(See Chapter 5 of the NOPR TSD)
    3. The reasonableness of the values that DOE used to characterize 
the rebound effect with higher-efficiency residential furnace fans.
    4. DOE's estimate of the base-case efficiency distribution of 
residential furnace fans in 2018.
    5. The long-term market penetration of higher-efficiency 
residential furnace fans.
    6. DOE performed physical teardowns on a selection of units 
currently on the market. From the bills of materials and cost model 
developed using this teardown data, DOE calculated an estimate of the 
manufacturer production cost for each covered product class in the 
engineering analysis. DOE also developed estimates of the costs for 
components that affect energy consumption, namely those it considered 
as design options. These estimates were obtained from a combination of 
sources, including publicly available prices from vendors and 
confidential estimates provided by manufacturers. These price data are 
aggregated for use in the engineering analysis. DOE seeks comment and 
data regarding the manufacturer production costs for furnace fan 
equipment and components and the technological feasibility of applying 
technologies identified in the engineering analysis to meet the 
proposed standards.
    7. To estimate the impact on shipments of the price increase for 
the considered efficiency levels, DOE used the relative price 
elasticity approach that was applied in the 2011 energy conservation 
standards rulemaking for residential furnaces. DOE welcomes stakeholder 
input and estimates on the effect of amended standards on future 
furnace fan equipment shipments. DOE also welcomes input and data on 
the demand elasticity estimates used in the analysis.
    8. DOE requests comment on whether there are features or attributes 
of the more energy-efficient furnace fans that manufacturers would 
produce to meet the standards in this proposed rule that might affect 
how they would be used by consumers. DOE requests comment specifically 
on how any such effects should be weighed in the choice of standards 
for furnace fans for the final rule.
    9. For this rulemaking, DOE analyzed the effects of this proposal 
assuming that the furnace fans would be available to purchase for 30 
years, and it undertook a sensitivity analysis using 9 years rather 
than 30 years of product shipments. The choice of a 30-year period of 
shipments is consistent with the DOE analysis for other products and 
commercial equipment. The choice of a 9-year period is a proxy for the 
timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards. We are seeking input, information and data on whether there 
are ways to refine the analytic timeline further.
    10. DOE defines lifetime as the age at which residential furnace 
fan equipment is retired from service. DOE modeled furnace fan lifetime 
based on the distribution of furnace lifetimes developed for the recent 
energy conservation standards rulemaking for residential furnaces. DOE 
welcomes further input on the average equipment lifetimes for the LCC 
analysis and NIA.
    11. DOE solicits comment on the application of the new SCC values 
used to determine the social benefits of CO2 emissions 
reductions over the rulemaking analysis period. The rulemaking analysis 
period covers from 2017 to 2046 plus an additional 50 years to account 
for the lifetime operation of the equipment purchased in that period. 
In particular, the agency solicits comment on its derivation of SCC 
values after 2050, where the agency applied the average annual growth 
rate

[[Page 64139]]

of the SCC estimates in 2040-2050 associated with each of the four sets 
of values.
    12. The agency also seeks input on the cumulative regulatory burden 
that may be imposed on industry either from recently implemented 
rulemakings for these products or other rulemakings that affect the 
same industry.

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking.

List of Subjects

10 CFR Part 429

    Administrative practice and procedure, Commercial equipment, 
Confidential business information, Energy conservation, Household 
appliances, Imports, Reporting and recordkeeping requirements.

10 CFR Part 430

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Imports, 
Intergovernmental relations, Small businesses.

    Issued in Washington, DC, on September 30, 2013.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.

    For the reasons stated in the preamble, DOE proposes to amend parts 
429 and 430 of chapter II, subchapter D, of title 10 of the Code of 
Federal Regulations, as set forth below:

PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER 
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 429 continues to read as follows:

    Authority:  42 U.S.C. 6291-6317.

0
2. Section 429.12 is amended by:
0
a. Amending paragraph (d) table, first column, second row (i.e., for 
products with a submission deadline of May 1st) by removing the word 
``and'' and by adding ``and Residential furnace fans'' at the end of 
the listed products.
0
b. Removing in paragraph (b)(13) ``429.54'' and adding in its place 
429.58''; and
0
c. Adding reserved paragraph (i)(5) and adding paragraph (i)(6).
    The addition reads as follows:


Sec.  429.12  General requirements applicable to certification reports.

* * * * *
    (i) * * *
    (5) [Reserved]
    (6) Residential furnace fans, [date five years after publication of 
the final rule].
0
3. Section 429.58 is added to read as follows:


Sec.  429.58  Furnace fans.

    (a) [Reserved]
    (b) Certification reports. (1) The requirements of Sec.  429.12 of 
this part are applicable to residential furnace fans; and
    (2) Pursuant to Sec.  429.12(b)(13) of this part, a certification 
report shall include the following public product-specific information: 
The fan energy rating (FER) in watts per thousand cubic feet per minute 
(W/1000 cfm); the calculated maximum airflow at the reference system 
external static pressure (ESP) in cubic feet per minute (cfm); the 
control system configuration for achieving the heating and constant-
circulation airflow-control settings required for determining FER as 
specified in the furnace fan test procedure (10 CFR part 430, subpart 
B, appendix AA); the measured steady-state gas, oil, or electric heat 
input rate (QIN) in the heating setting required for 
determining FER; and for modular blowers, the manufacturer and model 
number of the electric heat resistance kit with which it is equipped 
for certification testing.

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
4. The authority