Energy Conservation Program for Consumer Products: Energy Conservation Standards for Residential Furnace Fans, 38129-38211 [2014-15387]

Download as PDF Vol. 79 Thursday, No. 128 July 3, 2014 Part II Department of Energy mstockstill on DSK4VPTVN1PROD with RULES2 10 CFR Parts 429 and 430 Energy Conservation Program for Consumer Products: Energy Conservation Standards for Residential Furnace Fans; Final Rule VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\03JYR2.SGM 03JYR2 38130 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations FOR FURTHER INFORMATION CONTACT: 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 Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Final rule. AGENCY: 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 final rule, DOE is adopting new energy conservation standards for residential furnace fans. DOE has determined that the prescribed energy conservation standards for these products would result in significant conservation of energy, and are technologically feasible and economically justified. DATES: The effective date of this rule is September 2, 2014. Compliance with the prescribed standards established for residential furnace fans in this final rule is required on and after July 3, 2019. ADDRESSES: The docket for this rulemaking, which includes Federal Register notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at www.regulations.gov. All documents in the docket are listed in the www.regulations.gov index. However, 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. The www.regulations.gov Web page contains simple instructions on how to access all documents, including public comments, in the docket. For further information on how to review the docket, contact Ms. Brenda Edwards at (202) 586–2945 or by email: Brenda.Edwards@ee.doe.gov. mstockstill on DSK4VPTVN1PROD with RULES2 SUMMARY: VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 Mr. Ron Majette, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–5B, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone: (202) 586–7935. Email: Ronald.Majette@ee.doe.gov. Mr. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC–71, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone: (202) 586–9507. Email: Eric.Stas@hq.doe.gov. SUPPLEMENTARY INFORMATION: Table of Contents I. Summary of the Final Rule A. Benefits and Costs to Consumers B. Impact on Manufacturers C. National Benefits and Costs D. Conclusion II. Introduction A. Authority B. Background 1. Current Standards 2. History of Standards Rulemaking for Residential Furnace Fans III. General Discussion A. Test Procedures 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 a. Economic Impact on Manufacturers and Commercial Customers b. Savings in Operating Costs Compared To Increase in Price (Life-Cycle Costs) c. Energy Savings d. Lessening of Utility or Performance of Equipment e. Impact of Any Lessening of Competition f. Need of the Nation To Conserve Energy g. Other Factors 2. Rebuttable Presumption 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) PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 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 f. Other Components D. Markups Analysis E. Energy Use Analysis F. Life-Cycle Cost and Payback Period Analysis 1. Installed Cost 2. Operating Costs 3. Furnace Fan Lifetime 4. Discount Rates 5. Compliance Date 6. Base-Case Efficiency Distribution 7. 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. Conversion Costs b. Cumulative Regulatory Burden c. Scope of MIA Coverage d. Markups Analysis e. Employment Impacts f. Consumer Utility g. Small Businesses K. Emissions Analysis L. Monetizing Carbon Dioxide and Other Emissions Impacts 1. Social Cost of Carbon a. Monetizing Carbon Dioxide Emissions b. Development of Social Cost of Carbon Values c. Current Approach and Key Assumptions M. Utility Impact Analysis N. Employment Impact Analysis O. Comments on Proposed Standards 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. Conclusions 1. Benefits and Burdens of Trial Standard Levels Considered for Residential Furnace Fans E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 2. Summary of Benefits and Costs (Annualized) of Today’s 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 D. Review Under the National Environmental Policy Act of 1969 E. Review Under Executive Order 13132 F. Review Under Executive Order 12988 G. Review Under the Unfunded Mandates Reform Act of 1995 H. Review Under the Treasury and General Government Appropriations Act, 1999 I. Review Under Executive Order 12630 J. Review Under the Treasury and General Government Appropriations Act, 2001 K. Review Under Executive Order 13211 L. Review Under the Information Quality Bulletin for Peer Review M. Congressional Notification VII. Approval of the Office of the Secretary I. Summary of the Final Rule Title III, Part B 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. Pursuant to EPCA, any new or amended energy conservation standard that DOE prescribes for certain products, such as furnace fans, must be designed to achieve the maximum improvement in energy efficiency that is 38131 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)). In accordance with these and other statutory provisions discussed in this notice, DOE proposes amended energy conservation standards for furnace fans. The proposed standards shall have a fan energy rating (FER) value that meets or is less than the values shown in Table I.1. These standards would apply to all products listed in Table I.1 and manufactured in, or imported into, the United States on or after manufactured on and after July 3, 2019. TABLE I.1.—ENERGY CONSERVATION STANDARDS FOR COVERED RESIDENTIAL FURNACE FANS Product class FER* (watts/cfm) Percent increase over baseline (percent) 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) ......................................... Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan (MH–NWG–NC) .................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH–NWG–C) ............................... Mobile Home Electric Furnace/Modular Blower Fan (MH–EF/MB) .................................................... Mobile Home Non-Weatherized Oil Furnace Fan (MH–NWO) ........................................................... Mobile Home Weatherized Gas Furnace Fan (MH–WG) ................................................................... FER = 0.044 x QMax + 182 FER = 0.044 x QMax + 195 FER = 0.044 x QMax + 199 FER = 0.071 x QMax + 382 FER = 0.044 x QMax + 165 FER = 0.071 x QMax + 222 FER = 0.071 x QMax + 240 FER = 0.044 x QMax + 101 Reserved ........................... Reserved ........................... 46 46 46 12 46 12 12 46 ........................ ........................ * QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the final DOE test procedure at 10 CFR part 430, subpart B, appendix AA. A. Benefits and Costs to Consumers Table I.2 presents DOE’s evaluation of the economic impacts of today’s standards on consumers of residential furnace fans, as measured by the average life-cycle cost (LCC) savings and the median payback period (PBP). The average LCC savings are positive for all product classes. TABLE I.2—IMPACTS OF ENERGY CONSERVATION STANDARDS ON CONSUMERS OF RESIDENTIAL FURNACE FANS Average LCC savings (2013$) Product class Non-Weatherized, Non-Condensing Gas Furnace Fan .......................................................................................... Non-weatherized, Condensing Gas Furnace Fan ................................................................................................... Weatherized Non-Condensing Gas Furnace Fan ................................................................................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ............................................................................................ Non-weatherized Electric Furnace/Modular Blower Fan ......................................................................................... Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan .................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ........................................................................... Mobile Home Electric Furnace/Modular Blower Fan ............................................................................................... mstockstill on DSK4VPTVN1PROD with RULES2 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 (2014 to 2048). Using a real discount rate of 7.8 percent, DOE estimates that the INPV for manufacturers of residential furnace fans is $349.6 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 million.1 Under today’s standards, DOE expects that manufacturers may lose up to 16.9 percent of their INPV, which is approximately $59.0 million. Total conversion costs incurred by industry prior to the compliance date are expected to reach $40.6 million. 1 DOE calculated a present value in 2014; all monetary values in this document are expressed in 2013 dollars unless explicitly stated otherwise. PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 Median payback period (years) $506 $341 $447 $46 $204 $36 $35 $85 5.4 5.8 4.4 1.7 3.2 2.7 2.3 4.1 C. National Benefits and Costs 2 DOE’s analyses indicate that today’s standards would save a significant amount of energy. The lifetime energy savings for residential furnace fans purchased in the 30-year period that begins in the year of compliance with the standards (2019–2048) amount to 2 All monetary values in this section are expressed in 2013$ and are discounted to 2014. E:\FR\FM\03JYR2.SGM 03JYR2 38132 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 3.99 quadrillion Btu (quads 3). The estimated annual energy savings in 2030 (0.07 quads) are equivalent to 0.3 percent of total U.S. residential energy use in 2012. The cumulative net present value (NPV) of total consumer costs and savings of today’s standards for residential furnace fans ranges from $10,024 million (at a 7-percent discount rate) to $28,810 million (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. In addition, today’s standards are expected to have significant environmental benefits. The energy savings would result in cumulative emission reductions of approximately 180.6 million metric tons (Mt) 4 of carbon dioxide (CO2), 695.0 thousand tons of methane (CH4), 235.7 thousand tons of sulfur dioxide (SO2), 84.0 thousand tons of nitrogen oxides (NOX), 6.2 thousand tons of nitrous oxide (N2O), and 0.4 tons of mercury (Hg).5 The cumulative reduction in CO2 emissions through 2030 amounts to 34 million Mt. The value of the CO2 reductions is calculated using a range of values per metric ton of CO2 (otherwise known as the Social Cost of Carbon, or SCC) developed by a recent Federal interagency process.6 The derivation of the SCC values is discussed in section IV.L. Using discount rates appropriate for each set of SCC values, DOE estimates that the net present monetary value of the CO2 emissions reductions is between 1,134 million to 16,799 million. DOE also estimates that the net present monetary value of the NOX emissions reductions is $53.1 million at a 7-percent discount rate, and $110.8 million at a 3-percent discount rate.7 Table I.3 summarizes the national economic costs and benefits expected to result from today’s standards for residential furnace fans. TABLE I.3—SUMMARY OF NATIONAL ECONOMIC BENEFITS AND COSTS OF RESIDENTIAL FURNACE FANS ENERGY CONSERVATION STANDARDS* Present value million 2013 $ Category Discount rate (percent) Benefits Consumer Operating Cost Savings ....................................................................................................................... CO2 Reduction Monetized Value ($12.0/t case)** ................................................................................................ CO2 Reduction Monetized Value ($40.5/t case)** ................................................................................................ CO2 Reduction Monetized Value ($62.4/t case)** ................................................................................................ CO2 Reduction Monetized Value ($119/t case)** ................................................................................................. NOX Reduction Monetized Value (at $2,684/ton)** .............................................................................................. Total Benefits† ....................................................................................................................................................... 13,409 34,999 1,134 5,432 8,694 16,799 53 111 18,894 40,542 7 3 5 3 2.5 3 7 3 7 3 Costs Consumer Incremental Installed Costs ................................................................................................................. 3,385 6,189 7 3 15,509 34,353 7 3 Net Benefits Including CO2 and NOX† Reduction Monetized Value ......................................................................................... * This table presents the costs and benefits associated with residential furnace fans shipped in 2019–2048. These results include benefits to consumers which accrue after 2048 from the products purchased in 2019–2048. The results account for the incremental variable and fixed costs incurred by manufacturers due to the standard, some of which may be incurred in preparation for the rule. ** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values used in DOE’s analysis. † Total Benefits for both the 3% and 7% cases are derived using the series corresponding to average SCC with 3-percent discount rate. mstockstill on DSK4VPTVN1PROD with RULES2 The benefits and costs of today’s 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 operating the product that meets the new or amended standard (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.8 3 A quad is equal to 1015 British thermal units (Btu). 4 A metric ton is equivalent to 1.1 short tons. Results for NOX and Hg are presented in short tons. 5 DOE calculated emissions reductions relative to the Annual Energy Outlook 2013 (AEO 2013) Reference case, which generally represents current legislation and environmental regulations for which implementing regulations were available as of December 31, 2012. 6 Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; revised November 2013) (Available at: https://www.whitehouse.gov/sites/default/files/omb/ assets/inforeg/technical-update-social-cost-ofcarbon-for-regulator-impact-analysis.pdf). 7 DOE is investigating valuation of avoided Hg and SO2 emissions. 8 DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized values. First, DOE calculated a present value in 2014, the year used for discounting the NPV of total consumer costs and savings, for the time-series of costs and benefits using discount rates of three and seven percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates, as shown in Table I.4. From the present value, DOE VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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, 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 all future climate-related impacts resulting from the emission of one metric ton of carbon dioxide in each year. These impacts continue well beyond 2100. Estimates of annualized benefits and costs of today’s standards are shown in Table I.4. The results under the primary estimate are as follows. Using a 7percent discount rate for benefits and costs other than CO2 reduction (for which DOE used a 3-percent discount rate along with the SCC series that has a value of $40.5/t in 2015), the cost of the residential furnace fans standards in today’s final rule is $358 million per year in increased equipment costs, while the benefits are $1416 million per 38133 year in reduced equipment operating costs, $312 million in CO2 reductions, and $5.61 million in reduced NOX emissions. In this case, the net benefit amounts to $1,376 million per year. Using a 3-percent discount rate for all benefits and costs and the SCC series that has a value of $40.5/t in 2015, the cost of the residential furnace fans standards in today’s rule is $355 million per year in increased equipment costs, while the benefits are $2010 million per year in reduced operating costs, $312 million in CO2 reductions, and $6.36 million in reduced NOX emissions. In this case, the net benefit amounts to $1,973 million per year. TABLE I.4—ANNUALIZED BENEFITS AND COSTS OF STANDARDS FOR RESIDENTIAL FURNACE FANS Primary estimate * Discount rate Low net benefits estimate * High net benefits estimate * million 2013$/year Benefits Consumer Operating Cost Savings. CO2 Reduction (at $12.0/t case) **. CO2 Reduction (at $40.5/t case) **. CO2 Reduction (at $62.4/t case) **. CO2 Reduction (at $119/t case) **. NOX Reduction (at $2,684/ ton) **. Total Benefits † .................. 7% ..................................... 3% ..................................... 5% ..................................... 1416 .................................. 2010 .................................. 90 ...................................... 1167 .................................. 1626 .................................. 77 ...................................... 1718 2467 108 3% ..................................... 312 .................................... 268 .................................... 377 2.5% .................................. 459 .................................... 393 .................................... 555 3% ..................................... 965 .................................... 828 .................................... 1166 7% 3% 7% 7% 3% 3% 5.61 ................................... 6.36 ................................... 1,512 to 2,387 ................... 1,734 ................................. 2,106 to 2,981 ................... 2,328 ................................. 4.80 ................................... 5.35 ................................... 1,249 to 2,000 ................... 1,439 ................................. 1,708 to 2,459 ................... 1,899 ................................. 6.82 7.86 1,833 to 2,891 2,102 2,583 to 3,641 2,852 314 .................................... 304 .................................... 410 419 935 to 1,685 ...................... 1,125 ................................. 1,404 to 2,155 ................... 1,595 ................................. 1,423 to 2,481 1,692 2,164 to 3,222 2,433 ..................................... ..................................... plus CO2 range ........... ..................................... plus CO2 range ........... ..................................... Costs Consumer Incremental Product Costs. 7% ..................................... 3% ..................................... 358 .................................... 355 .................................... Net Benefits mstockstill on DSK4VPTVN1PROD with RULES2 Total † ......................... 7% 7% 3% 3% plus CO2 range ........... ..................................... plus CO2 range ........... ..................................... 1,154 1,376 1,750 1,973 to 2,029 ................... ................................. to 2,625 ................... ................................. * 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 from 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 2013 Reference case, Low Estimate, and High Estimate, respectively. In addition, incremental product costs reflect a flat rate for projected product price trends in the Primary Estimate, a slightly increasing rate for projected product price trends in the Low Benefits Estimate, and a slightly declining rate for projected product price trends in the High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F. ** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC time series used by DOE incorporate an escalation factor. The value for NOX is the average of the low and high values used in DOE’s analysis. † Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the average SCC with a 3% discount rate. 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. then calculated the fixed annual payment over a 30year period (2019 through 2048) that yields the same present value. The fixed annual payment is VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 the annualized value. Although DOE calculated annualized values, this does not imply that the time-series of cost and benefits from which the PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 annualized values were determined is a steady stream of payments. E:\FR\FM\03JYR2.SGM 03JYR2 38134 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations D. Conclusion Based on the analyses culminating in this final rule, DOE found the benefits to the nation of the standards (energy savings, consumer LCC savings, positive NPV of consumer benefit, and emission reductions) outweigh the burdens (loss of INPV and LCC increases for some users of these products). DOE has concluded that the standards in today’s final rule represent the maximum improvement in energy efficiency that is technologically feasible and economically justified, and would result in significant conservation of energy. II. Introduction The following section briefly discusses the statutory authority underlying today’s final rule, as well as some of the relevant historical background related to the establishment of standards for residential furnace fans. mstockstill on DSK4VPTVN1PROD with RULES2 A. Authority Title III, Part B 9 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’’),10 which includes the types of residential furnace fans that are the subject of this rulemaking. (42 U.S.C. 6295(f)(4)(D)) Pursuant to EPCA, DOE’s energy conservation program for covered products consists of 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 ‘‘electricity used for purposes of circulating air through duct work’’ (which DOE has referred to in shorthand as residential ‘‘furnace fans’’). (42 U.S.C. 6295(f)(4)(D)) DOE is also required by EPCA 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 9 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A. 10 All references to EPCA in this document refer to the statute as amended through the American Energy Manufacturing Technical Corrections Act (AEMTCA), Public Law 112–210 (Dec. 18, 2012). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 an energy conservation standard. (42 U.S.C. 6295(o)(A)(3) 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)) The DOE test procedures for residential furnace fans currently appear at title 10 of the Code of Federal Regulations (CFR) part 430, subpart B, appendix AA. DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including furnace fans. As indicated above, any 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 standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)–(B)) In deciding whether a standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven factors: (1) The economic impact of the standard on 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 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 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 of 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 for a group of products, DOE must consider such factors as the utility to the consumer of such a feature and other factors DOE deems appropriate. Id. Any rule prescribing such a standard must include an explanation of the basis on which such higher or lower level was established. (42 U.S.C. 6295(q)(2)) E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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. 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 furnace fan energy rating metric does not account for the electrical energy consumption in standby mode and off mode, because energy consumption in those modes is being fully accounted for in the DOE energy conservation standards for residential furnaces and residential central air conditioners (CAC) and heat pumps (HP). 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)) B. Background 1. Current Standards Currently, no Federal energy conservation standards apply to residential furnace fans. mstockstill on DSK4VPTVN1PROD with RULES2 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 electricallypowered device applied to residential central heating, ventilation, and airconditioning (HVAC) systems for the VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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 (NOPR) 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).11 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 11 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). PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 38135 Refrigeration Institute (AHRI) and other furnace fan manufacturers to rate the electrical energy consumption of furnace fans. DOE 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. DOE published in the Federal Register a final rule on January 3, 2014, which contained the final test procedure for residential furnace fans. 79 FR 500. 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. DOE published a NOPR in the Federal Register and made available an accompanying NOPR TSD on October 25, 2013. 78 FR 64068. In that document, DOE requested comment on the following matters discussed in the TSD: (1) Additional FER values; (2) the methodology for accounting for the relationship between FER and airflow capacity; (3) the reasonableness of the values that DOE used to characterize the rebound effect with high-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) data regarding manufacturer product costs for furnace fan equipment and components; (7) the effect of standards on future furnace fan equipment shipments; (8) whether there are features or attributes of the more energyefficient furnace fans that manufacturers would produce to meet the standards in the proposed rule that might affect how they would be used by consumers; (9) data that would refine the analytical timeline; (10) input on average equipment lifetimes; (11) the new SCC values used to determine the social benefits of CO2 emissions reductions over the rulemaking analysis period; and (12) input on the cumulative regulatory burden. Id. DOE also invited written comments on these subjects, as well as any other relevant issues. A PDF copy of the NOPR TSD is available at https://www.regulations.gov/ #!documentDetail;D=EERE-2010-BTSTD-0011-0068. The NOPR TSD provided an overview of the activities DOE undertook in developing proposed energy E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38136 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations conservation standards for residential furnace fans, and discussed the comments DOE received in response to the Preliminary Analysis. 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 developed relationships that show the manufacturer’s cost of achieving increased efficiency; • A markups analysis developed distribution channel markups that relate the manufacturer production cost (MPC) to the cost to the consumer; • An energy use analysis estimated the annual energy use of furnace fans at various potential standard levels; • 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-energyefficient products through lower operating costs; • 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; • A manufacturer impact analysis estimated the financial impact of new energy conservation standards on manufacturers and calculated impacts on competition, employment, and manufacturing capacity; • A consumer subgroup analysis evaluated variations in customer characteristics that might cause a standard to affect particular consumer sub-populations (such as low-income VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 households) differently than the overall population; • An emissions analysis assessed the effects of the considered standards on emissions of carbon dioxide (CO2), sulfur dioxide (SO2) nitrogen oxides (NOX), mercury (Hg), nitrous oxide (N20), and methane (CH4); • An emissions monetization estimated the economic value of reductions in CO2 and NOX emissions from the considered standards; • A utility impact analysis estimated selected effects of the considered standards on electric utilities; • An employment impact analysis assessed the impacts of the considered standards on national employment; and • A regulatory impact analysis (RIA) evaluated alternatives to amended energy conservation standards in order to assess whether such alternatives could achieve substantially the same regulatory goal at a lower cost. The NOPR public meeting took place on December 3, 2013. At this meeting, DOE presented the methodologies and results of the analyses set forth in the NOPR TSD. The numerous comments received since publication of the October 2013 NOPR, including those received at the NOPR public meeting, have contributed to DOE’s resolution of the issues raised by interested parties. The submitted comments include a comment from the American Council for an Energy-Efficiency Economy (ACEEE); a joint comment from the American Fuel and Petrochemical Manufacturers (AFPM), the U.S. Chamber of Commerce (the Chamber), the Council of Industrial Boiler Owners (CIBO), the American Forest and Paper Association (AF&PA), and the American Petroleum Institute (API); a comment from the American Gas Association (AGA); a comment from the Air-Conditioning, Heating, and Refrigeration Institute (AHRI); a comment from the American Public Gas Association (APGA); a joint comment from the Appliance Standards Awareness Project (ASAP), Alliance to Save Energy (ASE), National Consumer Law Center (NCLC) and the Natural Resources Defense Council (NRDC); 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 (SCGC), and San Diego Gas and Electric (SDGE); a comment from the Cato Institute; a comment from China WTO (WTO); a comment from Earthjustice; a comment from Edison Electric Institute (EEI); a comment from the George Washington University Regulatory Studies Center; a comment from Goodman Global, Inc. (Goodman); PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 a comment from Heating, AirConditioning and Refrigeration Distributers International (HARDI); a comment from Johnson Controls; a comment from Laclede Gas Company (Laclede); a comment from a comment from Lennox International, Inc. (Lennox); a comment from the Mercatus Center at George Mason University; a comment from Morrison Products, Inc. (Morrison); a comment from Mortex Product, Inc. (Mortex); a comment from the National Association of Manufacturers (NAM); a joint comment from the Northwest Energy Efficiency Alliance (NEEA) and the Northwest Power and Conservation Council (NPCC); a comment from the Northeast Energy Efficiency Partnerships (NEEP); a comment from Rheem Manufacturing Company (Rheem); a comment from Southern Company; a comment from Ingersoll Rand; and a comment from Unico, Incorporated. Comments made during the public meeting by those not already listed include Nidec Motor Corporation (Nidec) and the motor manufacturer Regal Beloit. This final rule 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 Procedures DOE published the furnace fan test procedure final rule in the Federal Register on January 3, 2014. 79 FR 499. DOE’s test procedure for furnace fans (hereinafter referred to as ‘‘the test procedure’’) is codified in appendix AA of subpart B of part 430 of the code of federal regulations (CFR).The test procedure is applicable to circulation fans used in weatherized and nonweatherized gas furnaces, oil furnaces, electric furnaces, and modular blowers. The test procedure is not applicable to any non-ducted products, such as whole-house ventilation systems without ductwork, central airconditioning (CAC) condensing unit fans, room fans, and furnace draft inducer fans. DOE aligned the test procedure with the DOE test procedure for furnaces by incorporating by reference specific provisions from an industry standard that is also incorporated by reference in the DOE test procedure for furnaces. DOE’s test procedure for furnaces is codified in appendix N of subpart B of part 430 of the CFR. The DOE furnace test procedure incorporates by reference American National Standards Institute (ANSI)/American Society of Heating, Refrigerating and Air Conditioning E:\FR\FM\03JYR2.SGM 03JYR2 38137 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations Engineers (ASHRAE) 103–1993, Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boilers (ASHRAE 103– 1993). The DOE furnace fan test procedure incorporates by reference the definitions, test setup and equipment, and procedures for measuring steadystate combustion efficiency provisions of the 2007 version of ASHRAE 103 (ASHRAE 103–2007). In addition to these provisions, the test procedure includes provisions for apparatuses and procedures for measuring temperature rise, external static pressure, and furnace fan electrical input power. The test procedure also incorporates by reference provisions for measuring temperature and external static pressure from ANSI/ASHRAE 37–2009, Methods of Testing for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump Equipment (ASHRAE 37–2009). There are no differences between the 2005 version (which is already incorporated by reference in the CFR) and the 2009 version of the ASHRAE 37 provisions incorporated by reference for the furnace fan test procedure. The test procedure also establishes calculations to derive the rating metric, fan energy rating (FER), for each furnace fan basic model based on the results of testing per the test method for furnace fans codified consistent with the CFR definition for ‘‘mobile home furnace.’’ All provisions and statements regarding mobile homes and mobile home furnaces are applicable to manufactured homes and manufactured home furnaces. in appendix AA of subpart B of part 430 of the CFR. FER is the estimated annual electrical energy consumption of a furnace fan normalized by: (a) The estimated total number of annual fan operating hours (1,870); and (b) the airflow in the maximum airflow-control setting. For the purposes of the furnace fan test procedure, the estimated annual electrical energy consumption is the sum of the furnace fan electrical input power (in Watts), measured separately for multiple airflow-control settings at different external static pressures (ESPs), multiplied by national average operating hours associated with each setting. These ESPs are determined by a reference system, based on operation at maximum airflow that represents national average ductwork system characteristics. Table III.1 includes the reference system ESP values by installation type that are specified by the test procedure. In previous rulemaking documents for the furnace fan test procedure and energy conservation standard rulemaking, DOE used the term ‘‘manufactured home furnace’’ to be synonymous with ‘‘mobile home furnace,’’ as defined in the Code of Federal Regulation (CFR). 10 CFR 430.2. DOE will use the term ‘‘mobile home’’ hereinafter to be TABLE III.1—REQUIRED REFERENCE SYSTEM CRITERIA (I.E., ESP AT MAXIMUM AIRFLOW) BY FURNACE FAN INSTALLATION TYPE ESP at maximum airflow (in. wc) Installation type Units with an internal evaporator coil ............................ Units designed to be paired with an evaporator coil ...... Units designed to be installed in a mobile home 12 0.50 0.65 0.30 The test procedure requires measurements for the airflow-control settings that correspond to fan operation while performing the cooling function (which DOE finds is predominantly associated with the maximum airflowcontrol setting), heating function, and constant-circulation function. Table III.2 describes the required airflow-control settings by product type. TABLE III.2—AIRFLOW-CONTROL SETTINGS AT WHICH MEASUREMENTS ARE REQUIRED FOR EACH PRODUCT TYPE Product type Airflow-control setting 1 Airflow-control setting 2 Airflow-control setting 3 Single-stage Heating ............................. Multi-stage or Modulating Heating ........ Default constant-circulation ................. Default constant-circulation ................. Default heat ......................................... Default low heat ................................... Absolute maximum.* Absolute maximum. mstockstill on DSK4VPTVN1PROD with RULES2 * For the purposes of the test procedure, ‘‘absolute maximum’’ airflow-control setting refers to the airflow-control setting that achieves the maximum attainable airflow at the operating conditions specified by the test procedure. As shown in Table III.2, for products with single-stage heating, the three airflow-control settings to be tested are: The default constant-circulation setting; the default heating setting; and the absolute maximum setting. For products with multi-stage heating or modulating heating, the airflow-control settings to be tested are: The default constantcirculation setting; the default low heating setting; and the absolute maximum setting. The absolute lowest airflow-control setting is used to represent constant circulation if a default constant-circulation setting is not specified. DOE defines ‘‘default airflow-control settings’’ as the airflow- control settings for installed use specified by the manufacturer in the product literature shipped with the product in which the furnace fan is integrated. See Section 2.2 of Appendix AA to Subpart B of 10 CFR part 430. 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. In instances where a manufacturer specifies multiple airflow-control settings for a given function to account for varying installation scenarios, the highest airflow-control setting specified for the given function shall be used for the DOE test procedure. High heat and reduced heat shall be considered different functions for multi-stage heating units. Manufacturer installation guides also provide detailed instructions regarding compatible thermostats and how to wire them to achieve the specified default settings. The Watt measurements for calculating FER are weighted using designated annual operating hours for each function (i.e., cooling, heating, and constant circulation) that represent national average operation. Table III.3 shows the estimated national average operating hours for each function. 12 Mobile home external static pressure is much lower because there is no return air ductwork in mobile homes. Also, the United States Department of Housing and Urban Development (HUD) requirements for mobile homes stipulate that the ductwork for cooling should be designed for 0.3 in. water column (wc). 24 CFR 3280.715. VerDate Mar<15>2010 18:02 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 38138 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE III.3—ESTIMATED NATIONAL AVERAGE OPERATING HOUR VALUES FOR CALCULATING FER Operating mode Variable Heating ......................................................................................................................................... Cooling ......................................................................................................................................... Constant Circulation .................................................................................................................... HH CH CCH Single-stage (hours) 830 640 400 Multi-stage or modulating (hours) 830/HCR 640 400 input rate to the measured maximum heat input rate. The FER equation is: comments that were not addressed in the test procedure final rule document. AHRI, Goodman, Morrison, Rheem, Southern Company, Johnson Controls, and Ingersoll Rand commented that DOE’s schedule for finalizing the test procedure did not provide interested parties with sufficient time to evaluate product performance in accordance with the final test procedure in order to develop and submit substantive comments on the standards proposed in the NOPR. (AHRI, No. 98 at p. 2, 3; Goodman, No. 102 at pp. 7, 8; Morrison, No. 108 at p. 3; Rheem, No. 83 at p. 1; Southern Company, No. 85 at p. 2; Johnson Controls, No. 95 at p. 3; Ingersoll Rand, No. 43 at p. 33) Ingersoll Rand added that the comments they have submitted to date are based on the proposed test procedure, not the final test procedure. (Ingersoll Rand, No. 107 at pp. 2, 10) AGA and Allied Air agree and recommend that DOE delay promulgation of standards to give interested parties and DOE more time to conduct analyses using the final test procedure. (AGA, No. 110 at pp. 3, 4; Allied Air, Public Meeting Transcript, No. 43 at p. 48) Goodman recommended a delay of three months for this type of product and testing. (Goodman, No. 102 at p. 3) Prior to publication of the test procedure final rule, EEI expressed support for DOE issuing a supplemental notice of proposed rulemaking (SNOPR) for the standard if changes were made to the test procedure final rule that had significant impacts on DOE’s analyses results. (EEI, No. 87 at p. 3) APGA and Southern Company also recommended that DOE publish a standards SNOPR. (APGA, No. 90 at p. 2; Southern Company, No. 43 at p. 37) DOE recognizes that interested parties need sufficient time to collect and evaluate relevant fan performance data in order to submit meaningful comments on the proposed energy conservation standard for furnace fans. Thus, on December 24, 2013, DOE posted a pre-publication test procedure final rule notice to regulations.gov and issued a 30-day extension of the standards NOPR comment period to provide interested parties with time to evaluate DOE’s proposed standards using the final test procedure. AHRI, Johnson Controls, and Morrison stated that, even with the comment period extension, the 20 days between the publication of the test procedure final rule on January 3, 2014 and the close of the standards NOPR comment period on January 23, 2014 did not provide interested parties with sufficient time to assess the energy conservation standards NOPR based on the provisions within the final test procedure. AHRI added that DOE was obligated to issue the NOPR on the proposed energy conservation standards after the issuance of the final rule on the furnace fan test procedures per Section 7(c) of Appendix A to Subpart C of 10 CFR part 430. (AHRI, No. 98 at pp. 2, 3; Johnson Controls, No. 95 at p. 3; Morrison, No. 108 at p. 3) Mortex stated that they were not able to test any of their products according to the final test procedure by the time the energy conservation standard NOPR comment period closed. (Mortex, No. 104 at p. 2) Ingersoll Rand commented that DOE’s standards NOPR analyses are invalid because they were not based on the test procedure final rule. (Ingersoll Rand, No. 107 at p. 2, 10). NEEA and NPCC provided there is a need for product testing using the final test procedure, and a re-assessment of the derivation of the proposed FER equations and standard levels. NEEA and NPCC added that they do not support a decision on DOE received comments from interested parties regarding the furnace fan test procedure in response to the furnace fan energy conservation standard (ECS) NOPR. Interested parties’ comments on the test procedure are summarized below. DOE addressed many of these issues in the test procedure final rule, published in the Federal Register on January 3, 2014. (79 FR 514). The publication of the test procedure final rule occurred after the standards NOPR public meeting, held on December 3, 2013, but before the close of the standards NOPR comment period on January 23, 2014. For comments that were addressed in the test procedure final rule, a reference to the applicable discussion contained in the test procedure final rule document is provided. DOE’s detailed response is provided in this document for VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 ER03JY14.000</GPH> (HCR) to account for variation in time spent in this mode associated with turndown of heating output. The HCR is the ratio of the measured reduced heat 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 lowheating 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 airflowcontrol setting operating point (or minimum airflow-control setting operating point if a default constantcirculation 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. mstockstill on DSK4VPTVN1PROD with RULES2 For multi-stage heating or modulating heating products, the specified operating hours for the heating mode are divided by the heating capacity ratio mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations standards before there is sufficient data with which to verify that the proposed FER values will not disqualify from compliance the majority of the very products upon which they are founded, and for which DOE’s economic analyses are valid. (NEEA and NPCC, No. 96 at p. 2) DOE disagrees with AHRI and Morrison that the extended comment period was insufficient. DOE issued a test procedure SNOPR for furnace fans on April 2, 2013. 78 FR 19606. DOE did not make changes to the test procedure between the SNOPR and final rule that would significantly alter FER values for most products. Interested parties that conducted testing in accordance with the test procedure SNOPR proposal should not have to retest most furnace models to derive an FER value that is consistent with the final test procedure. For most furnaces, the FER value should not change or the FER value can be recalculated per the final test procedure requirements using the raw data measured according to the SNOPR test method. Therefore, notwithstanding the 20 days between the test procedure final rule and the close of the standards NOPR comment period, interested parties still had over nine months between the publication of the test procedure SNOPR and the close of the standards NOPR comment period to collect and evaluate fan performance data that is relevant to DOE’s proposed standards. DOE received data that could be used to derive FER values that meet the final test procedure requirements from multiple manufacturers during this period. DOE agrees with NEEA and NPCC that its proposed standards should be assessed based on FER values that are reflective of performance as measured by the final test procedure. For the reasons stated above, DOE was able to use much of the FER data it has collected in previous phases of this rulemaking to generate FER values that meet the requirements of the final test procedure. DOE also conducted testing prior to and during the development of the test procedure final rule that generated a broad set of results to enable DOE to derive FER values that are consistent with the requirements of the final test procedure. In addition, DOE continued to collect and use data from publicly-available product literature. DOE relied on the mathematical methods outlined in the test procedure NOPR for using this data to model fan performance and estimate FER values that meet the final test procedure requirements. 77 FR 28690 (May 15, 2012). DOE recognizes that this method is not identical to the final test VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 procedure method. However, DOE believes the FER values generated in this manner are still relevant because the final test method is similar to the test method proposed by AHRI (with support from Goodman, Ingersoll Rand, Lennox, and Morrison) in response to the test procedure NOPR, which they argued would result in accurate and repeatable FER values that are comparable to the FER values resulting from the methods proposed in the NOPR. (AHRI, No. 16 at p. 3; Goodman, No. 17 at p. 4; Ingersoll Rand, No. 14 at p. 1; Morrison, No. 21 at p. 3.) For these reasons, Ingersoll Rand’s comment stating that DOE’s standards NOPR analyses are invalid because they are not based on the test procedure final rule is inaccurate. The standards proposed in the NOPR and those established by this final rule are based on relevant FER data. Goodman stated that DOE’s modifications to the test procedure since the April 2013 test procedure SNOPR will have a significant impact on FER. Goodman referred specifically to the modification in the test procedure that specifies that airflow be calculated based on firing the product in the absolute maximum airflow-control setting if that setting is a default heating setting. According to Goodman, most furnaces allow heating operation at the highest airflow setting. Thus, instead of heating airflow setting being a midrange temperature rise as typically set by factory default, it will now be a lowrange temperature rise at a much higher and less efficient setting for FER calculation (and a setting that will not be typical of a field installation). (Goodman, No. 102 at p. 7) Ingersoll Rand echoed Goodman’s statement, adding that the modification would also result in higher watts in heating mode and a higher FER value than would have resulted using the procedure in the SNOPR for a majority of furnaces. (Ingersoll Rand, No. 107 at pp. 2, 10). DOE disagrees with Goodman’s and Ingersoll Rand’s comments. DOE expects that both interested parties have misinterpreted the test procedure requirement. DOE recognizes that product controls can be altered from factory settings to allow heating in the absolute maximum airflow-control setting. The test procedure does not allow for this practice. The test procedure only requires testing in factory-set configurations. Specific to the modification in question, the test procedure requires heating in the absolute maximum airflow-control setting only if that setting is a default heat setting. See Section 8.6.1.2 of Appendix AA to Subpart B of 10 CFR PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 38139 part 430. By definition, as outlined in the test procedure, a default heating airflow-control setting is factory-set and specified for installed-use as a heat setting by the manufacturer. See Section 2.2 of Appendix AA to Subpart B of 10 CFR part 430. Consequently, the resulting temperature rise is also factory-set by the manufacturer, and the measured performance will be representative of field use. In addition, the test procedure SNOPR and final rule requirements for EHeat (the watts in heating mode input for FER) are consistent and the measured values for this input should not change. The impacts of the modification in question are explained in more detail in the test procedure final rule. 79 FR 514 (January 3, 2014). AHRI commented that in the final test procedure that was published on January 3, 2014, DOE introduced a change within the test procedure that increases the measured FER. AHRI stated that DOE decided not to implement AHRI’s recommendation that a furnace be fired at the maximum airflow rate to calculate the maximum airflow. Instead, according to AHRI, the final rule specifies that the maximum airflow is determined by applying the airflow equation for a heating setting and adjusting to the maximum setting based on pressure measurements. AHRI claims that this approach results in an increase of the measured FER and was not accounted within the analyses associated with the energy conservation standards NOPR TSD that was issued on October 25, 2013. AHRI recommends that DOE reevaluate the analyses within the entire TSD due to this single change. (AHRI, No. 98 at p. 3, 4) DOE introduced the change referred to by AHRI in the April 2, 2013 test procedure SNOPR. A detailed discussion of DOE’s reasoning for that change are provided in that notice. 78 FR 19616. DOE made additional changes to this provision in the test procedure final rule by requiring that the product under test be fired at the maximum airflow rate to calculate the maximum airflow for furnaces for which the maximum airflow-control setting is a default heat setting (consistent with AHRI’s recommendation). See Section 8.6.1.2 of Appendix AA to Subpart B of 10 CFR part 430. DOE disagrees with AHRI that the change in question will result in higher FER values. DOE fan performance tests, including tests following the final test procedure, show that the maximum airflow calculated when firing the product under test in the maximum airflow control setting is typically lower than when applying the airflow equation for a heating setting E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38140 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations and adjusting to the maximum setting based on pressure measurements. Consequently, FER values would be lower if they were derived using airflow values calculated when firing in the maximum airflow-control setting. AHRI did not provide data to the contrary. As stated above, DOE’s proposed standards and the standards established by this document are valid because they are based on FER values that are consistent with the final test procedure (to include FER values employing the airflow adjustment method in question). AHRI, Morrison, and Ingersoll Rand commented that they are opposed to DOE eliminating the HCR from the denominator of the FER equation. According to AHRI, DOE did not provide a sound technical justification for such a modification and unnecessarily penalized the FER values associated with multi-stage and modulating units. (AHRI, No. 98 at p. 2, 3; Morrison, No. 108 at p. 3, 4; Ingersoll Rand, No. 107 at p. 2, 10) As discussed in the test procedure final rule, DOE found that including HCR in the denominator of the FER equation resulted in percent reductions in estimated annual energy consumption, as calculated for FER, of 15 percent. 79 FR 515 (January 3, 2014). Further, DOE found percent reductions in FER of approximately 30 percent when comparing single-stage products using constant-torque brushless permanent magnet (BPM) motors to multi-stage products using constanttorque BPM motors. DOE eliminated HCR from the FER equation because, as a result, percent reductions in FER dropped to 15 percent on average, which is consistent with percent reduction in estimated annual energy consumption. 79 FR 515 (January 3, 2014). DOE did not receive any new FER values for products that use a constant-torque BPM motor and multistage heating. DOE was also unable to find data in the public domain with which to calculate new FER values to represent such products. In the absence of new data, DOE used the raw airflow, ESP, and fan electrical energy consumption data for single-stage furnaces with constant-torque BPM motors to generate FER values reflecting the addition of theoretical multi-stage heating capabilities. Single-stage furnaces using constant-torque BPM motors typically have additional airflow-control settings that provide less airflow than the factory-set heating airflow-control setting. Theoretically, these airflow-control settings could be used for a low heat setting in a multistage heating configuration. DOE identified as many models as possible VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 that meet this criterion and for which DOE has sufficient data to calculate theoretical FER values for a multi-stage configuration. For each model, DOE first calculated the temperature rise in the default heating setting based on the airflow, thermal efficiency and input heat rating in that setting. Next, DOE used a variation of the same relationship between these parameters to calculate the theoretical low input capacity that would achieve the same temperature rise for each available airflow-control setting below the heat setting. DOE then evaluated the HCR for each of the lower airflow-control settings based on the theoretical input capacity of the lower setting and the rated input capacity of the default heat setting. DOE selected the low airflow-control setting that produced an HCR between 0.4 and 0.9 that was closest to 0.7 to represent the theoretical low heating setting. DOE chose these criteria based on investigation of typical HCR values observed in currently available products. Finally, DOE calculated estimated annual energy consumption and an FER value using the single-stage model’s data for the absolute maximum and constant circulation airflow-control settings and the data for the theoretical low heating setting for the heating airflow-control setting. DOE’s new data shows that multi-staging reduces estimated annual energy consumption by an average of 14 percent and FER by an average of 12 percent. These findings are consistent with DOE’s previous findings and support its decision to eliminate HCR from the denominator of the FER calculation. Ingersoll Rand stated that the final test procedure reduces the estimated savings associated with BPM motors. Ingersoll Rand commented that BPM motors consume more power as static pressure increases than permanent-split capacitor (PSC) motors. (Ingersoll Rand, No. 107 at p. 2, 10) DOE addressed this issue in the energy conservation standards NOPR. 78 FR 64084 (October 25, 2013). While BPM motors consume more power as static pressure increases, they also provide more airflow. FER is normalized by airflow to account for this difference in behavior between BPM and PSC motors. In addition, the standards established in this document are a function of airflow. BPM motordriven fan performance is evaluated relative to PSC motor-driven fans that provide the same amount of airflow at the same reference system static pressure as a result. Interested parties did not provide any evidence that these methods are inappropriate for evaluating relative fan performance. PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 China WTO commented that FER includes factors, such as HCR, to account for multi-stage heating but does not include analogous factors for multistage cooling. (China WTO, No. 92 at p. 1) DOE considered accounting for fan performance during multi-stage cooling operation for the test procedure NOPR. 77 FR 28680. DOE did not include factors for multi-stage cooling in the final test procedure because the presence and capacity of low-stage cooling is dependent on the cooling system with which a product containing a furnace fan is paired. DOE found in its review of publicly-available product literature that detailed characteristics of the cooling system are not typically provided. Consequently, entities performing the DOE furnace fan test procedure cannot identify the airflowcontrol setting that would be designated for low-stage cooling operation. In addition, multi-stage heating is not necessarily associated with multi-stage cooling capability (e.g., multi-stage cooling equipment is much less common than multi-stage heating equipment). China WTO stated that the final test procedure does not provide a method for calculating the maximum airflow when the maximum airflow-control setting is only designated for cooling. (China WTO, No. 92 at p. 1) The method for calculating the maximum airflow when the maximum airflow-control setting is only designated for cooling is provided in the final rule and in Section 9 of appendix AA of subpart B of part 430 of the CFR. 79 FR 524 (January 3, 2014). The California Investor Owned Utilities (CA IOU) commented that they observed a potential error in the calculation of airflow in the final test procedure. Specifically, CA IOU recommended that DOE include the humidity ratio in pounds water vapor per pounds dry air. CA IOU submits that this addition will increase the accuracy of the calculation of specific volume of test room air in cubic feet per pound of dry air to calculate airflow. (CA IOU, No. 106 at p. 4) The equation for calculating airflow in the final test procedure already includes the humidity ratio in pounds water vapor per pounds dry air as codified in Section 9 of appendix AA of subpart B of part 430 of the CFR. CA IOU recommended that in addition to reporting FER, which is the basis for the performance standard, DOE require manufacturers to report individual mode electrical energy consumption values (e.g., EHeat, EMax, and ECirc). According to CA IOU, E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations reporting these values would greatly facilitate the development of more targeted energy efficiency incentive programs, and manufacturers already have to measure and perform these calculations for the composite FER. CA IOU recognizes that EMax could represent fan electrical energy consumption in either heating or cooling mode depending on the product. Nonetheless, CA IOU also recommends that DOE require manufacturers to report fan electrical energy consumption in cooling mode even if not included in FER because having it as an additional data point could be useful for the development of utility programs across the country. CA IOU stated that energy efficiency incentive programs typically require a rigorous level of review and justification for implementation. Gaps in performance data of commercially available equipment is one of the main limiting factors in program development, contributing to the lengthy and resource-intensive data collection and verification processes. In the case of this rulemaking, manufacturers will already be required to test their products in heating, cooling, and constant circulation modes. CA IOU believes that the minimal extra effort required by manufacturers to report these values would be outweighed by the opportunity for utilities and other public agencies to develop incentive programs using these performance metrics, which in turn would positively impact manufacturers of high performing products. For these reasons, CA IOU strongly urge DOE to require manufacturers to report tested and calculated metrics that feed into a composite metric for the standard. ASAP, ASE, NCLC, and NRDC, hereinafter referred to as ASAP, et al., agree. (ASAP, et al., No. 105 at p. 3) At this time, DOE is declining to adopt reporting requirements for individual mode electrical consumption values as the CA IOU suggests. While DOE is open to considering additional reporting metrics in the future, DOE believes that establishing a Federal test procedure and metric (i.e., FER) will provide utility programs with a basis for establishing meaningful incentive programs as the CA IOUs desire. Further, DOE believes that reporting the aggregated electrical consumption (i.e., the FER metric) will provide market differentiation amongst currentlyavailable models, thereby allowing the utility programs to set voluntary levels for incentive programs at meaningful levels to obtain energy savings. If data and analyses are provided, which show VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 the disaggregated levels are necessary for the proper execution of utility incentive programs, DOE will consider modifying the certification requirements for furnace fans. Unico pointed out that DOE presents the required minimum reference system ESP values inconsistently across rulemaking documents. Unico noticed that in some documents DOE presents these values as a range for each installation type, and in other rulemaking documents DOE presents only the lower value within each range with an asterisk. (Unico, No. 93 at p. 6) As explained in the test procedure final rule, DOE’s test experience confirms manufacturer concerns that specific ESP values are difficult to achieve and maintain when measuring airflow. The final test procedure specifies that products maintain an ESP level between the minimum reference system value and 0.05 in. wc. above that minimum value to allow for slight variations. 79 FR 508 (January 3, 2014). Consequently, DOE presents the minimum required ESP values as a range in Section 8.6.1.2 in appendix AA of subpart B of part 430 in the CFR or as the minimum value with an asterisk accompanied by the explanation above in other DOE documents. AHRI commented that DOE should provide the option of employing an alternative efficiency determination method (AEDM) to determine FER. AHRI insists that an AEDM is critical for manufacturers to implement new requirements on a timely basis while minimizing burden. AHRI believes that the number of furnace fan basic models will be greater than the number of furnace basic models. According to AHRI, the pressure drop due to the gas heat exchanger will require that each furnace basic model also be considered as a furnace fan basic model. AHRI added that additional furnace fan basic models would be created in order to account for the type of installation. AHRI also pointed out that many furnace fan manufacturers also produce several other DOE regulated products. AHRI submits that rather than requiring manufacturers to spend valuable resources on conducting several tests, DOE should recognize that those resources could be better spent on innovating more efficient products. (AHRI, No. 98 at p. 13) DOE provided a detailed discussion of this issue in the test procedure final rule. 79 FR 513 (January 3, 2014). DOE currently does not allow the use of AEDMs for residential products, with the exception of central air conditioners and heat pumps due to the uniquely large number of combinations of split- PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 38141 system air conditioners and heat pumps that are rated. DOE recognizes that the number of furnace fan basic models may outnumber furnace basic models for the reasons AHRI lists. Even so, DOE expects the number of basic models of furnace fans to be significantly less than the number of basic models of residential central air conditioners and heat pumps (CAC and HP) for which alternative rating methods are currently allowed. DOE has not found the residential furnace fan market to be highly customized (i.e., containing many unique built-to-order designs) and expects that manufacturers will be able to group similar individual furnace fan types into basic models to reduce testing burden. DOE notes that it currently has over 1 million CAC combinations certified in the Compliance Certification Management System (CCMS) compared to approximately 12,500 certified furnace basic models. Consequently, DOE does not agree with AHRI’s assertion that an alternative rating method needs to be considered at this time. Should AHRI or the industry provide additional data or substantiation for its requests demonstrating why testing furnace fans are unique, as compared to the majority of other residential products for which AEDMs are not allowed, then DOE may consider such requests in a separate rulemaking. 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 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. However, in this rulemaking, DOE is only covering 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, E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38142 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 final test procedure. DOE addresses 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 differentiates between product classes based on internal structure and application-specific design differences that impact furnace fan energy consumption. Details regarding how internal structure and applicationspecific design differences that impact furnace fan energy consumption are included in chapter 3 of the final rule technical support document (TSD). DOE includes 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) • Mobile Home Non-Weatherized, NonCondensing Gas Furnace Fan (MH– NWG–NC) • Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH– NWG–C) • Mobile Home Electric Furnace/ Modular Blower Fan (MH–EF/MB) VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 • Mobile Home Weatherized Gas Furnace Fan (MH–WG) • Mobile 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. ‘‘Mobile home’’ products meet certain design requirements that allow them to be installed in mobile 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) PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 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 document 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 tcrial standard levels (TSLs) in this rulemaking. For further details on the screening analysis for this rulemaking, see chapter 4 of the final rule 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 section IV.C of this final rule and in chapter 5 of the final rule TSD. D. Energy Savings 1. Determination of Savings For each TSL, DOE projected energy savings from the products that are the subjects of this rulemaking purchased during a 30-year period that begins in the year of compliance with amended standards (2019–2048).13 The savings are measured over the entire lifetime of products purchased in the 30-year period.14 DOE used the NIA model to estimate the NES for products purchased over the above period. The model forecasts total energy use over the analysis period for each representative product class at efficiency levels set by each of the considered TSLs. DOE then 13 DOE also presents a sensitivity analysis that considers impacts for products shipped in a 9-year period. 14 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 during 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. E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations compares the aggregated energy use at each TSL to the base-case energy use to obtain the NES. The NIA model is described in section IV. H of this document and in chapter 10 of the final rule TSD. DOE used its NIA spreadsheet model to estimate energy savings from amended 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. For electricity, DOE reports national energy savings in terms of the primary (source) energy savings, which are the savings in the energy that is used to generate and transmit the site electricity. To convert site energy to primary energy, DOE derives annual conversion factors from the model used to prepare the Energy Information Administration’s (EIA) Annual Energy Outlook 2013 (AEO 2013). DOE also has begun to estimate fullfuel-cycle energy savings. 76 FR 51282 (August 18, 2011), as amended at 77 FR 49701 (August 17, 2012). The full-fuelcycle (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 energy efficiency standards. DOE’s evaluation of FFC savings is driven in part by the National Academy of Science’s (NAS) report on FFC measurement approaches for DOE’s Appliance Standards Program.15 The NAS report discusses that FFC was primarily intended for energy efficiency standards rulemakings where multiple fuels may be used by a particular product. In the case of this rulemaking pertaining to residential furnace fans, only a single fuel—electricity—is consumed by the product. DOE’s approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products. Although the addition of FFC energy savings in the rulemakings is consistent with the recommendations, the methodology for estimating FFC does not project how fuel markets would respond to this particular standards rulemaking. The FFC methodology simply estimates how much additional energy, and in turn how many tons of emissions, may be displaced if the 15 ‘‘Review of Site (Point-of-Use) and Full-FuelCycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards,’’ (Academy report) was completed in May 2009 and included five recommendations. A copy of the study can be downloaded at: https://www.nap.edu/ catalog.php?record_id=12670. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 estimated fuel were not consumed by the products covered in this rulemaking. It should be noted that inclusion of FFC savings has not affected DOE’s choice of the energy conservation standards adopted in today’s final rule. For more information on FFC energy savings, see section IV. H.2. 2. Significance of Savings EPCA prohibits DOE from adopting a standard for a covered product that would not result in significant energy savings. (42 U.S.C. 6295(o)(3)(B)) Although the term ‘‘significant’’ is not defined in EPCA, the U.S. Court of Appeals for the District of Columbia, in Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended ‘‘significant’’ energy savings in this context to be savings that were not ‘‘genuinely trivial.’’ The energy savings for today’s standards (presented in section V of this notice) are nontrivial, and, therefore, DOE considers them ‘‘significant’’ within the meaning of section 325 of EPCA. E. Economic Justification 1. Specific Criteria As discussed in section II.A, 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 generally discuss how DOE is addressing each of those seven factors in this rulemaking. For further details and the results of DOE’s analyses pertaining to economic justification, see sections IV and V of today’s document. Economic Impact on Manufacturers and Commercial Customers In determining the impacts of a potential new or amended energy conservation standard on manufacturers, DOE conducts a manufacturer impact analysis (MIA), as discussed in section IV.J. DOE first determines a potential standard’s quantitative impacts using an annual cash flow approach. This step includes both a short-term assessment (based on the cost and capital requirements associated with new or amended standards during the period between the announcement of a regulation and the compliance date of the regulation) and a long-term assessment (based on the costs and marginal impacts over the 30year analysis period). The impacts analyzed include: (1) Industry net present value (INPV) (which values the industry based on expected future cash flows); (2) cash flows by year; (3) PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 38143 changes in revenue and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the potential impacts on different types of manufacturers, paying particular attention to impacts on small manufacturers. Third, DOE considers the impact of new or amended standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for new or amended 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 other DOE regulations and non-DOE regulatory requirements on manufacturers. For individual customers, measures of economic impact include the changes in LCC and the PBP associated with new or amended standards. These measures are discussed further 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. DOE also evaluates the LCC impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a national standard. Savings in Operating Costs Compared to Increase in Price (Life-Cycle Costs) EPCA requires DOE to consider the savings in operating costs throughout the estimated average life of the covered product compared to any increase in the price of the covered product that are likely to result from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP analysis. The LCC is the sum of the purchase price of a product (including the cost of its installation) and the operating costs (including energy, maintenance, and repair costs) discounted over the lifetime of the equipment. 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. For its analysis, DOE assumes that consumers will purchase the covered product in the first year of compliance with new standards. The LCC savings and the PBP for the considered efficiency levels are calculated relative to a base-case scenario, which reflects likely market trends in the absence of new or amended standards. 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 E:\FR\FM\03JYR2.SGM 03JYR2 38144 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations standard level. DOE’s LCC analysis is discussed in further detail in section IV.F. Energy Savings Although significant conservation of energy is a separate statutory requirement for adopting an energy conservation standard, EPCA 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)) DOE uses NIA spreadsheet results in its consideration of total projected savings. For the results of DOE’s analyses related to the potential energy savings, see section V.B of this notice and chapter 10 of the final rule TSD. mstockstill on DSK4VPTVN1PROD with RULES2 Lessening of Utility or Performance of Equipment In establishing product classes, and in evaluating design options and the impact of potential standard levels, DOE follows EPCA’s requirement to develop standards that would not lessen the utility or performance of the products under consideration. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) DOE has determined that none of the TSLs presented in today’s final rule would reduce the utility or performance of the products under consideration in this rulemaking. During the screening analysis, DOE eliminated from consideration any technology that would adversely impact customer utility. See section IV.B of this notice and chapter 4 of the final rule TSD for further details. Impact of Any Lessening of Competition EPCA requires DOE to consider any lessening of competition that is likely to result from setting new or amended 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)) To assist the Department of Justice (DOJ) in making such a determination, DOE provided DOJ with copies of both the NOPR and NOPR TSD for review. In its assessment letter responding to DOE, DOJ concluded that the proposed energy conservation standards for residential furnace fans are unlikely to have a significant adverse impact on competition. DOE is publishing the VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 Attorney General’s assessment at the end of this final rule. Need of the Nation To Conserve Energy Another factor that DOE must consider in determining whether a new or amended standard is economically justified is the need for national energy and water conservation. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from new or amended standards are likely to provide improvements to the security and reliability of the Nation’s energy system. Reductions in the demand for electricity may also result in reduced costs for maintaining the reliability of the Nation’s electricity system. DOE conducts a utility impact analysis to estimate how new or amended standards may affect the Nation’s needed power generation capacity, as discussed in section IV.M. Energy savings from energy conservation standards are also likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases associated with energy production (i.e., from power plants). For a discussion of the results of the analyses relating to the potential environmental benefits of today’s standards, see sections IV.K, IV.L and V.B.6 of this notice. DOE reports the expected environmental effects from today’s standards, as well as from each TSL it considered, in chapter 13 of the final rule TSD. DOE also reports estimates of the economic value of emissions reductions resulting from the considered TSLs in chapter 14 of the final rule TSD. Other Factors EPCA allows the Secretary, in determining whether a new or amended 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)) There were no other factors considered for today’s final rule. 2. Rebuttable Presumption As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA provides for a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the new or amended standard is less than three times the value of the first-year energy (and, as applicable, water) savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE’s LCC and PBP analyses generate values that calculate the PBP for consumers of products subject to potential new and amended energy conservation standards. These PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 analyses include, but are not limited to, the 3-year PBP contemplated under the rebuttable presumption test. However, 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 these analyses 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). The rebuttable presumption payback calculation is discussed in section IV.F of this rulemaking and chapter 8 of the final rule TSD. IV. Methodology and Discussion 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; (3) manufacturers; (4) quantities and types of products sold and offered for sale; (5) retail market trends; (6) regulatory and non-regulatory programs; and (7) 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 final rule 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)) DOE adopted the term ‘‘furnace fan’’ as shorthand to describe the range of products encompassed by this statutory mandate. In the preliminary analysis, DOE interpreted its statutory mandate by defining ‘‘furnace fan’’ to include ‘‘any electrically-powered device used in residential central heating, ventilation, and air-conditioning (HVAC) systems for the purpose of circulating air through duct work.’’ 77 FR 40530, 40532 (July 10, 2012). DOE E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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. In response to the preliminary analysis, many interested parties disagreed with DOE’s definition of ‘‘furnace fan’’ and corresponding approach to set component-level regulations, which they warned would ignore system effects that could impact both fan and HVAC system energy consumption. California investor-owned utilities CA IOUs suggested that ‘‘furnace fan’’ should 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, PA Public Meeting Transcript, 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, PA Public Meeting Transcript, No. 43 at p. 63) Rheem commented that turbulent flow is considerably more efficient for heat transfer than laminar flow,16 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. 16 ‘‘Laminar flow’’ is as term to describe when all fluid particles move in paths parallel to the overall flow direction (i.e., in layers). Laminar flow may occur when the flow channel is small and the speed is low. ‘‘Turbulent flow’’ is characterized by a threedimensional movement of the fluid particles superimposed on the overall direction of motion. Turbulent flow may occur when the flow speed is higher and when there are obstacles in the channel that disrupt the flow profile. The turbulent flow intensifies the heat transfer, thus resulting in more efficient heat exchange. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 (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 consequently, the furnace will consume more gas to compensate and meet the desired house heat load. (Ingersoll Rand, No. 43 at p. 66) In the NOPR, DOE responded by explaining that 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)) Consequently, in the context of furnace fans, DOE does not have latitude to apply only a single standard for the larger HVAC product (which is already regulated). Pursuant to this statutory mandate, DOE issued a NOPR which proposed energy conservation standards for circulation fans used in residential central HVAC systems (78 FR 64068 (Oct. 25, 2013)). DOE added that it did not interpret its authority as including regulating the duct work itself. DOE recognized that component-level regulations could have system-level impacts. Accordingly, DOE conducted its NOPR analyses and selected the standard levels proposed in the NOPR 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 final test procedure codified in DOE’s regulations at 10 CFR part 430, subpart B, appendix AA specifies that the furnace fan be tested as factory-installed in the HVAC product, thereby enabling the rating metric, FER, to account for system effects on airflow delivery and, ultimately, energy performance. In addition, the product class structure proposed in the NOPR allowed for differentiation of products with designs that achieve higher thermal efficiency but may have lower fan performance, such as condensing furnaces. 78 FR 64068, 64082 (Oct. 25, 2013). In the January 3, 2014 test procedure final rule, DOE broadened its definition of ‘‘furnace fan’’ to mean ‘‘an electrically-powered device used in a consumer product for the purpose of circulating air through ductwork.’’ 79 FR 500, 521. In response to the NOPR, DOE did not receive comments from interested parties regarding the definition of ‘‘furnace fan’’ established by the test procedure final rule. Consequently, in this standards final rule, DOE is maintaining the definition for ‘‘furnace fan,’’ codified at 10 CFR 430.2. PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 38145 However, DOE did receive comments on its definitions for certain product types that include furnace fans. DOE summarizes and responds to these comments later in this section of the notice. 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 blowercoil 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. In response to the preliminary analysis, efficiency advocates expressed concern at DOE’s exclusion of packaged and split-system CAC products because advocates 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. 78 FR 64068, 64080 (Oct. 25, 2013). In contrast, many manufacturers submitted comments in response to the preliminary analysis that they 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. Manufacturers also claimed that the electricity used to circulate air through duct work is already adequately accounted for in existing energy efficiency metrics for CAC and HP products that use circulation fans. 78 FR 64068, 64080–81 (Oct. 25, 2013). In the October 25, 2013 furnace fan energy conservation standard NOPR, DOE noted 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 E:\FR\FM\03JYR2.SGM 03JYR2 38146 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations FR 64068, 64081. 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.’’ Id. 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. In the standards NOPR, however, DOE only proposed energy conservation standards for those circulation fans that are used in residential furnaces and modular blowers (see discussion below). As a result, DOE did not address public comments that pertain to fans in other types of HVAC products (other than to clarify instances where there was uncertainty as to whether a given product fits within the scope of the current rulemaking). The following list describes the furnace fans which DOE proposed to address in the standards NOPR. • 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 indoor units, through-thewall indoor units, small-duct, highvelocity (SDHV) indoor units, energy recovery ventilators (ERVs), heat recovery ventilators (HRVs), draft inducer fans, exhaust fans, or hydronic air handlers. mstockstill on DSK4VPTVN1PROD with RULES2 Id. In the October 25, 2013 NOPR, DOE also maintained its proposal to account for the electrical consumption of furnace fans while performing all active mode functions (i.e., heating, cooling, and constant circulation) because 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. 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. Id. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 China WTO commented that DOE’s definition for ‘‘furnace fan’’ and the proposed scope show that residential furnace fans primarily perform the heating function. For this reason, China WTO recommended that DOE exclude fan performance for cooling operation to avoid unnecessary test procedure burden. (China WTO, No. 92 at pp. 1– 2). For the reasons stated above, the energy conservation standards established by this notice account for the electrical consumption of furnace fans while performing all active mode functions (i.e., heating, cooling, and constant circulation). The commenter did not dispute the fact that fans will operate in cooling or constantcirculation mode, often for non-trivial periods of time. Because the electrical energy consumption of the fan may vary substantially depending on its mode of operation, DOE has concluded that testing fan operation in all these modes is necessary to reflect the product’s energy consumption during a representative use cycle and that such testing would not be unduly burdensome to conduct. Unico submitted comments regarding concerns with DOE’s test procedure and proposed standard levels as they apply to SDHV systems. Unico explains that DOE proposed to exclude SDHV products from the rulemaking but included modular blowers and electric furnaces, resulting in a potential conflict. Unico added that most of their SDHV air handlers are modular in construction. Unico also offers an addon electric furnace to provide secondary or backup heat, but very few systems are installed as an electric furnace. As a result, Unico expressed uncertainty whether this rule applies to SDHV modular blowers and SDHV electric furnaces. Unico provided data showing that SDHV blowers operate at different conditions compared to the products proposed to be covered and cannot meet the proposed FER levels. Ultimately, Unico expressed concerns that this rule could potentially eliminate many SDHV products from the market if they are subject to DOE’s proposed standards. (Unico, No. 93 at pp.1–4) In response to the comment, DOE clarifies that the furnace fan test procedure and the energy conservation standards established by this final rule do not apply to SDHV products, including SDHV modular blowers and electric furnaces. DOE recognizes that these products operate at different conditions which significantly impact their fan performance, as compared to the products addressed in this rulemaking. While DOE’s regulations at PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 10 CFR 430.2 include a definition for ‘‘small duct high velocity systems,’’ it does not include a definition for small duct high velocity modular blowers or SDHV electric furnaces. Absent clarification, DOE realizes that confusion may result regarding which products are and are not covered by today’s standards. Accordingly, DOE is adopting the following definition of ‘‘small-duct high-velocity (SDHV) modular blower,’’ which has been drafted to be consistent with the existing definition of ‘‘SDHV system’’ at 10 CFR 430.2: Small-duct high-velocity (SDHV) modular blower means a product that: • Meets the definition of ‘‘modular blower,’’ as set forth in 10 CFR part 430, subpart B, appendix AA; • Is designed for, and produces, at least 1.2 inches of external static pressure when operated at the certified air volume rate of 220–350 CFM per rated ton of cooling in the highest default cooling airflow-controls setting; and • When applied in the field, uses high velocity room outlets generally greater than 1,000 fpm that have less than 6.0 square inches of free area. Similarly, DOE is adopting a definition for ‘‘small-duct high-velocity (SDHV) electric furnace’’ to read as follows: Small-duct high-velocity (SDHV) electric furnace means a product that: • Meets the definition of ‘‘electric furnace,’’ as set forth in 10 CFR 430.2; • Is designed for, and produces, at least 1.2 inches of external static pressure when operated at the certified air volume rate of 220–350 CFM per rated ton of cooling in the highest default cooling airflow-control setting; and • When applied in the field, uses high velocity room outlets generally greater than 1,000 fpm that have less than 6.0 square inches of free area. DOE has concluded that these amendments should eliminate any confusion associated with DOE not addressing SDHV modular blowers and SDHV electric furnaces in the present rulemaking. Unico also submitted other SDHV-related concerns, but DOE need not discuss those issues further because SDHV products are not addressed in this rulemaking. AHRI, Morrison, Goodman, Johnson Controls, and Mortex stated that modular blowers should be excluded from the scope of this rulemaking. (AHRI, No. 98 at pp. 1, 2; Morrison, No. 108 at p. 1; Goodman, No. 102 at p. 5; Johnson Controls, No. 95 at p. 2; and Mortex, NOPR Public Meeting Transcript, No. 91 at pp. 78–79). AHRI, E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations Morrison, and Johnson Controls continue to advance an interpretation of 42 USC 6295(f)(4)(D) as being only applicable to furnaces, and these commenters argued that absent a legislative change, DOE has exceeded its statutory authority in terms of the NOPR’s proposed coverage of modular blowers. (AHRI, No. 98 at pp. 1–2; Morrison, No. 108 at p. 1; and Johnson Controls, No, 95 at p. 2). AHRI and Johnson Controls added that some modular blowers in today’s marketplace are not designed to operate with electric resistance heat kits, rendering the final test procedure insufficient for these products. (AHRI, No. 98 at pp. 1, 2; and Johnson Controls, No. 95 at p. 3). ASAP, et al., on the other hand, expressed support for the inclusion of modular blowers in the scope of coverage. ASAP, et al. stated that they understand that the strip heat used with electric furnaces is often installed in the field, which means that an ‘‘electric furnace’’ is often sold by the manufacturer as a ‘‘modular blower.’’ ASAP, et al. cite DOE’s finding that nonweatherized and mobile home electric furnace/modular blower furnace fans represent 10 percent of all furnace fan sales. According to ASAP, et al., excluding modular blowers from the scope of coverage would not only reduce energy savings from this rulemaking, but would also create a loophole—i.e., manufacturers would have an incentive to sell electric furnaces as modular blowers (without strip heat installed) in order to avoid compliance with the furnace fan energy conservation standards. (ASAP, et al., No. 105 at pp. 1, 2) As stated above, DOE maintains its interpretation that the relevant statutory language at 42 U.S.C. 6295(f)(4)(D) is broader in its applicability than just furnaces, and consequently, it provides DOE authority to cover modular blowers in this rulemaking. These same arguments were already addressed in some detail in the NOPR (see 78 FR 64068, 64081 (Oct. 25, 2013)). DOE also disagrees with the contention of AHRI and Johnson Controls that the final test procedure is not sufficient to address all modular blowers. All modular blower models of which DOE is aware can be operated in conjunction with an electric resistance heat kit, and commenters did not identify any models of modular blowers that cannot. Even assuming arguendo that modular blowers do exist that are not designed to operate with an electric resistance heat kit, DOE expects that number of such models would be de minimis and that manufacturers producing modular blowers that cannot be operated in conjunction with an VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 electric resistance heat kit would apply for a waiver from the test procedure. DOE provides more details regarding this issue in the January 3, 2014 test procedure final rule. 79 FR 504. In its comments, Johnson Controls stated that DOE’s use of the phrase ‘‘primary heat source’’ is too ambiguous, especially when certain products might be modified in the field. According to Johnson Controls, DOE’s characterizations of air handlers and modular blowers when an air handler or modular blower is the primary heating source is still confusing and brings uncertainty to the NOPR market assessment. Johnson Controls commented that none of the residential air handlers, modular blowers, or residential single-package finished good models built by Johnson Controls includes factory-installed electric heat kits. Therefore, according to the commenter, electric heat kits installed in these products cannot be considered to be the primary source for heat in their applications, and so none of these products should be included in this rulemaking. Johnson Controls added that while field-installed electric heat kits are available and used frequently, the use of field kits is outside of the air handler or modular blower manufacturer’s control, unlike gas furnaces where the application is known to usually be the primary heating source in the vast number of situations. (Johnson Controls, No. 95 at p. 2) NEEA, Mortex, and Daikin agreed that the contractor determines whether a CAC/ HP blower-coil unit with electric resistance heat is the principal source of heating for a residence, rendering any such determination speculative for other entities. (NEEA, NOPR Public Meeting Transcript, No. 91 at pp. 64–65; Mortex, NOPR Public Meeting Transcript, No. 91 at pp. 78–79; and Daikin, NOPR Public Meeting Transcript, No. 91 at pp. 75–76) Modular blowers are not a source of heat per DOE’s definition of ‘‘modular blower’’ as provided in 10 CFR part 430, subpart B, appendix AA. Consequently, the ‘‘principal heating source’’ qualifier (per the definition of ‘‘furnace’’ at 10 CFR 430.2) does not apply to modular blowers, so this part of the ‘‘furnace’’ definition has the effect of excluding modular blowers from that definition. However, the ‘‘furnace’’ definition is not the only factor in deciding whether modular blowers are covered in this rulemaking, contrary to what Johnson Controls suggests. If electric resistance heat is added to a modular blower product, that product no longer meets DOE’s definition of a ‘‘modular blower.’’ Instead, DOE considers the modified product an electric furnace, absent other PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 38147 design changes. Regardless of whether the electric resistance heat is factoryinstalled, both product variations are covered in the final test procedure and this energy conservation standard. DOE recognizes that interested parties may have trouble determining whether a CAC/HP blower-coil unit with electric resistance heating is considered an electric furnace and thereby covered by the energy conservation standards established by this final rule. Strictly following the DOE definition for ‘‘electric furnace’’ (which references the DOE definition of ‘‘furnace’’) as set forth at 10 CFR 430.2, coverage in this final rule of a CAC/HP blower-coil with electrical resistance heating depends on whether the electric resistance heating is the ‘‘principal heating source for the residence.’’ As Johnson Controls points out, this is not as easily determined as for gas and oil furnaces. DOE expects that in the significant majority of CAC/ HP blower-coil models that have electric resistance heat, the electric resistance heat is supplemental in nature and not the principal heating source for the residence. For this reason, DOE has decided that the energy conservation standards established by this rule will not cover CAC/HP blower-coil units, regardless of whether they include electric resistance heat. Lennox argued that including weatherized commercial products in this rulemaking is unrealistic and improper. Specifically, Lennox expressed concerns that DOE mischaracterizes single-package weatherized products as ‘‘residential’’ when these products are offered with a single-phase power source. The commenter stated that these products are often used in commercial applications, explaining that singlephase weatherized products are often designed to have higher duct static pressure capability than a traditional residential furnace. Lennox commented that they have single-phase belt-drive products that are capable of operating up to 2 inches water column external static pressure to meet commercial duct static requirements. According to Lennox, BPM motors (including both constant-torque and constant-airflow BPM motors) typically used in residential products cannot achieve the high static pressures required in these commercial installations. Therefore, Lennox recommended that DOE should exclude all products marked not for residential use from standards coverage. (Lennox, No. 100 at p. 4). DOE recognizes that industry may differentiate between residential products and commercial equipment differently than DOE. The standards E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38148 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations established by this final rule do not cover all single-phase, single-package HVAC products, only single-phase weatherized furnaces (i.e., single-phase, single-package HVAC products that include a ‘‘furnace’’ as defined at 10 CFR 430.2). Lennox did not identify, and after additional research, DOE is not aware of any weatherized gas furnace models that operate at the static pressures mentioned by the commenter. DOE expects that the operating conditions mentioned by Lennox are typical of single-package heat pump equipment, which is not covered by this rule. DOE expects the number of models covered by this rule that DOE defines as residential but are designed and operated in commercial applications to be de minimis. Any manufacturer which can substantiate its case that it would suffer serious hardship, gross inequity, and an unfair distribution of burdens if required to comply with the furnace fan standards may seek exception relief from DOE’s Office of Hearings and Appeals (OHA).17 ACEEE commented that if manufacturers offered air handlers as a separate product, without the coil, the modified product would not be inherently different than a modular blower. ACEEE stated that DOE should cover CAC/HP blower-coil units following the same logic that DOE used to justify covering modular blowers (i.e., because of their similarities to electric furnaces). ACEEE also commented that the DOE definition for ‘‘modular blower’’ is confusing because, in their experience, all (or almost all) conventional indoor blower units— whether furnaces, HP, or CAC—use a separate assembly (or field-fabricated ‘plenum’) to house the coil used as the evaporator (CAC) or evaporator and condenser (HP). (ACEEE, No. 94 at pp. 1–2, 4). DOE disagrees with ACEEE’s assessment that a CAC/HP blower-coil unit with the coil removed and an electric furnace are equally comparable to a modular blower. For example, modular blowers are typically designed to accommodate the addition of electric resistance heating kits (after which DOE would consider them as electric furnaces) without modifying the product envelope. Modular blower envelope dimensions are similar, and in many cases identical, to electric furnace dimensions as a result. In addition, the final test procedure requires an electric resistance heat kit to be installed in 17 For information about obtaining exception relief, see 10 CFR part 1003 (available at https:// www.ecfr.gov/cgi-bin/text-idx?SID=d95bf6ed9cd8 49253fab734656f80c2e&node=10:4.0.3.5.3 &rgn=div5). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 modular blowers to produce a temperature rise allowing for calculation of airflow for the rating metric, FER. The test configurations for electric furnaces and modular blowers are almost identical as a result. In turn, the FER values for an electric furnace and modular blower with no other design difference other than the presence of an electric resistance heat kit are expected to be approximately equivalent. On the other hand, the coils typically included in CAC/HP blowercoil units are larger than heat resistance kits. Consequently, blower-coil unit envelope dimensions are different than modular blower dimensions, which impacts fan performance. CAC/HP blower-coil unit design, as it relates to fan performance, cannot be compared to modular blower design for this reason. The final test procedure does not include methods for deriving an FER value for CAC/HP blower-coil units. Furthermore, the coil and envelope dimension differences mentioned would preclude the circulation fan performance of a CAC/HP blower-coil unit from being deemed equivalent to an otherwise similarly-designed modular blower. In addition, modular blowers and electric furnaces are product configurations installed in the field. DOE doubts that a CAC/HP blower-coil unit with the coil removed would be offered by manufacturers or purchased and installed in the field. Regarding the criticism of its definition of ‘‘modular blower,’’ DOE recognizes that the definition for ‘‘modular blower’’ as set forth at 10 CFR part 430, subpart B, appendix AA may be confusing because it does not explicitly state that a modular blower does not include an indoor refrigerant coil, only that it does not provide heating or cooling. An ‘‘indoor unit,’’ on the other hand, is defined at 10 CFR 430.2 as containing a ‘‘coil.’’ This notice modifies the definition of ‘‘modular blower’’ to explicitly exclude products that contain an indoor refrigerant coil in order to eliminate ambiguity between the two definitions. ACEEE, Earthjustice, and CA IOU stated that DOE’s decision to exclude products such as CAC/HP and hydronic air handlers is inappropriate and in conflict with DOE’s interpretation of the statutory language. These interested parties also commented that DOE does not provide a justification for its decision to exclude products for which DOE claims to have authority to set energy conservation standards. (ACEEE, No. 94 at pp. 1–2, 4; and CA IOU, No. 106 at pp. 1, 2) According to Earthjustice, DOE’s decision to exclude PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 products for which it claims authority to cover represents a failure to carry out EPCA’s command to adopt ‘‘standards for electricity used for purposes of circulating air through ductwork’’ and does not comply with the statute’s requirement that standards ‘‘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). Earthjustice adds that EPCA authorizes DOE not to prescribe an amended or new standard for a type or class of covered product in three situations: (1) The standard will eliminate certain product features from the market; (2) the standard will not result in significant conservation of energy or is not technologically feasible or economically justified; or (3) for certain products, test procedures have not been established. (42 U.S.C. 6295(o)(3) and (4)). Earthjustice states that DOE has failed to show that the products it is not addressing in this rule meet those criteria. (Earthjustice, No. 101 at p. 1). ASAP, et al. encouraged DOE to adopt standards and/or test procedure changes to drive improved efficiency of furnace fans that are part of single-package and blower-coil central air conditioners and heat pumps in the future. According to ASAP, et al., CA IOU and ACEEE, the operating conditions and metrics used in the DOE test procedures for CAC/HP (i.e., SEER and HSPF) are insufficient for representing furnace fan performance in the field for those products. (ASAP, et al., No. 105 at pp. 2, 3; CA IOU, No. 106 at pp. 1, 2; and ACEEE, No. 94 at pp. 1–2, 4). Further, ASAP, et al. are concerned that heat pump indoor units will increasingly be installed and operated as electric furnaces (without an outdoor unit) to avoid both the DOE standard for CAC/ HP and the standards established by this rule. ASAP, et al. added that consumers will have greater incentive to install heat pump indoor units to operate as electric furnaces if a heat pump indoor unit with a PSC motor is less expensive than an electric furnace/modular blower with a constant-torque BPM motor. (ASAP, et al., No. 105 at pp. 2, 3) Earthjustice also identified CAC/HP blower-coil units installed without an outdoor unit and operated as an electric furnace as a potential loophole. (Earthjustice, No. 101 at p. 1) While ASAP, et al., stated that they recognize that it may be too late to include furnace fans that are part of single-package and blower-coil central air conditioners and heat pumps in the scope of coverage in the current rulemaking, they encourage E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations DOE to address furnace fan efficiency in these products in the future through one of two options: (1) Amend the test procedures for central air conditioners and heat pumps to incorporate more realistic external static pressure values; or (2) include furnace fans that are part of single-package and blower-coil central air conditioners and heat pumps in a future rulemaking for furnace fans. ASAP, et al., submitted that if DOE pursued the second option, changing the external static pressure values in the central air conditioner and heat pump test procedures would be less critical, because fan efficiency would be addressed through standards for furnace fans. (ASAP, et al., No. 105 at pp. 2, 3) CA IOU also expressed support for a separate, expedited rulemaking to set energy conservation standards for products not addressed in this rule. CA IOU claims that such a rule would ensure that the entire market for furnace fans is regulated, thereby avoiding the negative market impacts due to the prevalence of unregulated products. (CA IOU, No. 106 at pp. 1, 2). NEEA and NPCC also expressed disappointment that DOE is choosing to cover only twothirds of furnace fan products by excluding indoor blower/cool units used with split system heat pump and air conditioning systems and hydronic air handlers, which leaves substantial energy savings on the table. (NEEA and NPCC, No. 96 at p. 3). ACEEE estimated that approximately two quads of potential cumulative energy savings are left uncaptured by DOE’s decision to exclude CAC/HP blower-coil units, which ACEEE claims could jeopardize achievement of the Administration’s goal of 3 billion tons of CO2 avoided. (ACEEE, No. 94 at p. 1–2, 4). CA IOU cited these potential energy savings as another reason that a separate, expedited rulemaking is warranted. (CA IOU, No. 106 at pp. 1, 2). Laclede, APGA, and AGA also recommended that DOE expand the scope of this rule to include products such as split-system central air conditioners, heat pump air handlers, through-the-wall air handlers, and small-duct high-velocity air handlers that compete with the types of natural gas furnaces covered by this rules. Each cited concerns that DOE’s decision to exclude fans used in these products could lead to fuel switching. (Laclede, No. 89 at p. 2; APGA, No. 90 at p. 2; and AGA, No. 110 at p. 2). Laclede believes the Department failed to adequately explain why fans in heat pumps are excluded and to clearly demonstrate how this exclusion serves the best interests of the American public. EEI, on the other hand, supports DOE’s exclusion of CAC/HP blowercoils and hydronic air handlers from this rulemaking. EEI commented that the energy used by the fans operating in the cooling mode is part of the calculation of SEER, EER, and HSPF. EEI explains that manufacturers have already made design decisions that reduce the energy usage of such fans for these systems to meet the higher air conditioner and heat pump energy conservation standards (based on SEER and HSPF) that took effect in 1992 and 2006, and will take effect in 2015. EEI stated that including these fans in this rule would be a form of ‘‘double regulation’’ of the same product. (EEI, No. 87 at p. 3) Southern Company agreed that CAC/HP fan energy is already covered by the SEER and HSPF rating. (Southern Company, NOPR Public Meeting, No. 43 at p. 70). 38149 As explained previously, DOE has noted the relatively broad scope of the language of 42 U.S.C. 6295(f)(4)(D), which provides DOE authority to regulate ‘‘electricity used for purposes of circulating air through duct work.’’ At the present time, however, DOE is only adopting energy conservation standards for those circulation fans that are used in residential furnaces and modular blowers. The DOE test procedure for furnace fans is not currently equipped to address fans contained in central air conditioners, heat pumps, or other products, as would be required for the adoption of standards under 42 U.S.C. 6295(o)(3). Consequently, DOE is not considering standard setting for other products beyond the current scope of the rulemaking at this time. 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 applicationspecific 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 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 Fan (WG–NC) ................... mstockstill on DSK4VPTVN1PROD with RULES2 Non-weatherized, Non-Condensing Oil Furnace Fan (NWO–NC) .......... Weatherized, Non-Condensing Oil Furnace Fan (WO–NC). Weatherized Electric Furnace/Modular Blower Fan (WEF/WMB). Mobile Home Weatherized Gas Furnace Fan (MH–WG). Mobile Home Weatherized Oil Furnace Fan (MH–WO). Mobile Home Weatherized Electric Furnace/Modular Blower Fan (MH– WEF/WMB). Non-Weatherized, Condensing Oil Furnace Fan (NWO–C). Mobile Home Non-Weatherized Oil Furnace Fan (MH–NWO). Non-weatherized Electric Furnace/Modular Blower Fan (NWEF/NWMB). Heat/Cool Hydronic Air Handler Fan (HAH–HC) ..................................... Heat-Only Hydronic Air Handler Fan (HAH–H). Hydronic Air Handler Fan with Coil (HAH–C). Mobile Home Heat/Cool Hydronic Air Handler Fan (MH–HAH–HC). Mobile Home Heat-Only Hydronic Air Handler Fan (MH–HAH–H). Mobile Home Hydronic Air Handler Fan with Coil (MH–HAH–C). Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan (MH–NWG–NC). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 38150 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE IV.1—PRELIMINARY ANALYSIS PRODUCT CLASSES—Continued Key product class Additional product classes Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH– NWG–C). Mobile Home Electric Furnace/Modular Blower Fan (MH–EF/MB). Manufacturers agreed that the selected key product classes are an accurate representation of the market. Some manufacturers 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. In the NOPR, DOE agreed with manufacturers’ assertion that the additional non-key product classes represent products with few and in many cases, no shipments. 78 FR 64082. Individual discussions with manufacturers for the MIA confirmed this assertion. Additionally, review of the AHRI appliance directory revealed that only two of the additional non-key product classes have active models listed: (1) Mobile home weatherized gas furnace fans (MH–WG) and (2) mobile 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 proposed in the NOPR to eliminate the additional non-key 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 proposed to reserve space to establish standards for MH–WG and MH–NWO furnace fans in the future as sufficient data become available. DOE also proposed to exclude hydronic air handlers from consideration in this rulemaking, thereby further reducing the number of product classes addressed in the NOPR to 10. 78 FR 64082. Table IV.2 includes a list of the revised set of product classes for residential furnace fans used in the NOPR. DOE did not receive comment or additional information on the proposed product classes, thus, DOE is not making changes to the product classes in this Final Rule. Table IV.2 includes a list of the product classes for residential furnace fans used in the Final Rule. TABLE IV.2—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) Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan (MH–NWG–NC) Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH–NWG–C) Mobile Home Electric Furnace/Modular Blower Fan (MH–EF/MB) Mobile Home Weatherized Gas Furnace Fan (MH–WG) Mobile Home Non-Weatherized Oil Furnace Fan (MH–NWO) mstockstill on DSK4VPTVN1PROD with RULES2 3. Technology Options In the preliminary analysis, DOE considered seven technology options that would be expected to improve the energy 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 permanentsplit 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. In the NOPR, DOE revised its proposed scope of coverage to no longer address hydronic air handlers, the only furnace fan product class for which standby mode and off mode energy consumption is not already fully accounted for in the DOE energy conservation standards rulemakings for residential furnaces and residential CAC and HPs. 76 FR 37408 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 (June 27, 2011); 76 FR 67037 (Oct. 31, 2011). Consequently, the standby mode and off mode technology options (options 5 through 7 in the list above) are no longer applicable. In addition, DOE found that multi-staging and modulating heating controls can also improve FER, so DOE evaluated multistaging and modulating heating controls as a separate technology option for the NOPR. 78 FR 64083. DOE did not receive comment or additional information regarding the evaluated technology options, so DOE did not make any changes to the list of technology options identified in the NOPR. The resultant list of technology options identified to be evaluated in the screening analysis before consideration in the engineering analysis for the Final Rule include: (1) Fan housing and airflow path design modifications; (2) inverter-driven PSC fan motors; (3) high-efficiency fan motors; (4) multistaging and modulating heating PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 controls; and (5) backward-inclined impellers. Each identified technology option is discussed below and in more detail in chapter 3 of the Final Rule TSD. 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 18 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 18 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. E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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. Interested parties expressed support for DOE’s consideration of the aerodynamics of furnace fan cabinets in its initial analysis of technology options. In particular, ASAP cited a 2003 GE study 19 that quantified energy savings produced by modifying fan housing as justification for its inclusion as an option. ACEEE, et al. also cited a Lawrence Berkeley National Laboratory (LBNL) study 20 that linked changes in efficiency to modifying the clearance between fan housing and an air handler cabinet wall. Ingersoll Rand stated that 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. 78 FR 64083. 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. 78 FR 64083. Many interested parties requested that DOE keep airflow path design as a technology option. Manufacturers stated that improving airflow path design, like modifying fan housing, is highly costeffective when compared to other enhancements. 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. 78 FR 64083. DOE believes including airflow path design is appropriate because of its potential to impact fan efficiency. Airflow path design will impact the rating metric, FER, because the DOE test procedure requires the furnace fan to be tested as it is factory-installed in the HVAC product. 19 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). 20 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). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 DOE did not receive comment or additional information on fan housing about including airflow path design improvements as a technology option, thus, DOE is including these as technologies to be evaluated further in the screening analysis. Chapter 3 of the Final Rule TSD provides more technical detail regarding fan housing and airflow path design modifications and how these measures could reduce furnace fan energy consumption. 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 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. Manufacturers commented that there are alternate, more cost-effective solutions to reduce energy consumption for air-moving systems, such as airflow path design or ECM (referred to herein by DOE as a ‘‘constant-airflow BPM motor’’) technology. 78 FR 64084. For the NOPR analysis, DOE recognized manufacturers’ concerns with the cost-effectiveness of inverterdriven 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. 78 FR 64084. DOE did not receive comment or additional information on including inverter controls for PSC motors as a technology option, thus, DOE is including this technology option in the Final Rule. DOE evaluates in the engineering analysis the costeffectiveness of all energy-saving technology options that are not screened PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 38151 out. Chapter 3 of the Final Rule TSD provides a more detailed discussion of inverter-driven PSC furnace fan motors. 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) constanttorque BPM motors (often referred to as ‘‘X13 motors’’); and (4) constant-airflow BPM motors (often referred to as ‘‘ECMs’’).21 DOE finds that furnace fans using high-efficiency motor technology options operate more efficiently than furnace fans using baseline PSC motors by: • Functioning more efficiently at a given operating condition; • Maintaining efficiency throughout the expected operating range; and • Achieving a lower turndown ratio 22 (i.e., ratio of airflow in lowest setting to airflow in highest setting). 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, PA Public Meeting Transcript, No. 43 at p. 67) For the NOPR analysis, DOE stated that it 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).23 DOE agreed with Ingersoll Rand that as static pressure increases, input power to a PSC-driven furnace fan will decrease, which is 21 ‘‘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 interestedparty submitted comments include the terminology used by the interested party when referring to motor technologies. 22 A lower turndown ratio can significantly improve furnace fan efficiency because fan input power has a cubic relationship with airflow. 23 See chapter 3 of the TSD for more details regarding fan operation. E:\FR\FM\03JYR2.SGM 03JYR2 38152 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations seemingly contradictory to the principle described above. DOE found 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). 78 FR 64084. 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 As detailed in the NOPR, interested parties recognized the benefits provided by constant-torque and constant-airflow BPM motors. Interested parties also agreed that the BPM motor variations (i.e., constant-torque and constantairflow) and inverter-driven PSC motors generally have lower turndown ratios than a three-speed PSC motor. 78 FR 64084. Table IV.3 contains the turndown ratio estimates supplied publicly by interested parties. Manufacturers generally provided similar feedback during interviews. of airflow. Recognizing that this behavior could complicate comparing the relative performance of these motor technologies, DOE’s rating metric, FER, is normalized by airflow to result in ratings that are in units of watts/cfm. DOE believed 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. TABLE IV.3—INTERESTED PARTY ESTIMATED FAN MOTOR TURNDOWN RATIOS PSC Interested party mstockstill on DSK4VPTVN1PROD with RULES2 NMC (NMC, No. 60 at p. 1) ............................................................................. Goodman (Goodman, No. 50 at p. 2) ............................................................. Rheem (Rheem, No. 54 at p. 6) ...................................................................... Overall, comments regarding highefficiency 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 disagreed with Lennox that including constant circulation as part of FER would ‘‘artificially’’ inflate the performance of BPM motors compared to PSC motors, because DOE concluded that there is non-trivial use of this mode by consumers. 78 FR 64085. As part of the test procedure rulemaking, DOE estimated that on average, consumers operate furnace fans in constantcirculation 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 Final Rule published on January 3, 2014. 79 FR 499. DOE did not receive comment or additional information on including high-efficiency motors as a technology option, thus, DOE is including this technology option in the Final Rule. DOE evaluates in the engineering analysis the cost-effectiveness of all VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 Wave chopper controller PSC 0.45 0.70–0.75 0.60 0.36 ........................ ........................ energy-saving technology options that are not screened out. Chapter 3 of the Final Rule TSD provides a more detailed discussion of high-efficiency furnace fan motors. 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 airflowcontrol setting for extended periods of time compared to single-stage furnaces to heat a residence.24 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. Interested parties encouraged DOE to consider X13-level motors applied with multi-stage furnace controls as a technology option. 78 FR 64085. During interviews, manufacturers commented 24 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-00110037. PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 Constanttorque ECM 0.45 0.40–0.50 0.30 Constantairflow ECM 0.20 0.25–0.35 0.20 that multi-stage heating controls can be and are used regardless of motor type. Based on comments from manufacturers, DOE recognized that multi-stage controls can be paired with other motor types, not just constantairflow BPM motors. DOE agreed with interested parties that implementing multi-stage heating controls independent of motor type could result in residential furnace fan efficiency improvements. Consequently, DOE decided to de-couple multi-staging controls from the constant-airflow BPM motor technology option. Accordingly, DOE evaluated multi-staging controls as a separate technology option for the NOPR. 78 FR 64085. DOE did not receive comment or additional information on multi-staging controls as a technology option, thus, DOE is including this technology option in the Final Rule. 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 (GE) that showed large improvements in efficiency were achievable under certain operating conditions.25 Interested parties disagreed with the DOE’s findings, stating that literature indicates there are varying degrees of performance improvement when 25 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). E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 backward-inclined impellers are used in place of forward-curved impellers. 78 FR 64085. Ebm-papst, a company that provides custom air-movement products, offered a diverging opinion from most manufacturers regarding the energy-saving potential of backwardinclined impellers. That company retrofitted 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. (ebmpapst Inc., No. 52 at p. 1). DOE recognized that backwardinclined 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 included backwardinclined impellers as a technology option in the NOPR. 78 FR 64086. DOE did not receive additional comment or information on including backward-inclined impellers as a technology option. Thus, DOE included backward-inclined impellers as a technology to be evaluated further in the screening analysis for the Final Rule. 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 38153 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. discussion with manufacturers, DOE was not able to identify a case in which fan housing or airflow path design modifications could lead to potential fan energy savings without increasing the size of the HVAC product or compromising thermal performance or safety. 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. 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 decided to screen out fan housing and airflow path design modifications in the NOPR. 78 FR 64086. DOE did not receive additional comment or information regarding fan housing and airflow path design modifications in response to the NOPR. Thus, DOE determined to screen out fan housing and airflow path design modifications in the Final Rule. 1. Screened-Out 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. 78 FR 64087. In summary, DOE did not screen out the following technology options: (1) Inverter-driven PSC fan motors; (2) high-efficiency fan motors; (3) multistage 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 Final Rule. Therefore, DOE believes all of the efficiency levels evaluated in this notice are technologically feasible. For additional details, please see chapter 4 of the Final Rule TSD. Interested parties, however, voiced concerns regarding these screening criteria as they apply to BPM fan motors and backward-inclined impellers in previous phases of this rulemaking. DOE summarizes and addresses these concerns in the sections immediately below. DOE did not receive public comments relevant to the screening 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. In response to the preliminary analysis, interested parties stated many concerns associated with modifying airflow path designs to reduce residential furnace fan electrical energy consumption, namely, 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. 78 FR 64086. For the NOPR, 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 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 2. Remaining Technologies E:\FR\FM\03JYR2.SGM 03JYR2 38154 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 analysis criteria for the other remaining technology options. High-Efficiency Motors In response to the preliminary analysis, manufacturers stated that there are a limited number of ECM motor suppliers to furnace fan manufacturers, and that it is a proprietary technology. Manufacturers also stated that no alternative ECM exists at the scale of Regal Beloit ECMs and that limiting PSC applicability would reduce product flexibility. Motor manufacturers disagreed with residential furnace fan manufacturers, claiming that there is more than just a single motor manufacturer offering ECM technology. Motor manufacturers also supported DOE’s assumption that after implementation of furnace fan efficiency standards, brushless permanent magnet motor technologies will become increasingly available over time. 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, PA Public Meeting Transcript, 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. Most furnace fan manufacturers claimed that development of in-house controls for BPM motors is not an option. 78 FR 64087. While DOE recognizes that Regal Beloit possesses a number of patents in the BPM motor space, other motor manufacturers (e.g., Broad Ocean, ebmpapbst, and 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 continues to expect that BPM motor technology is currently available from more than one source and will become increasingly available to residential furnace fan manufacturers. 78 FR 64087. Also in response to the preliminary analysis, some fan manufacturers expressed concern that high-efficiency motor reliance on rare earth metals VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 would impact supply. However, DOE is aware of high-efficiency motors that do not contain rare earth materials. DOE is also confident, after discussions with manufacturers, 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. 78 FR 64087. DOE did not receive additional comment or information in response to the NOPR about high-efficiency motors related to the screening criteria. Thus DOE included high-efficiency motors as a technology option in the engineering analysis. Backward-Inclined Impellers In response to the preliminary analysis, furnace fan manufacturers stated that 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). However, ebm-papst stated that they retrofitted existing equipment with backward-inclined impellers, which only required making minor changes to the airflow path within the equipment. 78 FR 64088. Manufacturers were also concerned with the potential impacts that backward-inclined impellers could have on heat exchanger temperatures. Some commenters also argued that backwardinclined impellers may affect furnace fan utility, because the noise produced by this impeller type may limit product application. Utilities claimed that a backward-inclined impeller, in combination with increased fan motor speeds to achieve higher efficiency, leads to amplified noise levels. 78 FR 64088. For the NOPR, DOE found that there are multiple approaches to implementing backward-inclined impellers to reduce furnace fan energy consumption. DOE recognized 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 backwardinclined 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 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 size required). Ebm-papst does not believe that achieving higher RPMs with existing motor technology is an obstacle for implementing this technology. DOE believed that this prototype represented 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 in the NOPR. 78 FR 64088. DOE did not receive additional comment or information about backward-inclined impellers related to the screening criteria. Thus, DOE decided not to screen out backwardinclined impellers in the Final Rule. C. Engineering Analysis In the engineering analysis (corresponding to chapter 5 of the Final Rule TSD), DOE establishes the relationship between the manufacturer selling price (MSP) and improved residential furnace fan efficiency. This relationship serves as the basis for costbenefit 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 E:\FR\FM\03JYR2.SGM 03JYR2 38155 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 costassessment 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. 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 Final Rule 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 performance information from publiclyavailable 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 FER (W/1,000 cfm) Product class Non-Weatherized, Non-Condensing Gas Furnace Fan ................................................................................................. Non-Weatherized, Condensing Gas Furnace Fan ......................................................................................................... Weatherized, Non-Condensing Gas Furnace Fan ......................................................................................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ................................................................................................... Electric Furnace/Modular Blower Fan ............................................................................................................................ Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ........................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan .................................................................................. Mobile Home Electric Furnace/Modular Blower Fan ...................................................................................................... In response to the preliminary analysis, manufacturers asserted that the baseline FER values presented were not representative of the furnace fans in the least-efficient residential HVAC models offered for sale today. Some manufacturers also requested that DOE alter FER to better reflect unit capacity. Specifically, some manufacturers stated that residential furnace fans having a larger capacity also have higher FERs and recommended that DOE adjust baseline FER values to include the largest-capacity fan within a product class. 78 FR 64089. In the NOPR, 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 380 393 333 333 312 295 319 243 constant). The slope of the linear fit 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). For the NOPR, DOE proposed to use such linear functions to represent FER for the different efficiency levels of the different product classes. 78 FR 64089. Table IV.5 shows the revised FER baseline efficiency levels estimates that DOE used for the NOPR. TABLE IV.5—NOPR BASELINE FER ESTIMATES FER* (W/1,000 cfm) Product class mstockstill on DSK4VPTVN1PROD with RULES2 Non-Weatherized, Non-Condensing Gas Furnace Fan ................................................................................................. Non-Weatherized, Condensing Gas Furnace Fan ......................................................................................................... Weatherized Non-Condensing Gas Furnace Fan .......................................................................................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ................................................................................................... Electric Furnace/Modular Blower Fan ............................................................................................................................ Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ........................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan .................................................................................. Mobile Home Electric Furnace/Modular Blower Fan ...................................................................................................... Mobile Home Weatherized Gas Furnace Fan ................................................................................................................ Mobile Home Non-Weatherized Oil Furnace Fan .......................................................................................................... FER = 0.057 FER = 0.057 FER = 0.057 FER = 0.057 FER = 0.057 FER = 0.057 FER = 0.057 FER = 0.057 Reserved. Reserved. × × × × × × × × QMax QMax QMax QMax QMax QMax QMax QMax + + + + + + + + 362. 395. 271. 336. 331. 271. 293. 211. *QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the proposed DOE test procedure at the time of the ECS NOPR publication. 78 FR 19606, 19627 (April 2, 2013). Manufacturers stated that the baseline FER values presented in the NOPR need to be re-evaluated to determine the appropriate baseline. Because the test VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 procedure was not finalized at the time of the ECS NOPR publication, Lennox believes that assumptions were made by DOE to determine the baseline from PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 other sources, leading to overstated energy savings and misleading conclusions. (Lennox, No. 100 at p. 3) Goodman believes that the NOPR E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38156 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations baseline values are too high. Goodman initially commented that baseline values were too low for the preliminary analysis. Based on the product testing per the April 2013 test procedure SNOPR, Goodman feels the increased values for baseline FER are too high, and should be closer (but still higher than) the original TSD estimated values. (Goodman, No. 102 at p. 8) Morrison, NEEA, and NPPC also commented that because there was no finalized test procedure at the time the ECS NOPR was published, DOE should not be using test data from public literature to generate FER values. (Morrison, No. 91 at p. 124; NEEA, NPCC, No. 96 at p. 2) Ingersoll-Rand echoed Lennox’s and Morrison’s comments, stating that it is difficult to get furnace fan power data from public literature, and that DOE’s baseline FER values are over-estimated. (Ingersoll-Rand, No. 91 at pp. 110–111) Rheem and Lennox questioned whether the efficiency levels are based off of FER or the average annual auxiliary electrical energy consumption (Eae). (Rheem, No. 83 at p. 4; Lennox, No. 100 at p. 3) Lennox and Ingersoll-Rand also commented specifically about the baseline FER for weatherized gas furnaces, citing a dramatic difference in DOE’s baseline performance level as compared to their product offerings. Additionally, when the performance improvement factors are applied to DOE’s baseline, the result is a very aggressive mandated increase in performance. (Lennox, No. 100 at p. 3; Ingersoll-Rand, No. 107 at p. 4) AHRI also commented on the FER for weatherized gas furnaces, stating that the FER values for weatherized gas furnace fans and non-weatherized condensing gas furnace fans should be the same because the test procedure is the same for both products, except for a difference in ESP. AHRI explained the difference in ESP accounts for the cooling coil within the weatherized gas furnace, therefore, in effect, the furnace fan assemblies for weatherized and nonweatherized gas furnaces are subject to the same ESP. (AHRI, No. 91 at pp. 127– 129) Goodman agreed with AHRI that weatherized gas furnace fans should have the save efficiency levels as nonweatherized gas, non-condensing furnace fans. (Goodman, No. 102 at p. 3) DOE did not use Eae as an input for the engineering analysis. All efficiency levels considered by DOE throughout this rulemaking, including the baseline, are based on FER data, not Eae. DOE used Eae as a proxy for FER to evaluate market-wide energy performance of furnace fans in the market and technology assessment only. Further VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 description of this characterization is found in chapter 3 of the Final Rule TSD. DOE disagrees with Lennox, Morrison, NEEA, and NPPC that FER values that DOE generated prior to the final test procedure or based on public literature should not be considered in this Final Rule. DOE outlines in detail in section III.A the reasons that FER data from previous stages of the rulemaking and public literature are relevant. Section III.A also explains how DOE’s changes to the test procedure between the test procedure SNOPR and final rule should not result in significant differences in FER values for many covered products. Thus, DOE disagrees with Ingersoll Rand, Lennox, Goodman, and Morrison’s claims that, in the absence of a final test procedure or because of changes in the final test procedure, DOE used unreliable information to calculate FER and model efficiency levels for the NOPR. Regardless, DOE agrees with interested parties that DOE should re-update its NOPR baseline equations based on new data. DOE received some baseline FER data from interested parties in response to the NOPR. As discussed in section III.A, DOE also conducted testing prior to and during the development of the test procedure final rule that generated a broad enough set of results to enable DOE to derive FER values that are consistent with the requirements of the final test procedure. DOE used this new baseline FER data to revise its baseline equations. DOE investigated interested party claims that DOE’s proposed baseline equation for weatherized gas furnace fans did not match manufacturer performance estimates. DOE did not receive additional baseline FER data for weatherized gas furnace fans. However, DOE did derive additional FER values from data from specification sheets and testing of weatherized gas furnaces at higher efficiency levels (i.e., weatherized gas furnaces that use constant-torque and constant-airflow BPM motors). DOE was able to collect more reliable FER data for more efficient weatherized gas furnace fans than for baseline weatherized gas furnace fans. Consequently, DOE estimated the weatherized gas furnace fan baseline FER by multiplying the market and capacity weighted FER value for weatherized gas furnace fans with constant-airflow BPM motor and multistaging by the expected percent increase in FER (i.e., the inverse of the expected percent reduction in FER for constantairflow BPM and multi-staging). DOE then developed a conversion factor from the non-weatherized, non-condensing PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 gas furnace fan baseline FER to generate a y-intercept for the weatherized noncondensing gas furnace fan baseline FER equation. This approach significantly increased DOE’s estimated baseline FER for weatherized non-condensing gas furnace fans to a level consistent with the revised baseline for nonweatherized, condensing gas furnace fans. Even though they are not identical, DOE concludes that the approach described is appropriate based on interested party feedback. The airflow path design of weatherized noncondensing gas and non-weatherized, condensing gas furnaces are very different, which impacts furnace fan performance, accounting for the slightly different FER equations. DOE also received comments from interested parties regarding the slopes in the NOPR FER equations. Rheem and Lennox commented that the slope characterizing the relationship between FER and airflow capacity is too flat, adding that higher-capacity models are space constrained, and their FER values do not meet the proposed FER levels in the NOPR. (Rheem, No. 83 at p. 8; Lennox, No. 100 at p. 6) Ingersoll-Rand commented that for condensing furnaces and furnaces using improved PSC motors and multi-staging controls, FER tends to decrease as capacity increases, creating a negative slope. (Ingersoll-Rand, No. 91 at pp. 110–111; Ingersoll-Rand, No. 107 at pp. 3–4) Ingersoll-Rand also commented that even though FER values for furnace fans with PSC motors follow a linear trend, FER values for furnace fans that use BPM motor technologies do not because they react differently to changes in static pressure (Ingersoll-Rand, No. 107 at p. 5) ACEEE, Goodman, and Mortex questioned whether a linear slope is the best way to characterize the relationship between FER and airflow capacity. AHRI and Goodman added that there is a cubic relationship between fan input power and airflow, thus, a non-linear slope may be more appropriate. (ACEEE, No. 94 at p. 3; Goodman, No. 102 at p. 13; Mortex, No. 104 at p. 3; AHRI, No. 98 at p. 3) In response to interested party comments, DOE recalculated FER versus airflow capacity slopes using new data from baseline series for both nonweatherized, non-condensing gas furnace fans and non-weatherized, condensing gas furnace fans. DOE found that the average baseline slope increased dramatically from 0.057 to 0.081. DOE is aware that some instances of furnace series models will not match DOE’s slope analysis results. The data, that DOE has, shows a positive slope when characterizing the relationship between E:\FR\FM\03JYR2.SGM 03JYR2 38157 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations FER and airflow capacity. Furthermore, DOE did not determine that a linear fit was the best fit statistically. DOE believes a linear fit is the best representation of furnace fan performance given the level of data available. DOE finds that linear fits result in a distribution of efficiency levels that match the distribution of furnace fan performance by technology option used. Additionally, a cubic trend-line does not account for changes in furnace envelope size, heat exchanger size, furnace fan outlet size, and other factors the affect furnace fan performance. Using a cubic trend-line would only be appropriate if these other factors were held constant. 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 rating metric, FER, is normalized by airflow to result in ratings that are in units of watts/cfm. Table IV.5 shows the revised FER baseline efficiency levels estimates that DOE used for the Final Rule. TABLE IV.6—FINAL RULE BASELINE FER ESTIMATES FER * (W/1,000 cfm) Product class Non-Weatherized, Non-Condensing Gas Furnace Fan ................................................................................................. Non-Weatherized, Condensing Gas Furnace Fan ......................................................................................................... Weatherized Non-Condensing Gas Furnace Fan .......................................................................................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ................................................................................................... Electric Furnace/Modular Blower Fan ............................................................................................................................ Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ........................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan .................................................................................. Mobile Home Electric Furnace/Modular Blower Fan ...................................................................................................... Mobile Home Weatherized Gas Furnace Fan ................................................................................................................ Mobile Home Non-Weatherized Oil Furnace Fan .......................................................................................................... FER = 0.081 FER = 0.081 FER = 0.081 FER = 0.081 FER = 0.081 FER = 0.081 FER = 0.081 FER = 0.081 Reserved. Reserved. × × × × × × × × QMax QMax QMax QMax QMax QMax QMax QMax + + + + + + + + 335. 358. 365. 433. 304. 252. 273. 186. * QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the final DOE test procedure. 79 FR 499, 524 (January 3, 2014). 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.7 includes DOE’s preliminary analysis estimates for the percent reduction in FER from baseline for each efficiency level. TABLE IV.7—PRELIMINARY ANALYSIS ESTIMATES FOR PERCENT REDUCTION IN FER FROM BASELINE FOR EACH EFFICIENCY LEVEL Efficiency level (EL) 1 2 3 4 5 ................................................ ................................................ ................................................ ................................................ ................................................ Percent reduction in FER from baseline Design option Improved PSC .............................................................................................................................. Inverter-Driven PSC ..................................................................................................................... Constant-Torque BPM Motor ....................................................................................................... Constant-Airflow BPM Motor + Multi-Staging .............................................................................. Premium Constant-Airflow BPM Motor + Multi-Staging + Backward-Inclined Impeller ............... 2 10 45 59 * 63 mstockstill on DSK4VPTVN1PROD with RULES2 * 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 highefficiency motors. Specifically, interested parties noted that DOE underestimated the efficiency gain of improved PSC motors over standard PSC motors, and overestimated the efficiency improvement of BPM motor technology options. 78 FR 64090. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 For the NOPR, 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 summarized 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.8 PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 shows DOE’s revised estimates for the percent reduction in FER for each efficiency level that DOE used in the NOPR. 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. E:\FR\FM\03JYR2.SGM 03JYR2 38158 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE IV.8—NOPR ESTIMATES FOR PERCENT REDUCTION IN FER FROM BASELINE FOR EACH EFFICIENCY LEVEL Efficiency level (EL) 1 2 3 4 5 6 ................................................ ................................................ ................................................ ................................................ ................................................ ................................................ Percent reduction in FER from baseline Design option Improved PSC .............................................................................................................................. Inverter-Driven PSC ..................................................................................................................... Constant-Torque BPM Motor ....................................................................................................... Constant-Torque BPM Motor and Multi-Staging .......................................................................... Constant-Airflow BPM Motor and Multi-Staging .......................................................................... Premium Constant-Airflow BPM Motor and Multi-Staging + Backward-Inclined Impeller ........... 10 25 42 50 53 * 57 mstockstill on DSK4VPTVN1PROD with RULES2 * 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. Note that EL 4 in the table above was a newly proposed efficiency level in the NOPR. As discussed in section IV.A.3, DOE analyzed multi-staging as a separate technology option. For the NOPR, DOE also evaluated a separate efficiency level representing applying multi-staging to a furnace fan with a constant-torque BPM motor. 78 FR 64091. In response to the NOPR, AHRI asked if DOE considered pairing PSC motors with multi-stage furnace controls in its analysis. (AHRI, No. 91 at p. 310) While DOE did gather data for and investigated PSC-driven furnace fans in multi-stage products, DOE did not include this combination as an efficiency level for the Final Rule. In the engineering analysis, DOE assesses technology options in order of cost-effectiveness. DOE finds that constant-torque BPM motors are more cost-effective than PSC motors with multi-staging. While the cost of multi-staging for each motor type is approximately the same, multi-staging results in significantly less energy savings when used with a PSC motor. DOE expects this is the result of a limited turndown ratio as discussed in section III.A.4. Interested parties commented on the NOPR percent reductions in FER from the baseline and resulting efficiency level equations. Nidec stated that the percent reductions do not reflect furnace fan performance improvements when using higher-efficiency PSC motors. (Nidec, No. 91 at p. 147) Many manufacturers stated that the proposed efficiency levels are not consistent with product performance using the varying design options. Rheem, Allied Air, Daikin, Lennox, and Ingersoll-Rand stated that only their multi-staging furnace lines that use constant-airflow BPM motors would meet the proposed standard level. (Rheem, No, 83 at pp. 1– 2; Allied Air, No. 91 at p. 105; Daikin, No. 91 at p. 105; Lennox, No. 100 at p. 5; Ingersoll-Rand, No. 91 at pp. 102– 103) Goodman and AHRI submitted VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 similar comments stating that there are existing products that use the design options specified within TSL 5 that will not even meet the proposed energy conservation standards. (AHRI, No. 98 at p. 3; and Goodman, No 102 at pp. 4 and 7) In a joint comment submitted by Appliance Standards Awareness Project (ASAP), Alliance to Save Energy (ASE), National Consumer Law Center (NCLC), and National Resources Defense Council (NRDC) and in a separate comment submitted by California Investor-Owned Utilities (CA IOUs), interested parties recommended that DOE conduct additional testing of furnace fans with constant-torque BPM motors with multistaging controls to verify the accuracy of the proposed FER standard level equations, and to ensure that the majority of products containing constant-torque BPM motors with multistaging controls meet the standard. (ASAP, et al., No. 105 at p. 2; CA IOU, No. 106 at p. 3) DOE carefully considered the feedback received from interested parties on the percent reductions in FER from baseline that the Department proposed in the NOPR. DOE shares manufacturers’ concerns that their products are not meeting the levels proposed in the NOPR despite those models using the technologies (or more efficient technologies) on which those levels are based. DOE used data provided by interested parties, conducted additional testing using the final DOE test procedure, and gathered data from additional product specification sheets to generate new FER values. DOE used this new FER data to revise its estimates of percent reduction in FER from baseline for each efficiency level. In response to Nidec, DOE did analyze an efficiency level associated with improved PSC motors. However, DOE did not receive and could not gather any new FER data with which to revise its estimated percent reduction in FER from baseline for this technology. Using the revised estimates of percent PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 reduction in FER from baseline, DOE revised its FER equations. Then, for the product classes with the highest shipments, DOE assessed how many models for which DOE has an FER value met the revised EL 4. DOE finds that over 90% of the non-weatherized, noncondensing gas, non-weatherized, condensing gas and weatherized noncondensing gas furnace fans for which DOE has FER values that use constanttorque BPM motors and multi-staging meet the revised EL 4. DOE finds that many models in those product classes for which DOE has FER data that use constant-torque BPM motors without multi-staging would also meet the revised EL 4. DOE feels that the percentage of models that meet the revised EL 4 show that the Final Rule efficiency levels are reflective of the performance of the technologies on which they are based. Ingersoll Rand stated that percent reduction in FER from the baseline should not be constant across all capacities for products using constanttorque BPM motor technologies. Specifically, Ingersoll-Rand noted that efficiency improvements with this technology decrease with increasing furnace capacity, and that at high airflow capacities, there is little or no difference in FER values between furnace fans using improved PSC motors and those using constant-torque BPM motors. (Ingersoll-Rand, No. 107 at p. 5) Additionally, Ingersoll-Rand stated that wider cabinets for furnaces with more cooling capacity but the same heating input will have lower FERs. (Ingersoll-Rand, NOPR Public Meeting Transcript, No. 91 at p. 94) IngersollRand and Mortex disagree with DOE using the same slope for FER equations for both mobile home furnaces as well as non-mobile home furnaces. These parties cite that there are space constraints associated with mobile home applications, and that it is more difficult to meet the proposed standard at higher capacities because the cabinet E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations size must remain the same. (IngersollRand, No. 91 at pp. 116–117; Mortex, No. 91 at pp. 129–131) DOE recognizes that percent reduction in FER from baseline for a given technology option varies with capacity. DOE’s estimates of percent reduction in FER from baseline are based on market-weighted averages of FER values from across the entire range of furnace fan airflow capacities to account for this variation. As discussed above, DOE finds that constant percent reductions in FER from baseline result in a distribution of efficiency levels that match the distribution of furnace fan performance by technology option used across the entire range of furnace fan airflow capacities. Thus, DOE believes that a constant percent reduction in FER from baseline across all airflow capacities is appropriate. DOE is also aware that in some instances FER may decrease for furnaces with higher cooling capacities but the same heating input. DOE’s analysis includes FER data for furnace fans that have differing heating capacity to cooling capacity ratios. DOE recognizes that these ratios indicate design differences that impact fan performance. However, a significant majority of the models for which DOE has FER data are meeting the ELs associated with the technologies that they use. Of the few models that do not, DOE observes no pattern related to the ratio of heating capacity to cooling capacity. DOE recognizes that mobile home products are more spaceconstrained than the other products covered by this standard. DOE did not receive mobile home FER data in response to the NOPR. Despite DOE using the same slope for mobile home product classes to characterize the relationship between FER and airflow capacity for all product classes, the resulting ELs for mobile home furnace fans are less stringent than those for non-mobile home furnaces at higher capacities. EL 4 for MH–NWG–NC and NWG–NC both have slopes of 44 FER per 1000 cfm, for example. Thus, for an increase in airflow capacity of 1000 cfm, EL 4 allows for an increase of 44 in FER for both classes. At 1,200 cfm, EL 4 is represented by and FER of 235 for NWG–NC and 190 for MH–NWG–NC. 38159 An increase of 44 in FER would represent an increase in FER of approximately 18 percent for the NWG– NC furnace fan, but an increase in FER of approximately 23% for the MH– NWG–NC furnace fan. Consequently, the allowable increase in FER as capacity increases is more lenient for mobile home furnaces. DOE believes this leniency is appropriate considering the more rigid space constraints mobile home furnaces must meet. DOE recognizes that the same variation in stringency occurs as a result of DOE’s method for establishing baseline FER equations using conversion factors as described in more detail in chapter 5 of the Final Rule TSD. However, the difference in FER values between mobile home and non-mobile home furnace fans is much greater than the difference between FER values amongst non-mobile home furnace fans. The variation in stringency for non-mobile home products is minimal as a result. Table IV.9 shows DOE’s revised estimates for the percent reduction in FER for each efficiency level that DOE used in the Final Rule analyses. TABLE IV.9—FINAL RULE ESTIMATES FOR PERCENT REDUCTION IN FER FROM BASELINE FOR EACH EFFICIENCY LEVEL Efficiency level (EL) 1 2 3 4 5 6 ................................................ ................................................ ................................................ ................................................ ................................................ ................................................ Percent reduction in FER from baseline Design option Improved PSC .............................................................................................................................. Inverter-Driven PSC ..................................................................................................................... Constant-Torque BPM Motor ....................................................................................................... Constant-Torque BPM Motor and Multi-Staging .......................................................................... Constant-Airflow BPM Motor and Multi-Staging .......................................................................... Premium Constant-Airflow BPM Motor and Multi-Staging + Backward-Inclined Impeller ........... 12 25 41 46 51 * 56 * 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 5% percent reduction in FER from baseline. The total percent reduction in FER from baseline for EL 6 includes the 51% reduction from EL 5 and the 5% net reduction from the backward-inclined impeller for a total percent reduction of 56% from baseline. Ingersoll Rand provided a significant amount of FER data in its written comment to support its statements. (Ingersoll Rand, No. 107 at pp. 3, 12–16) DOE appreciates this information and included these FER values in its revision of the engineering analysis to account for the furnace fan performance behaviors described by Ingersoll Rand. mstockstill on DSK4VPTVN1PROD with RULES2 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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 lowvolume product classes and generated high-volume and low-volume MPC estimates to account for the increased purchasing power of high-volume manufacturers.26 26 High-volume and low-volume product classes are discussed further in chapter 5 of the Final Rule TSD. PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 Production Volume Impacts on MPC In response to the preliminary analysis, manufacturers commented that they use different manufacturing processes for high and low-volume products. In the NOPR analysis, DOE found that 94 percent of the MPC for furnace fans is attributed to materials (included purchased parts like fan motors), which are not impacted by process differences. DOE’s estimates also already accounted 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 highvolume and low-volume models. Observed process differences are reflected in the bills of materials for E:\FR\FM\03JYR2.SGM 03JYR2 38160 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations those products. DOE believed that its approach to distinguish between highvolume and low-volume product classes accounts for the expected difference in MPC between high-volume and lowvolume product classes. 78 FR 64091. DOE did not receive comment or additional information on production volume impacts on MPC, thus, DOE is taking the same approach to distinguish between high-volume and low-volume product classes in the Final Rule. mstockstill on DSK4VPTVN1PROD with RULES2 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. Interested parties commented that DOE was underestimating the cost of adding an inverter to a PSC motor, and questioned if DOE’s cost estimate was for wave chopper technology and not inverters. In the NOPR, DOE stated that the preliminary analysis estimate for the MPC of an inverter-driven PSC was indeed based on a wave chopper drive. DOE found that more sophisticated and costly inverters are required to achieve the efficiencies reflected in DOE’s analysis. Consequently, DOE 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 found that $30 for high-volume 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 updated those values for the NOPR. 78 FR 64091–64092. DOE did not receive comment or additional information on cost estimates for inverter-driven PSC motors, thus, DOE is not making changes to the MPC estimates for inverters used to drive PSC furnace fan motors in the Final Rule. Furnace Fan Motor MPC In response to the preliminary analysis, manufacturers stated that DOE underestimated the incremental MPC to implement high-efficiency motors in HVAC products, other than oil furnaces. Most manufacturers stated that the cost increase to switch from PSCs to moreefficient motor technologies was at least twice that of the DOE’s estimate. Based upon the input received from interested parties, DOE adjusted its motor cost estimates in the NOPR analysis. In general, DOE increased its estimates by approximately 10 to 15 percent, which VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 is consistent with the feedback DOE received. 78 FR 64092. Goodman stated that DOE significantly underestimated the costs of the increasing levels of fan motor cost. (Goodman, No. 102 at p. 9) Lennox stated that DOE underestimated the total cost of furnace fans with BPM motor technology by 10 to 30 percent, therefore, the incremental costs are underestimated by 20 to 120 percent. (Lennox, No. 100 at p. 6) Conversely, ACEEE commented that DOE has a wellestablished record of over-estimating the cost of complying with standards, thus, DOE’s cost estimates should be discounted to further improve the economics of advanced technology options. (ACEEE, No. 94 at p. 3) Rheem questioned if the DOE motor cost estimates included power factor correction filters for BPM motors, as those can cost $10 to $20. (Rheem, No. 91 at p. 165) DOE recognizes that BPM motor use contributes to concerns regarding total harmonic distortion. However, the use of power factor correction filters for BPM motor technologies is currently not required under federal regulations. The DOE cost estimates reflect what is currently available on the market, thus, the added cost of filters for BPM motor technologies is not included in DOE’s MPC estimates for BPM motors. DOE believes the motor MPC estimates presented in the NOPR are representative of current motor costs. Thus, DOE is keeping the same furnace fan motor cost estimates presented in the NOPR for the Final Rule analysis. Details regarding DOE’s MPC estimates are provided in chapter 5 of the Final Rule TSD. 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). Manufacturers confirmed that higherefficiency motors and modulating motors require more sophisticated and costly controls. 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. 78 FR 64092. PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 In the NOPR, DOE agreed 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 estimated 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 agreed 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. DOE did not receive comment or additional information on motor control costs, thus, DOE is not making changes to this in the Final Rule. 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. Manufacturers also 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. During the NOPR, 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 in the NOPR. 78 FR 64092. In response to the NOPR, Mortex questioned whether the price differential between backward-inclined impellers manufactured at high volume and those manufactured at low volume should be greater than DOE’s estimate of 32 cents. (Mortex, No. 91 at p. 163) DOE reviewed its manufacturer production cost estimates for the backward-inclined impeller technology option based on interested party comments. DOE did not receive any E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations quantification of the total MPC of backward-inclined impellers or the incremental MPC associated with the changes needed to implement them. Consequently, DOE did not modify its NOPR estimated MPC for backwardinclined impellers in the Final Rule. Regardless, DOE finds that EL 6, which represents use of a backward-inclined impeller, is not economically justified. Modifying the MPC estimate for this technology would not impact the standard set by this Final Rule as a result. mstockstill on DSK4VPTVN1PROD with RULES2 Other Components In response to the MPCs presented in the NOPR, Goodman commented that there are likely additional components for the furnace that may need to be added if significant changes to the blower system are implemented. For example, improving air moving efficiency may require an increase in cabinet size, or the addition of internal baffling to direct airflow over the heat exchanger. None of these additional components or modifications were accounted for in the furnace fan MPC. (Goodman, No. 102 at p. 13) As discussed in section III.B.1 and chapter 4 of the Final Rule TSD, DOE did not include housing design modifications in the engineering analysis. Thus, DOE did not develop cost estimates for housing design modifications. DOE recognizes that the airflow path design of the HVAC product in which the furnace fan is integrated impacts efficiency. DOE anticipates that modifying the size of the cabinet and the geometry of the heat exchanger(s) would be the primary considerations for improving airflow path design. Alterations to the design and configuration of internal components, such as the heat exchanger, could impact the thermal performance of the HVAC product, potentially reducing or eliminating product availability for certain applications. While DOE did not consider airflow path design as a technology option, as described in section III.B.1, DOE did account for the components used to direct or guide airflow in the MPC estimates. 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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. DOE used the same distribution channels for furnace fans as it used for furnaces in the recent energy conservation standards rulemaking for those products. DOE believes that this is an appropriate approach, because the vast 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 mobile homes. DOE has concluded that there is insufficient evidence of a replacement market for furnace fans to establish a separate distribution channel on that basis. 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 higherefficiency models. Ingersoll Rand stated that the incremental markup percentages do not represent real life practices and are too low. It commented that once the new rule goes into effect, the more expensive furnaces will become the baseline and will need to be marked up appropriately for manufacturers, distributors, and dealers to remain viable. (Ingersoll Rand, No. 107 at p. 8) However, the commenter provided no data to support its expectation of how the actors respond in terms of pricing when confronted with more-stringent energy conservation standards. DOE acknowledges that detailed information on actual distributor and contractor practices would be helpful in evaluating their markups on furnaces. In the absence of such information, DOE has concluded that its approach, which is consistent with expected business behavior in competitive markets, is reasonable to apply. If the cost of goods sold increases due to efficiency PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 38161 standards, DOE continues to assume that markups would decline slightly, leaving profit unchanged, and, thus, it uses lower markups on the incremental costs of higher-efficiency products. Goodman stated that lower markups on incremental costs of higherefficiency products is an invalid practice because manufacturers will attempt to have higher margin dollars to offset overall lower volumes. (Goodman, No. 102 at p. 9) For the LCC and NIA analyses, DOE does not use a lower markup on the incremental manufacturer selling price of higherefficiency products. Instead, it assumes that manufacturers are able to maintain existing average markups in response to new standards. The MIA considers different markup scenarios for manufacturers (see section IV.J.2.b). 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 constantcirculation functions. The methodology and the data are fully described in chapter 7 of the final rule TSD. DOE used the Energy Information Administration’s (EIA) Residential Energy Consumption Survey (RECS) 27 to establish a sample of households using furnace fans for each furnace fan 27 Energy Information Administration, 2009 Residential Energy Consumption Survey (Available at: https://www.eia.gov/consumption/residential/ data/2009/index.cfm?view=consumption). E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38162 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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. DOE used RECS 2009 28 heating and cooling energy use data to determine heating and cooling operating hours. DOE used data from RECS 2009, American Housing Survey (AHS) 2011,29 and the Census Bureau 30 to project household weights in 2019, which is the anticipated compliance date of any new energy efficiency standard for residential furnace fans. These adjustments account for housing market changes since 2009, as well as for projected product and demographic changes. 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. For the final rule, DOE adjusted the furnace fan energy use estimated from RECS 2009 data to account for projected changes in heating and cooling loads due to climate change (as projected by EIA in AEO 2013). 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 mobile 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. w.c. for single-family households and 0.30 in. w.c. for mobile homes. 28 See https://www.eia.gov/consumption/ residential/data/2009/. 29 See https://www.census.gov/housing/ahs/data/ national.html. 30 See https://www.census.gov/popest/. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 Rheem stated that substitution of a BPM motor can increase the conditioned air that is leaked to the atmosphere. (Rheem, No. 83 at p. 13) However, the commenter provided no data to support its view on increased air leakage associated with BPM motors. DOE agrees that if a BPM motor maintains flow in a high-resistance duct system that has leakage, it may lead to higher duct leakage compared to a PSC motor. However, in cases where the heating load can be met with low air flow, the BPM motor may have lower air leakage. Given that the magnitude of these effects is uncertain and may offset, DOE did not include it in its analysis. DOE notes that the constant-torque BPM motor, which meets the standards in today’s final rule, may not maintain the flow in leaky and overly-restrictive ducts, and, thus, would be expected to have similar losses as a PSC motor. NEEA stated that their field measurements of ESP for the past 40 years are consistent with DOE’s analysis. (NEEA, No. 91 at p. 222) Daikin stated that, from experience over the past 30 plus years, mobile homes have higher external static pressure than the typical site-built home in the preponderance of cases. (Daikin, No. 91 at p. 222) The data that DOE has seen (described in appendix 7B of the final rule TSD) do not indicate that mobile homes have higher external static pressure. Furthermore, the HUD static pressure criteria for mobile homes 31 are supportive of DOE’s assumptions regarding ESP. Consequently, DOE has maintained its approach regarding ESP for this final rule. 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. For the NOPR, to estimate use of constant circulation in the sample homes, DOE evaluated the available studies, which include a 2010 survey in Minnesota 32 and a 2003 Wisconsin field monitoring of residential furnaces.33 DOE did not use these data directly, however, because it believes they are not representative of consumer practices 31 HUD for Mobile Home with comfort cooling certificate ¥0.3 inches WC at cooling airflow setting [Title 24 of the HUD code PART 3280— Mobile Home Construction and Safety Standards, Part 3280.715(a)(3)(ll)]. 32 Provided in CEE, No. 22 at pp. 1–2. 33 Pigg, S., ‘‘Electricity Use by New Furnaces: A Wisconsin Field Study’’ (October 2003) (Available at https://www.ecw.org/sites/default/files/230-1.pdf) PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 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. For the NOPR, DOE used the same assumptions for use of constant circulation as were used in the proposed DOE test procedure for furnace fans. 77 FR 28674 (May 15, 2012). The average value that emerges is approximately 400 hours per year. The shares of homes using the various constant-circulation modes are presented in Table IV.10. NEEA and NPCC commented that DOE’s estimate of 400 hours per year of continuous-circulation mode may be overly conservative, and they disagree with stakeholders who suggest that 400 hours per year is too high. (NEEA, NPCC, No. 32 at p. 5) For the final rule, DOE examined a newly-released proprietary survey that broadly evaluates the use of continuous circulation across the U.S.34 This survey shows a higher number of continuouscirculation hours than DOE used for the NOPR. DOE has concerns about the representativeness of the data, however, because the survey only included homeowners who had been involved in the purchase of central HVAC equipment in the past two years. The practices of these consumers may not accurately portray the use of continuous circulation across the entire stock of homes with central HVAC equipment. Given the uncertainty regarding the survey data, DOE decided that it would not be appropriate to change the continuous-circulation hours for the final rule. Southern Company stated that if DOE is assuming a greater percentage of variable speed fans in the future, the need for constant circulation will be reduced. (Southern Company, No. 91 at p. 233) DOE accounted for the reduced hours of operation during constantcirculation mode when variable speed motors are applied (see appendix 7–C). Variable speed fans tend to increase the operating hours in heating and cooling modes, which would result in a smaller fraction of time in continuous-fan mode. 34 Decision Analysts, 2013 American Home Comfort Study (2013) (Available at: https:// www.decisionanalyst.com/Syndicated/ HomeComfort.dai). E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 38163 results are discussed in section V.B.1 of this document. TABLE IV.10—CONSTANT-CIRCULATION TEST PROCEDURE ASSUMPTIONS USED FOR FURNACE FANS STANDARDS ANALYSIS Assumed average number of hours Constant-circulation fan use Estimated share of homes in north and south-hot dry regions (percent) Estimated share of homes in south-hot humid region (percent) 0 7290 1097 541 365 84 7 2 2 5 97 1 0.4 0.4 1 Total ...................................................................................................................................... mstockstill on DSK4VPTVN1PROD with RULES2 No constant fan ........................................................................................................................... Year-round ................................................................................................................................... During heating season ................................................................................................................. During cooling season ................................................................................................................. Other (some constant fan) ........................................................................................................... ........................ 100 100 Morrison stated that not all the energy used in circulation is wasted heat because the energy consumed for circulation during the heating season is useful energy. Morrison recommended that for a more accurate analysis of energy use in circulation mode, DOE should split heating and cooling hours. (Morrison, No. 108 at p. 2) DOE adjusted its analysis so that heat generated by constant-circulation fan operation reduces furnace heating energy use in the heating season, and in the cooling season, it adds to the operating hours of the air conditioner. In the NOPR, 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 did not include furnace fan electricity savings that were counted in DOE’s rulemaking for CAC and heat pump products.35 Several stakeholders stated that DOE may be double-counting energy savings in cooling mode in this rulemaking by accounting for the central air conditioner blower output used for calculating SEER. (JCI, No. 95 at pp. 4– 5; Morrison, No. 108 at p. 2; AHRI, No. 98 at p.6; Goodman, No. 102 at p. 5) EEI stated that a large share of the estimated furnace fan energy savings are a result of the air conditioner and heat pump energy efficiency standards, so some or all of these estimated energy savings should be removed from the furnace fan analyses. (EEI, No. 87 at p. 5) 35 U.S. Department of Energy—Energy Efficiency & Renewable Energy, Final Rule Technical Support Document: Energy Efficiency Standards for Consumer Products: Central Air Conditioners, Heat Pumps, and Furnaces (2011) (Available at: https:// www.regulations.gov/#!documentDetail;D=EERE2011-BT-STD-0011-0012). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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 a BPM motor-driven fan in the furnace to achieve that efficiency level. The basecase efficiency distribution of fans used in the current analysis includes the presence of those BPM 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. Morrison stated that any reduction in energy use by the fan from this rulemaking would be a de facto improvement in SEER and an unlawful change to the current SEER regulations. It noted that if there is no change to SEER, then there will be no energy savings when operated in the cooling mode. (Morrison, No. 108 at p. 2) A reduction in energy use by the furnace fan resulting from this rulemaking would improve the CAC operating efficiency (for homes with both furnace and CAC), but DOE is not increasing the energy conservation standard for CAC or requiring a change to the reported current SEER ratings for CAC. DOE has clear and explicit statutory authority to regulate furnace fans under 42 U.S.C. 6295(f)(4)(D), and any related improvements to CAC efficiency would simply be an added benefit. 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 PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 Wisconsin 36 to estimate the extent to which increased use of constant circulation under a standard requiring BPM furnace fans is likely to cancel out some of the savings from such a fan. The specific assumptions are described in chapter 7 of the final rule TSD. Commenting on the average energy use estimates reported in the final rule TSD, EEI stated that the baseline energy use values seem to be overstated, because baseline values reported in the market and technology assessment are lower than what was used in following analyses. Consequently, the estimated energy savings and energy cost savings are overstated as well, because they are shown in the NOPR as percentage savings based on the design options. (EEI, No. 87 at pp. 4–5) Goodman believes that the calculated baseline values, and thus the projected energy savings, are too high based on product testing for the April 2013 test procedure SNOPR. (Goodman, No. 102 at p. 8) The baseline values reported in the market and technology assessment are based on the test procedure. The energy use analysis is not based on test procedure conditions, but instead reflects actual usage in the field, which is more appropriate for estimating the impacts of higher furnace fan efficiency on consumers. Therefore, the estimated energy savings and energy cost savings are not overstated. JCI and AHRI stated that DOE needs to ensure that it avoids double-counting energy consumption associated with standby mode, noting that there is no standby mode and off mode energy use associated with furnace fans that would 36 State of Wisconsin, Public Service Commission of Wisconsin, Focus on Energy Evaluation Semiannual Report, Final (April 8, 2009) (Available at: https://focusonenergy.com/sites/default/files/ semiannualreport18monthcontractperiodfinal revisedoctober192009_evaluationreport.pdf). E:\FR\FM\03JYR2.SGM 03JYR2 38164 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 not already be measured by the established test procedures, because they are integrated in the electrical systems of the HVAC products in which they are used. (JCI, No. 95 at p. 5; AHRI, No. 98 at p. 6) 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 accounted for in the energy conservation standards for residential furnaces and residential CAC and HP. Accordingly, DOE did not include standby mode and off mode energy use associated with furnace fans in the present analysis. Consequently, there should not be any problems associated with double-counting of standby mode and off mode energy consumption. 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 final rule 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 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 commerciallyavailable software program used to conduct stochastic analysis using Monte Carlo simulation and probability distributions) to account for uncertainty and variability among the input 1. Installed Cost The installed cost at each efficiency level is based on the product price, distribution chain markups, sales tax, and installation cost. The current product price comes from the engineering analysis. DOE believes that price trends for integral horsepower electric motors are a reasonable proxy for trends in prices of furnace fans, and for the NOPR DOE evaluated the historic real (i.e., adjusted for inflation) producer price index (PPI) of such motors. DOE found that this index has been decreasing except for the last few years, when it started to increase (see appendix 10–C of the final rule TSD). Given the uncertainty about whether the recent trend will continue or instead revert to the historical mean, DOE elected to use constant prices at the most recent level as the default price assumption to project future prices of furnace fans. 78 FR 64068, 64096 (Oct. 25, 2013). Morrison stated that motor prices have remained flat in the last decade because production of motors moved offshore and foreign competitors entered the marketplace. It stated that in the coming decades, motor prices will increase at the rate of long run prices for commodities (e.g. copper, steel, aluminum). (Morrison, No. 108 at p. 2) Goodman believes that it is incorrect to use constant prices at the most recent level of motor cost, which has shown a recent increasing trend, as the default price assumption to project future prices of furnace fans. (Goodman, No. 102 at p. 9) DOE continues to believe that it is unclear whether the increasing trend in motor prices since 2004 will continue in the future. Part of the recent growth in prices of commodities used in motors was due to strong demand from China. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 Current projections envision slower growth in China, which would likely dampen commodity prices. Given the uncertainty, DOE continued to use constant prices at the most recent level as the default price assumption for the final rule. For the NIA, DOE also conducted sensitivity analysis using alternative price growth assumptions. Because furnace fans are installed in furnaces in the factory, there is generally no additional installation cost at the home. However, furnace fans that employ a constant-airflow BPM design may require additional installation costs. DOE assumed that all constantairflow BPM furnace fan installations will require extra labor at startup to check and adjust airflow. Goodman stated that it is acceptable for relative product cost comparison to include costs only for the components of the HVAC product that impact FER in the manufacturing cost, but it disagrees with using the cost of only the furnace fan portion of the furnace in the LCC, GRIM, and other aspects of the financial analysis. The real upfront costs for the consumer will be significantly higher (likely two to four times more) than DOE has included in the analysis using only the furnace fan portion. (Goodman, No. 102 at p. 9) DOE believes that the commenter is claiming that the consumer will face higher costs when buying a furnace because the proposed furnace fan standards would require changes in furnace design. As discussed in section IV.B.1, DOE screened out fan housing and airflow path design modifications from further analysis. Accordingly, it is unlikely that significant changes in furnace design would be required to accommodate furnace fans that meet today’s standards. Therefore, DOE concludes that using the incremental costs of the furnace fan portion is reasonable. 2. Operating Costs To estimate the annual energy costs for operating furnace fans at different efficiency levels, DOE used the annual energy use results from the energy use analysis and projections of residential energy prices. DOE derived average monthly energy prices for a number of geographic areas in the United States using the latest data from EIA 37 and monthly energy price factors that it 37 U.S. Department of Energy—Energy Information Administration, Form EIA–826 Database Monthly Electric Utility Sales and Revenue Data, 2013. https://www.eia.doe.gov/cneaf/ electricity/page/eia826.html; U.S. Department of Energy—Energy Information Administration, Natural Gas Navigator. 2013. https:// tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_ m.htm. E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations developed. Electricity and natural gas prices were adjusted using seasonal marginal price factors to come up with monthly marginal electricity and natural gas prices. DOE assigned an appropriate price to each household in the sample, depending on its location. Laclede stated that using average utility rates leads to significantly overstating consumer savings. DOE should use marginal energy rates in its consumer energy savings calculations. (Laclede, No. 86 at p. 4) As described above, DOE did derive marginal electricity and natural gas prices based on recent data. (For a discussion of the development of marginal energy price factors, see appendix 8–C of the final rule TSD). To arrive at marginal prices in future years, DOE multiplied the current marginal prices by values in the Reference case projection of annual average residential electricity and natural gas price changes in EIA’s AEO 2013. The price trends projected in the AEO 2013 Reference case are shown in chapter 8 of the final rule TSD. For electricity prices, which are primarily of interest in this rulemaking, the AEO 2013 projection shows the average residential price growing from 0.119 $/kWh in 2020 to 0.122 $/kWh in 2030 and 0.131 $/kWh in 2040 (constant dollars). To estimate annual maintenance costs, DOE derived labor hours and costs for annual maintenance from RS Means data.38 The frequency with which the maintenance occurs was derived from a consumer survey 39 on the frequency with which owners of different types of furnaces perform maintenance. For the NOPR, DOE used the same maintenance costs for furnace fans at different efficiency levels. 78 FR 64096. Goodman stated that it is invalid to assume that the maintenance costs for all efficiency levels are the same regardless of technology, as higher technology products will take a higher skill level of technician, and will require more costly equipment for service than baseline products. (Goodman, No. 102 at p. 9) Allied Air stated that in shifting from a primarily single-stage PSC market to multistage constant torque, the maintenance cost could be two to three times current costs. (Allied Air, No. 43 at pp. 252– 253) 38 RS Means Company Inc., Means Facilities Maintenance & Repair Cost Data. 2012. Kingston, MA. 39 Decision Analysts, 2008 American Home Comfort Study: Online Database Tool, 2009. Arlington, Texas. https://www.decisionanalyst.com/ Syndicated/HomeComfort.dai. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 DOE understands that furnace fans require very little maintenance, and it did not find any evidence that there is any additional maintenance cost associated with higher efficiency equipment. It seems likely that the commenters are including repair costs under the term ‘‘maintenance.’’ DOE’s treatment of repair costs is discussed below. The most important element of repair costs for furnace fans is replacement of the fan motor. For the NOPR, 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). DOE then paired these data with the calculated number of annual operating hours for each sample furnace, including constant circulation as appropriate. DOE did not have a firm basis for quantifying whether constant-torque BPM motors and constant-airflow BPM motors have different failure rates than PSC motors. Thus, it 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 constanttorque BPM and constant-airflow BPM motors because they are more frequently used in multi-stage heating mode). 78 FR 64097. Rheem stated that DOE did not justify the assumption that furnace fan motor lifetimes are equal to furnace lifetimes. (Rheem, No. 83 at p. 4) DOE modeled overall furnace fan lifetime based on furnace lifetimes (see discussion below), but it used the approach described above for furnace fan motor lifetime. Morrison stated that multi-staged BPM assemblies will have longer operating times within a given period (to account for lower fire rates and heat output) and therefore, all else being equal, will have a shorter life expectancy. (Morrison, No. 108 at p. 5) DOE’s approach is consistent with the comment; a multi-staged BPM motor has a shorter lifetime measured in years. A number of stakeholders stated that failure rates are higher for BPM motors than for PSC motors, leading to shorter lifetime. Rheem stated that the PSC motor life, which it estimated to be 15 years, is much longer than the BPM motor life. (Rheem, No. 83 at pp. 2 and 13) Mortex stated that, based on their experience, BPM lifetime is half that of PSC motors. (Mortex, No. 104 at p. 2) Lennox estimated that constant-airflow BPM motors have failure rates that are 50% higher than PSC motors at 5 and 10 years, and furnaces with constanttorque BPM motors have failure rates that are 385% higher than PSC motors PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 38165 at 5 and 10 years. (Lennox, No. 100 at p. 8) Ingersoll Rand stated that its data indicate that BPM motors fail at 2.3 times the rate of PSC motors in the 5 to 10 year time frame. (Ingersoll Rand, No. 107 at pp. 6–7) AHRI stated that the failure rate for a high efficiency motor is typically higher than that of a PSC motor because the electronics added to a high efficiency motor introduce additional failure modes associated with the life of electronic controls in damp, very cold and very hot conditions. AHRI has collected data from manufacturers that show that the failure rates associated with constant-torque BPM and constant-airflow BPM technologies are higher than PSC motors over an extended time period. (AHRI, No. 98 at p. 7) Morrison and Ingersoll Rand cited recent data from an AHRI survey of manufacturers that indicate failure rates at 1, 5 and 10 years are 24%, 87% and 165% greater for BPM motors than PSC ones. (Morrison, No. 108 at p. 5, Ingersoll Rand, No. 107 at p. 6) JCI stated that, based on an analysis of JCI’s residential warranty data, failure rates associated with constant-torque BPM and constant-airflow BPM technologies are significantly higher than those experienced by standard PSC motors due to the added electronic controls that are required as part of the BPM motor designs, which are more susceptible to failure due to power fluctuations and other factors. (JCI, No. 95 at p. 7) Ingersoll Rand stated that repair of the electronics is not possible for the constant-torque BPM motors available today, so an electronics failure will result in a complete motor replacement. (Ingersoll Rand, No. 107 at pp. 7–8) In contrast, NEEA and NPCC believe that the NOPR analysis assumptions may unfairly penalize BPM motors, as the Department has insufficient data to properly estimate the frequency and nature of BPM motor repair. (NEEA, NPCC, No. 96 at p. 5) DOE notes that BPM motors had higher level of failure in the late 1990s and early 2000s when the electronics technologies went through major renovations. The comments from furnace manufacturers may reflect this past experience. For example, the cited data from an AHRI survey of manufacturers would reflect BPM technology in the early 2000s. For the final rule, DOE searched for more information on the lifetime of BPM and PSC motors. This information (discussed in appendix 8–E) suggests that BPM and PSC motors have similar lifetimes, as BPM designs have improved over the years. While BPM motor designs could have additional failures due to the additional controls or E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38166 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations electronics, furnace fan motor manufacturers claim longer mechanical life for BPM designs due to better bearings and less heat generated by inefficiency. Between now and the compliance date, future BPM motor enhancements could further strengthen product reliability and reduce failures. In this analysis, DOE assumes higher failures for BPM designs due to longer operating hours (because of multi-stage operating at more hours and more constant circulation operation of BPM motors), as well as additional control failures. For example, DOE estimates that 43% for BPM constant torque multi-stage designs experience failure during the lifetime of the furnace, compared to 35% of PSC designs. Recognizing that there exists some uncertainty regarding the lifetime of BPM motors, DOE conducted a sensitivity analysis using alternative assumptions, as requested in a comment by Mortex. (Mortex, No. 43 at pp. 264– 265) This analysis is described in appendix 8–E of the final rule TSD. For the NOPR, the replacement motor costs were based on costs developed in the engineering analysis for each motor type, and the labor time and unit costs were based on RS Means data.40 78 FR 64097. 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. DOE assumed that when replacement is necessary, consumers replace the failed motor with the same type of motor. A number of stakeholders stated that the replacement cost of BPM motors is higher than the cost DOE used in its analysis. (Morrison, No. 108 at p. 2; Goodman, No 102 at p. 8; APGA, No. 110 at p. 3) Mortex stated that DOE substantially underestimated BPM replacement costs, which in its experience are 2–3 times that of a PSC. (Mortex, No. 104 at p. 2) Ingersoll Rand stated that replacement costs are significantly underestimated for constant-torque BPM and constantairflow BPM motors. It added that the difference between PSC motor replacement and constant-torque BPM motor replacement should be at least $225, and the PSC to constant-airflow BPM difference should be at least $295. (Ingersoll Rand, No. 107 at pp. 7–8) JCI stated that outside the warranty periods (typically 10 years for parts), ECM motors can cost 3 to 5 times the replacement costs of PSC motors due to the complexity of those motors and the 40 RS Means Company Inc., RS Means Residential Cost Data (2012); RS Means Company Inc., Facilities Maintenance & Repair Cost Data (2012). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 electronic controls required to use them. (JCI, No. 95 at p. 6) The replacement equipment cost of BPM and PSC motors used in DOE’s LCC analysis is based on costs derived in the engineering analysis, which DOE believes are accurate. It is possible that the stakeholders believe that the higher BPM replacement costs are largely due to extra labor charges by contractors. DOE determined that for a constant torque BPM motor any such extra charges would be minimal. In the analysis for today’s final rule, on average the replacement cost is $407 for a constant torque multi-stage BPM (EL 4) and $356 for the PSC design (EL 0). Several stakeholders stated that the replacement cost of an aftermarket furnace fan is 2–3 times higher than DOE’s estimated manufacturer production costs for low-volume product classes. They added that DOE’s material cost estimate of $0.00 for furnace fan replacements is incorrect. (JCI, No. 95 at p. 6; Morrison, No. 108 at p. 5; AHRI, No. 98 at p. 8; Lennox, No. 100 at p. 8; Unico, No. 93 at p. 5) DOE believes that the first comment above refers to a replacement motor. DOE applies markups to the motor MPC, such that the cost to the consumer is two to three times higher than the MPC. The material cost is listed as $0.00 in the cited tables because these tables refer to labor costs only (as stated in the table captions). Ingersoll Rand stated that motors that fail in-warranty are not free, as standard product warranties in the HVAC industry cover parts only, and do not typically include labor charges, which the homeowner must pay. (Ingersoll Rand, No. 107 at p. 7) DOE excluded labor charges only if the consumer has a service contract or if the motor fails the first year (which is rare). Southern Company stated that DOE unrealistically considered component failures as independent events rather than interdependent ones. It stated that in actual consumer settings, rather than a lab, it is likely that a capacitor failure will not be detected until it results in a motor failure. (Southern Company, No. 85 at p. 3) Undetected capacitor failure that leads to motor failure (as may occur for PSC motors) is reflected in DOE’s distribution of motor lifetimes. 3. Furnace Fan Lifetime DOE used the same modeling for furnace fan lifetime (meaning the life of the overall equipment not including the motor) as in the NOPR.78 FR 64097. Chapter 8 of the final rule TSD describes the approach. DOE used the same lifetime for furnace fans at different efficiency levels because there are no PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 data that indicate variation of lifetime with efficiency. For the NOPR analysis, DOE assumed that the lifetime for the fans installed in electric furnaces and gas furnaces is the same. Rheem stated that the lifetime of a residential furnace fan is limited by the lifetime of the electronic control, and advanced controls may shorten the lifetime of the product. (Rheem, No. 83 at pp. 6, 13) JCI stated that the repair costs for furnace fans are generally the cost of replacing the motors used, as there are very few failures of fan components other than the motor. (JCI, No. 95 at p. 6) DOE believes that with current technology there are few failures of the electronic control, as stated by JCI. DOE also expects that the reliability of the electronic controls is likely to increase as the technology matures. Nonetheless, DOE accounts for failure of capacitors and motor electronic controls in its repair cost analysis. APGA stated that 23.6 years lifetime for gas-fired furnace fans in the LCC analysis is unrealistic, and DOE should employ more realistic furnace fan lives based on documented motor lives. (APGA, No. 110 at p. 3) It would appear that APGA misinterpreted DOE’s approach. Motor failure, which occurs on average at around 15 years, is counted as a repair cost. However, DOE believes that the rest of the furnace fan would last as long as the furnace itself. Southern Company stated that because the analysis shows at least 50% greater shipments of furnace fans than furnaces, the data seems to indicate a shorter lifetime for furnace fans than furnaces. (Southern Company, No. 85 at p. 3) DOE did not calculate the shipments of furnace fans. Since furnace fans are a component of furnaces, the shipments in the NIA analysis are limited to furnace shipments only. 4. Discount Rates For the NOPR, DOE used distributions of discount rates based on a variety of financial data. 78 FR 64097. For replacement furnaces, the average rate was 5.0 percent. Miller stated that, based on a literature review of consumer discount rates for energy-using durables, the 3percent and 7-percent discount rates used in the analysis only represent highincome households; other consumers may use much higher discount rates. Consumers with higher discount rates— including median-income Americans, low-income Americans, and the elderly—are much less likely to benefit from higher efficiency furnace fans. (Miller, No. 79 at pp. 10–13) E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations DOE uses 3-percent and 7-percent discount rates to measure net consumer benefits from energy efficiency standards from a national perspective (see section IV.H). DOE recognizes that a wide range of discount rates may be appropriate for consumers, and thus it uses distributions of discount rates when it evaluates consumer impacts in the LCC analysis. For the final rule, DOE developed specific distributions of discount rates for each of six consumer income groups. Chapter 8 of the final rule TSD describes the approach. The estimated impacts of today’s standards on low-income households are discussed in section V.B.1.41 5. Compliance Date mstockstill on DSK4VPTVN1PROD with RULES2 In the NOPR, DOE proposed a 5-year compliance date for residential furnace fan standards. 78 FR 64103. A number of stakeholders encouraged DOE to adopt a three-year period between the final rule publication and the compliance date rather than the five years proposed in the NOPR. (ACEEE, No. 94 p. 6; NEEP, No. 109 at p. 2; Earthjustice, No. 101 at p. 3; CA IOU, No. 106 at p. 3; Joint Advocates, No. 105 at p. 4; NEEA, NPCC, No. 96 at p. 3) ACEEE, CA IOU, the Joint Advocates, and NEEA and NPCC stated that the technologies assumed to be required to meet TSL 4 are well-established in the market and commercially available. (ACEEE, No. 94 at p. 6; CA IOU, No. 106 at p. 3; Joint Advocates, No. 105 at p. 4; NEEA, NPCC, No. 96 at p. 3) NEEP stated that three years should provide adequate time for manufacturers to adjust product lines. (NEEP, No. 109 at p. 2) The Joint Advocates stated that constant-torque BPM motors are essentially drop-in replacements for PSC motors, and capital conversion costs are not required. (Joint Advocates, No. 105 at p. 4) NEEA and NPCC believe that three years of lead time should be sufficient to allow a ramping up of motor manufacturing capacity and a gradual shift of air handler manufacturing lines to incorporate them. The technology required to meet the TSL 4 standards requires little more than expansion of current production 41 The comment refers to high discount rates based on studies of implicit consumer discount rates using the purchase of energy-using durables (such as air conditioners, dishwashers, and refrigerators) to measure consumer time preferences. While these studies of implicit consumer discount rates provide a way of characterizing consumer behavior, they do not necessarily measure consumer time preferences. What appears to be low valuation of future energy cost savings from higher-efficiency appliances instead may be partially a result of lack of information on the magnitude of savings or inability to evaluate the available information. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 38167 capacity for these models, which mostly means buying different furnace fan motors and the associated controls. (NEEA, NPCC, No. 96 at p. 3) Earthjustice stated that DOE must choose a compliance date based on an assessment that includes a consideration of factors beyond the impact on manufacturers. (Earthjustice, No. 101 at p. 3) JCI, Morrison, AHRI, Lennox, and HARDI support the five-year period between the final rule publication and the compliance date as proposed in the NOPR. (JCI, No. 95 at p. 2; Morrison, No. 108 at p. 2; AHRI, No. 98 at p. 2; Lennox, No. 100 at p. 4; HARDI, No. 103 at p. 2) JCI, AHRI, and Lennox stated that to comply with the proposed standard, manufacturers would not only have to alter the designs and fabrication processes for the furnace fan assembly but also modify the broader product design of the furnaces, air handlers, modular blowers, and residential single package units that include those furnace fans. (JCI, No. 95 at p. 2; AHRI, No. 98 at p. 2; Lennox, No. 100 at pp. 4–5) AHRI stated that similar products that require similar actions for compliance typically have lead times of five years. (AHRI, No. 98 at p 2) Ingersoll Rand agrees with AHRI’s comments. (Ingersoll Rand, No. 107 at p. 11) DOE continues to believe a 5-year lead time is appropriate. Since EPCA does not mandate a specific lead time for furnace fan standards, DOE considered the actions required by manufacturers to comply with today’s standards. As discussed in the NOPR, 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. 78 FR 64103. To comply with the standards, 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 lead time, which would place the compliance date in 2019. For the purposes of the LCC and PBP analysis, DOE assumed that all relevant consumers purchase a furnace fan in 2019. 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 NOPR, DOE reviewed the information provided by the manufacturers and estimated that the combined market share of constanttorque BPM fans and constant-airflow BPM fans will be 35 percent in 2019. The shares are 13 percent for constanttorque BPM fans and 22 percent for constant-airflow BPM fans. DOE estimated separate shares for replacement and new home applications.78 FR 64097. 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.42 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. Id No comments were received on the base case efficiency distribution, and DOE retained the NOPR assumptions for the final rule. The details of DOE’s approach are described in chapter 8 of the final rule TSD. 6. Base-Case Efficiency Distribution To estimate the share of consumers that would be affected by an energy conservation standard at a particular 42 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. PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 7. Payback Period To calculate PBPs for the considered efficiency levels, DOE uses the same inputs as for LCC analysis, except that discount rates are not required. Goodman stated that not including repair costs from later years in the PBP does not provide a realistic picture of what most consumers will face. It noted that while repair costs later in the product life cycle may allow the initial investment to balance out faster, the overall life-cycle costs can be very negatively impacted by such repairs. (Goodman, No 102 at p. 10) DOE recognizes that the PBP metric does not provide a complete assessment of all costs that consumers may face, but it has found that the results are of interest in standards rulemakings. The LCC analysis does include all costs, and in part for this reason, DOE expresses the share of consumers who benefit E:\FR\FM\03JYR2.SGM 03JYR2 38168 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 from standards in terms of the change in LCC. 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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. For the final rule, DOE used AEO 2013 for projections of new housing. Furnace saturation rates in new housing are provided by the U.S. Census Bureau’s Characteristics of New Housing.43 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. Lennox stated that the shipment projections do not appear to be supported by the record or recent sales figures, as historical shipments data from AHRI for gas and oil warm air furnaces show a downward trend in shipments. (Lennox, No. 100 at pp. 6– 7) AHRI stated that DOE’s shipment projections are inaccurate and the projected numbers significantly skew the national energy savings estimates. (AHRI, No. 98 at pp. 4–5) DOE’s shipments projections are based on replacement of furnaces installed over the past few decades and furnaces installed in future new homes. Most of the recent downward trend in shipments is due to lower new construction in the wake of the financial crisis. DOE updated historical shipments with 2013 data, which shows a growth in gas furnace shipments. DOE also updated the new construction forecast based on AEO 2013 projections, which reflect improving economic conditions and a future increase of the new construction market. In addition, the replacements reflect an updated furnace retirement function based on the latest furnace lifetime data. Oil furnace shipments are projected to continue to drop in the future. JCI and AHRI stated that the projected shipments should account for an echo effect loss in replacement sales for the furnaces that were not sold in the years 2008–2012. (JCI, No. 95 at p. 10; AHRI, No. 98 at pp. 4–5) The projection for today’s final rule shows a lower level of 43 Available at: https://www.census.gov/ construction/chars/. PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 replacement shipments in the 2025– 2030 period, which is a consequence (i.e., an echo) of the decline in historical shipments in 2006–2009. JCI believes that the shipment projections for furnaces are too optimistic. It noted that during the years prior to 2006, demand for large homes with multiple furnace systems was more common than it is today. (JCI, No. 95 at pp. 9–10) Mortex stated that forecasts of future shipments are unrealistically high because new homes are smaller and less likely to have two furnaces. (Mortex, No. 104 at p. 3) In DOE’s final rule analysis, DOE assumed that new homes would not have multiple furnaces. 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 estimate the impact on shipments of the price increase for the considered efficiency levels, DOE used a relative price elasticity approach. This approach also gives some weight to the operating cost savings from higher-efficiency products. Ingersoll Rand stated that the shipment projections do not account for a drop off in sales due to higher furnace prices that will result from using more expensive components. (Ingersoll Rand, No. 107 at p. 9) The comment is incorrect; the relative price elasticity approach does estimate the impact on shipments of the price increase for the considered efficiency levels for the NOPR and the final rule. Several stakeholders raised issues with DOE’s relative price elasticity approach. They stated that the household income data and data used to derive the elasticity are outdated and do not reflect current trends, and the household appliances used to derive the relative price elasticity (refrigerators, clothes washers and dishwashers) are inappropriate for this rulemaking. (JCI, No. 95 at p. 10; Morrison, No. 108 at p. 8; AHRI, No. 98 at pp. 12–13; Goodman, No. 102 at p. 13) Rheem expressed similar concerns. (Rheem, No. 83 at p. 12) In response, DOE notes that there are very few estimates of consumer demand elasticity for durable goods. Although the data that DOE used to estimate relative price elasticity are not current, and the analysis focused on products that differ from furnaces, DOE believes that consumer behavior with respect to the impact of higher appliance price on E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 demand is not likely to have changed significantly. One recent paper suggests that demand elasticity for air conditioners is inelastic—holding efficiency constant, a 10% rise in price leads to a 1.4% decline in sales.44 This is a lower elasticity than DOE uses in its analysis. Therefore, DOE believes that it is reasonable to use the relative price elasticity approach for today’s final rule. See chapter 9 in the final rule TSD for a description of the method. Mortex stated that a big increase in the installed cost of a new furnace under the proposed energy conservation standards will lead many consumers to repair rather than replace with a new furnace. (Mortex, No. 104 at p. 3) In terms of the overall cost of a new furnace, the increase attributable to using a more energy-efficient furnace fan is relatively small—less than 10 percent—for fans meeting today’s standards. In any case, the price elasticity approach described above captures the potential consumer response to higher furnace prices, which often would consist of choosing to repair an existing furnace rather than replace it with a new furnace. AGA urged the Department to include a robust fuel switching analysis, including the competing economics of natural gas furnaces versus both electric furnaces and heat pumps. (AGA, No. 110 at p. 3) There is a possibility that for some consumers considering replacement of a non-condensing gas furnace, the higher price of a gas furnace due to today’s standards could lead to some switching to heat pumps. However, this switching would only occur if the CAC is replaced at the same time as the furnace. Furthermore, switching to a heat pump would require additional cost to install backup electric resistance heating elements. Based on the above considerations, DOE believes that any switching to heat pumps due to today’s standards would be minimal. The standards would not create any incentive to switch to electric furnaces because electric furnaces are subject to the furnace fan standard and would see a similar incremental cost as a gas furnace. 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 44 David Rapson. Durable Goods and Long-Run Electricity Demand: Evidence from Air Conditioner Purchase Behavior. Department of Economics, University of California, Davis. Available at: www.econ.ucdavis.edu/faculty/dsrapson/Rapson_ LR_electricity.pdf. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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). 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 constantairflow BPM motor furnace fans. The NOPR analysis assumes a long-run trend that results in market share of the constant-torque BPM and constantairflow BPM furnace fans reaching 45 percent in 2048. 78 FR 64099. No comments were received on this issue and DOE retained the same approach for the final rule. For the NOPR, 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) Products with 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) products with efficiencies above the standard level under consideration would not be affected. Id. Rheem stated that DOE’s assumption that the sale of premium products above the standard level will be unaffected is unreasonable. (Rheem, No. 83 at p. 3) DOE acknowledges that the market PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 38169 shares of fans with efficiency levels above a given standard level could change after compliance with the new standards is required. Estimating how manufacturers will respond to new standards with regard to their marketing strategy for ‘‘above-standard’’ products is very difficult, however. Rather than speculate, DOE believes that it is preferable to retain a roll-up scenario for today’s final rule. For the standards cases, the assumed efficiency trend after the compliance year varies depending on the particular standard. For the case with today’s standards, the overall BPM motor market share goes to 100 percent in 2019 and remains at that level. The shares of the specific BPM motor designs (i.e., constant-torque BPM, constant-torque BPM motor + multistage, constant-airflow BPM motor + multi-stage, and constant-airflow BPM motor + multi-stage + backwardinclined impeller) remain at the levels of 2019. The details are provided in chapter 10 of the final rule TSD. 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. Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis. DOE calculates primary energy savings (power plant consumption) from site electricity savings by applying a factor to account for losses associated with the generation, transmission, and distribution of electricity. For the NOPR, DOE derived marginal site-topower plant factors based on the version of the National Energy Modeling System (NEMS) that corresponds to AEO 2012. 78 FR 64099. The factors change over time in response to projected changes in the types of power plants projected to provide electricity to the country. E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38170 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations Commenting on DOE’s approach, AGA stated that it is highly unlikely and unrealistic that all of the projected changes in types of power plant used to generate electricity in this country will occur between 2019 and 2021 and that essentially no change will occur from 2031 through 2048. AGA stated that realistic trend lines to 2048 including a linear forecast of declining site-to-power plant energy use should be provided. (AGA, No. 110 at p. 3) For the final rule, DOE derived siteto-power plant factors based on the version of NEMS that corresponds to AEO 2013. As shown in Figure 10.3.1 in the final rule TSD, the factor (expressed as primary energy per site kWh) declines through 2030 as more efficient power plants gain share in power generation. After 2035, there is an increase due to lower projected share of highly-efficient combined-cycle power plants. DOE acknowledges that projections after 2035 are uncertain, but it believes that NEMS provides a reasonable projection. DOE has historically presented NES in terms of primary energy savings. In response to the recommendations of a committee on ‘‘Point-of-Use and FullFuel-Cycle Measurement Approaches to Energy Efficiency Standards’’ appointed by the National Academy of Science, DOE announced its intention to use fullfuel-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). After evaluating 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 the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (August 17, 2012). The approach used for today’s final rule is described in appendix 10–C of the final rule TSD. JCI and AHRI stated that, for cooling mode, the NIA spreadsheet model does not indicate how DOE used the average annual electricity use values from the energy use analysis to determine national energy savings. (JCI, No. 95 at pp. 4–5; AHRI, No. 98 at p. 6) In the NIA spreadsheet, the LCC Inputs worksheet shows how the average annual electricity use values are used over the analysis period. Several stakeholders questioned the accuracy of the doubling in FFC energy savings from TSL 3 to TSL 4 from an incremental efficiency level improvement of 8 percent for five of the product classes from adding the multi- VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 staging option. (JCI, No. 95 at p 4; EEI, No. 91 at pp. 307, 309; Morrison, No. 108 at p. 4; AHRI, No. 98 at pp. 4–5; Lennox, No. 100 at p. 2; Ingersoll Rand, No. 107 at p. 9) Similarly, AHRI stated that if the effect of multi-staging was indeed prominent enough to nearly double the estimated FFC energy savings between TSLs 3 and 4, DOE should have evaluated this effect for PSC motors as well. (AHRI, No. 98 at p. 5) Morrison stated that for nonweatherized gas furnace fans, it is inconsistent that TSL 4 could produce a very large increase in FFC energy savings over TSL 3 while TSL 2 and 3 have the same national energy savings; compared to the difference in energy use between TSL 2 and TSL 3, TSL 4 has a much lower incremental average electricity savings and higher additional fuel use compared to TSL 3. (Morrison, No. 108 at p. 4) For the final rule, DOE incorporated new test data on the fan efficiency levels that were included in TSL 3 (constant torque BPM motors) and TSL 4 (constant torque BPM motors (multistage)). These data contributed to a decrease in efficiency for TSL 4 (see section IV.C.1) With this change, the increase in savings from TSL 3 to TSL 4 is now smaller than in the NOPR. The NIA results are presented in section V.B.3. Several stakeholders stated that it is implausible that the furnace fan standard will save about as much energy as the 2006 13 SEER rulemaking (76 FR 7185) or the 2013/2015 90% AFUE furnace and 14 SEER rulemaking (76 FR 37412). (AHRI, No. 98 at p. 6; Ingersoll Rand, No. 107 at p. 9; Lennox, No. 100 at p. 2; Goodman, No. 102 at p. 6) Ingersoll Rand stated that the energy savings from the proposed rule claim to be greater than savings from the 13 SEER rule, but the energy savings of a furnace switching from a PSC motor to a constant torque BPM is nearly an order of magnitude less than the energy use of the furnace or heat pump. (Ingersoll Rand, No. 107 at p. 9) DOE reviewed the methodology used to assess the energy savings estimated for the proposed standards, as discussed in previous parts of this notice, and believes that the energy savings estimated for the considered TSLs are reasonable. Comparison with other rules must be done with caution, as the savings in those rules depends on both the stringency of the standards and the base case that was chosen in the analysis. The fact that the energy savings of a furnace switching from a PSC motor to a constant torque BPM is much less than the energy use of the furnace or heat pump is not relevant to PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 the energy savings associated with standards for furnaces or heat pumps. 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 final rule 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 7percent 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.45 The NPV results for the residential furnace fan TSLs are presented in section V.B.3 of this document. I. 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). 45 OMB Circular A–4 (Sept. 17, 2003), section E, ‘‘Identifying and Measuring Benefits and Costs.’’ E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations The purpose of a consumer subgroup analysis is to determine the extent of any such disproportional impacts. For today’s final rule, 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 document. mstockstill on DSK4VPTVN1PROD with RULES2 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 final rule 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,46 corporate annual reports, the U.S. Census 46 U.S. Securities and Exchange Commission, Annual 10–K Reports (Various Years) (Available at: https://sec.gov). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 Bureau’s Economic Census,47 and Hoover’s reports.48 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 crosssection 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. Section IV.J.4 of the NOPR contains a description of the key issues manufacturers raised during the interviews. 78 FR 64068, 64104–05 (Oct. 25, 2013). 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 maximum of 750 employees. The 750employee threshold includes all employees in a business’s parent 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). 48 Hoovers Inc. Company Profiles (Various Companies) (Available at: https:// www.hoovers.com). PO 00000 47 U.S. Frm 00043 Fmt 4701 Sfmt 4700 38171 company and any other subsidiaries. Based on this classification, DOE identified 15 residential furnace fan manufacturers that qualify as small businesses. The residential furnace fan small manufacturer subgroup is discussed in chapter 12 of the final rule TSD and in section V.B.2.d of this document. 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 cashflow analysis that incorporates manufacturer costs, markups, shipments, and industry financial information as inputs. The GRIM model 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 2014 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 final rule 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 E:\FR\FM\03JYR2.SGM 03JYR2 38172 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 final rule 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 2014 (the base year) to 2048 (the end year of the analysis period). See chapter 9 of the final rule TSD for additional details. mstockstill on DSK4VPTVN1PROD with RULES2 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 final rule 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 would 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 same product in the standards case. See chapter 9 of the final rule 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 nonproduction 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 per unit 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 nonproduction 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.11—MANUFACTURER MARKUP BY RESIDENTIAL FURNACE FAN PRODUCT CLASS Product class Markup 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) .......................................................................................................... Electric Furnace/Modular Blower Fan (EF/MB) ....................................................................................................................................... VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 1.30 1.31 1.27 1.35 1.19 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 38173 TABLE IV.11—MANUFACTURER MARKUP BY RESIDENTIAL FURNACE FAN PRODUCT CLASS—Continued Product class Markup Mobile Home Non-Weatherized, Non-condensing Gas Furnace Fan (MH–NWG–NC) ......................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH–NWG–C) ................................................................................... Mobile Home Electric Furnace/Modular Blower Fan (MH–EF/MB) ........................................................................................................ 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 per unit 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 on a per unit basis. 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 basecase operating profit per unit. The implicit assumption behind this markup scenario is that the industry can only maintain its operating profit in absolute dollars per unit 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 NOPR public meeting, interested parties commented on the assumptions and results of the NOPR analysis TSD. Oral and written comments addressed several topics, including conversion costs, cumulative regulatory burdens, scope of MIA coverage, markups analysis, employment impacts, consumer utility impacts, and impacts on small businesses. a. Conversion Costs Several manufacturers expressed concern regarding the DOE’s estimates of the capital and product conversion costs, including costs relating to testing and certification. Regarding capital conversion costs associated with a furnace fans standard, Goodman commented that DOE’s estimate of zero capital conversion costs at TSL 4 does not properly reflect feedback from manufacturer interviews. (Goodman, No. 102 at p. 10) AHRI stated that the technology option associated with TSL 4 would necessitate changes in manufacturers’ assembly and subassembly production lines, including the modification and/or elimination of current fan housings, heat exchanger types, and furnace 1.25 1.25 1.15 cabinet sizes, at a cost of $103 million for the industry. (AHRI, No. 98 at p. 10) Johnson Controls commented that compliance with the proposed standard would likely require them to make a capital investment ranging from $2.8 million to $4 million. (JCI, No. 95 at p. 2) In the engineering analysis, most of the technology options being considered require only a change in the type of motor used. At the NOPR stage, DOE tentatively concluded that TSLs 1 through 5 would not require manufacturers to incur capital expenditures for new tooling or equipment. However, in response to the above-mentioned public comments received during the NOPR period, DOE has revised its methodology for estimating capital conversion costs at all TSLs for the final rule. DOE incorporated all capital conversion cost values submitted by manufacturers during the course of MIA interviews and used a product listing weighted-average of feedback (based on basic model listings in the AHRI directory) to determine conversion costs for the industry. As a result, capital conversion costs were revised upward at all TSLs, as shown in Table IV.12. TABLE IV.12—FINAL RULE CAPITAL CONVERSION COSTS (CCC) TSL 1 mstockstill on DSK4VPTVN1PROD with RULES2 Total Industry CCCs ($ millions) .............................................................. DOE notes that the conversion costs submitted by AHRI and Johnson Controls are generally consistent with DOE’s estimates of conversion costs at TSL 6 in the final rule. However, without a more detailed breakdown of the conversion costs by TSL from those stakeholders, it was not feasible for DOE to determine the discrepancies in capital conversion cost values or to incorporate their feedback into the GRIM model. With regards to product conversion costs, including costs associated with compliance, certification, and enforcement (CC&E), both Trane and Johnson Controls provided their own estimates in support of the notion that VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 8.8 11.1 11.8 15.1 15.7 134.7 there will be significant testing burden associated with standards compliance. (Trane, No. 107 at pp. 2, 6, and JCI, No. 95 at p. 8) Goodman also stated that investments in additional testing equipment may be required in order to keep pace with current and future testing requirements. (Goodman, No. 102 at p. 11) AHRI and multiple manufacturers commented that the performance standard associated with TSL 4 would require total industry product conversion costs of $6.2 million. (AHRI, No. 98 at p. 10) DOE acknowledges manufacturers’ concerns regarding product conversion cost estimates, including those relating to testing and certification. Similar to PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 the capital conversion cost analysis, DOE refined its final rule modeling of product conversion costs to better reflect information received during manufacturer interviews. DOE used a product listing weighted-average (based on basic model listings in the AHRI directory) to extrapolate individual manufacturer feedback to an industry value for each efficiency level and for each product class. Additionally, for the final rule, DOE explicitly incorporated certification costs into the product conversion cost estimates used in the GRIM. These certification costs occur in the base case and apply in the standards cases. DOE modeled testing and certification costs under the assumption E:\FR\FM\03JYR2.SGM 03JYR2 38174 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations that larger manufacturers have would conduct all FER testing in-house, while small manufacturers would outsource all certification testing. DOE assumed a cost of $175 per test per basic model for large manufacturers (derived from the summary of testing and certification cost calculations and overall product conversion costs. Conversion costs are discussed in detail in section V.B.2.a of today’s document and in chapter 12 of the final rule TSD. test procedure estimate of a maximum of 4 hours per test) (79 FR 500 (Jan. 3, 2014)) and a cost of $2,000 per test per basic model for small manufacturers (77 FR 28674 (May 15, 2012)). See Table IV.13 and Table IV.14 below for a TABLE IV.13—TESTING AND CERTIFICATION COSTS Value General assumptions: [a] Number of FER tests required per Basic Model ......................................................................................................................... [b] Total Industry Number of Basic Models 1 ................................................................................................................................... [c] Number of Basic Models for Large Manufacturers ..................................................................................................................... [d] Number of Basic Models for Small Manufacturers ..................................................................................................................... Large manufacturer assumptions: [e] Labor rate ($/hr) 2 ........................................................................................................................................................................ [f] Time required per test (hours) 3 ................................................................................................................................................... Small manufacturer assumptions: [g] Cost per FER test (outsource) ($) 4 = ......................................................................................................................................... [h] FER costs per model for Large Manufacturer ($) = [a]*[e]*[f] .................................................................................................... [i] FER costs per model for Small Manufacturer ($) = [a]*[g] .......................................................................................................... Total Industry FER costs ($ millions) = [h]*[c] + [i]*[d] ..................................................................................................................... Total Industry FER costs rescaled to account for EF/MB and MH–EF/MB product classes ($ millions) 5 ..................................... 2 2,254 1,943 311 43.73 4 $2,000 $350 $4,000 $1.9 $2.2 1 AHRI Directory: Residential Furnaces. of Labor Statistics, 2012 mean hourly wage for all engineers. 3 2012–05–15 Test Procedures for Residential Furnace Fans; Notice of proposed rulemaking, section IV, part B. 4 2012–05–15 Test Procedures for Residential Furnace Fans; Notice of proposed rulemaking, section IV, part B. 5 The AHRI residential furnaces database does not contain electric furnaces/modular blowers. In order to account for CC&E costs relates to these products (standard and MH), DOE rescaled the $1.9 value by 12%, which is the estimated proportion of shipments for these two categories combined. $2.2 is the value used in the GRIM. 2 Bureau TABLE IV.14—PRODUCT CONVERSION COSTS Baseline Total Number of Basic Models 1 ............................ Average Testing and Certification Costs + R&D Costs per Basic Model ($) ................................. Total Industry PCCs ($ millions) ............................ mstockstill on DSK4VPTVN1PROD with RULES2 1 AHRI TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 2,254 .................. .................. .................. .................. .................. .................. 853 2.2 8,449 18.8 10,577 23.6 11,356 25.3 11,434 25.5 12,157 27.1 13,182 29.4 Directory: Residential Furnaces. b. Cumulative Regulatory Burden Interested parties expressed concern over the cumulative regulatory burden that would result from a residential furnace fan energy conservation standard. AHRI, Morrison, and Lennox commented that DOE did not account for the cumulative impacts of additional DOE regulations, including energy conservation standards or potential standards for commercial and industrial fans and blowers, commercial package air conditioners and heat pumps, and commercial warm air furnaces. The three stakeholders also asserted that DOE did not address testing burdens associated with the recently finalized test procedures for two-stage and modulating condensing furnaces and boilers, and potential updates to test procedures for residential furnaces and boilers. (AHRI, No. 98 at p. 8–9; Morrison, No. 108 at p. 6; Lennox, No. 100 at p. 8) Rheem argued that DOE failed to address cumulative burdens relating to regulations for water heaters, boilers, pool heaters, and commercial VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 refrigeration equipment. (Rheem, No. 83 at p. 14) DOE notes that the energy conservation standard rulemakings for commercial and industrial fans and blowers, commercial package air conditioners and heat pumps, commercial warm air furnaces, water heaters, residential boilers, commercial boilers, and pool heaters are all regulation currently in progress. No standards have been proposed, and no final regulations have been issued for these rulemakings. It is DOE’s policy not to include the impacts of regulatory proposals until the analyses are complete and the standards are finalized. Until such rulemaking is complete, it is unclear what, if any, requirements will be adopted for the products in question. Consequently, it would be speculative to try to include incomplete regulatory actions in an assessment of cumulative regulatory burden. With regard to the test procedure final rule for residential furnaces and boilers published on July PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 10, 2013, the changes have a compliance date of January 6, 2014. 78 FR 41265. Because the regulation goes into effect before 2016, it is outside of the 3-year window set for consideration in the cumulative regulatory burden analysis. With regard to the commercial refrigeration equipment (CRE) energy conservation standard rulemaking, at the time of the residential furnace fan rulemaking NOPR publication, the final rule for CRE standards had not yet been published. The final rule for CRE standards was published on March 28, 2014 and is now included in the final rule cumulative regulatory burden review in section V.B.2.e. 79 FR 17725. Johnson Controls commented that DOE should consider the cumulative impacts of State or local weatherization programs that may be restrictive on HVAC equipment selections, as well as building code standards at State, national, and international levels. In addition, JCI believes DOE should include the impact of commercial product energy efficiency standards, E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations alternate refrigeration requirements, and modifications to existing or the generation of new building performance standards, such as ASHRAE standards. (JCI, No. 95 at p. 7). DOE considers cumulative regulatory burden pursuant to the directions in the Process Rule (10 CFR part 430, subpart C, appendix A). DOE notes that States and localities are generally preempted from requiring HVAC standards beyond the Federal minimum through building codes or other regulatory requirements. Once finalized, Federal commercial energy efficiency standards, alternative refrigeration requirements, and ASHRAE 90.1 standards that go into effect within 3 years of the effective date of today’s standard are considered in the cumulative regulatory burden analysis. AHRI and Morrison commented that DOE failed to provide quantitative estimates of the incremental burden imposed by the additional DOE standards impacting furnace fan manufacturers. As a result, both parties do not feel that such impacts were adequately reflected in the GRIM. (AHRI, No. 98 at p. 9, and Morrison, No. 108 at p. 7). In the final rule cumulative regulatory burden section, DOE has provided an explicit review of the conversion costs associated with DOE energy conservation standards that impact the manufacturers covered under the residential furnace fan rulemaking. For more information, please see section V.B.2.e of this document. mstockstill on DSK4VPTVN1PROD with RULES2 c. Scope of MIA Coverage AHRI and Rheem commented that impacts on motor manufacturers should be included in the manufacturing impact analysis. (AHRI, No. 43 at p. 151, and Rheem, No. 83 at p. 6) DOE’s manufacturer impact analysis focuses on the manufacturers that have the direct burden of complying with the energy conservation standard. In this rulemaking, the manufacturer of the residential furnace has the burden of certifying and labeling the furnace fan performance. Motors manufacturers are a component supplier but do not have a direct compliance burden associated with this rule. d. Markups Analysis AHRI provided comments relating to both markup scenarios used in the GRIM. With regards to the preservation of gross margin percentage markup scenario, AHRI commented that it is unreasonable for DOE to assume that, as manufacturer production costs increase in response to an energy conservation standard, manufacturers would be able to maintain the same gross margin VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 percentage markup as the base case. (AHRI, No. 98 at p. 10) AHRI continued by commenting that the preservation of operating profit scenario is also inaccurate since it implies that manufacturer markups are set so that operating profit one year after the compliance date of the new energy conservation standards is the same as in the base case. AHRI believes that the one year time period is an extremely optimistic assumption and that a fiveyear time period would be a more realistic average for the industry. (AHRI, No. 98 at p. 10) DOE intends for the preservation of gross margin percentage and preservation of per-unit operating profit markup scenarios to represent the upper and lower bounds for the performance of the industry as a result of new standards. The preservation of gross margin percentage scenario assumes that manufacturers are able to pass on all increases in MPC that result from standards to their first customers. Additionally, the scenario assumes manufacturers are able to maintain the existing markup on the incremental manufacturer production costs that result from the standard, thereby allowing manufacturers to recover portions of their conversion cost investments. The preservation of perunit operating profit scenario assumes that manufacturers are not able to generate greater operating profit per unit sold in the standards case. Additionally, the scenario assumes that manufacturers are not able to recover any of their conversion cost investments. By applying these two scenarios, DOE models examine the range of potential industry impacts that reflect manufacturers’ varying ability to pass costs on to customers and recover conversion costs. The scenario described by AHRI appears to relate to manufacturers’ ability to recover conversion costs, which is likely not possible by one year following the standard year. However, the preservation of operating profit per-unit markup scenario assumes only that manufacturers will maintain the same annual operating profit as in the base case in the year after the standards go into effect. DOE believes that manufacturers’ annual operating profit will be relatively constant in the years following the standard, and, accordingly, the choice between a oneyear and five-year time horizon for this scenario is arbitrary. e. Employment Impacts AHRI and EEI commented that it is unrealistic to assume there would be no reductions in domestic production PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 38175 employment at TSLs 1 through 5. This is because labor costs will increase with higher design options, and, subsequently, manufacturers will try to compensate by reducing labor. (AHRI, No. 98 at p. 10 and EEI, No. 43 at p. 349) Additionally, AHRI commented that subsection 12.7.1 in the NOPR TSD accounts for line-supervisors as production workers who contribute towards the manufacture of furnace fans, but should also account for engineers and managers in supervisory roles who may not be involved in the day-to-day assembly line operations. (AHRI, No. 98 at p. 11) At the NOPR stage, DOE’s employment analysis only provided an upper bound to employment changes. These upper bound impacts were directly correlated to changes in shipments and changes in per-unit labor inputs. For the final rule, DOE uses the same employment model to determine the upper bound of employment impacts. At the lower bound, DOE models the scenario in which all production moves to lower production cost countries. In reference to AHRI’s second comment, DOE does account for non-production workers in the GRIM and presents these results along with revised estimates of domestic production employment in chapter 12 of the final rule TSD. f. Consumer Utility Morrison commented in support of DOE’s previously-stated concern relating to the use of multiple rating systems on a given product. Morrison emphasized that this would indeed lead to consumer confusion. (Morrison, No. 108 at p. 2) DOE understands manufacturer concern relating to multiple ratings. However, DOE is required by legislation to set a separate standard and an associated metric for the covered product, furnace fans. g. Small Businesses In reference to the Regulatory Flexibility Analysis contained in the NOPR, Mortex expressed concern that DOE significantly underestimated capital and product conversion costs. According to Mortex, even at the underestimated level, the calculated impact to small businesses (conversion costs of 5.1 percent of annual revenues) would be highly detrimental. (Mortex, No. 104 at pp. 2–3) DOE has revised its analysis of conversion costs for the final rule. The increase in conversion costs is reflected in the Final Regulatory Flexibility Analysis (FRFA), in section VI.B of this notice. To help portray the magnitude of E:\FR\FM\03JYR2.SGM 03JYR2 38176 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations the conversion costs relative to the size of the average small business, the conversion costs (which are invested over a five-year period) are compared to the financial metric of a single year’s operation. mstockstill on DSK4VPTVN1PROD with RULES2 K. Emissions Analysis In the emissions analysis, DOE estimated 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 (here, furnace fans). 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 (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 51281 (August 18, 2011) as amended at 77 FR 49701 (August 17, 2012)), this FFC analysis also includes impacts on emissions of methane (CH4) and nitrous oxide (N2O), both of which are recognized as greenhouse gases. DOE primarily conducted the emissions analysis using emissions factors for CO2 and most of the other gases derived from data in AEO 2013, supplemented by data from other sources. DOE developed separate emissions factors for power sector emissions and upstream emissions. The method that DOE used to derive emissions factors is described in chapter 13 of the final rule 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 each ton of the greenhouse gas by the gas’s global warming potential (GWP) over a 100year time horizon. Based on the Fourth Assessment Report of the Intergovernmental Panel on Climate Change,49 DOE used GWP values of 25 for CH4 and 298 for N2O. EIA prepares the Annual Energy Outlook using the National Energy 49 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. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 Modeling System (NEMS). Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. AEO 2013 generally represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of December 31, 2012. SO2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions capand-trade programs. Title IV of the Clean Air Act sets an annual emissions cap on SO2 for affected EGUs in the 48 contiguous States (42 U.S.C. 7651 et seq.) and the District of Columbia (DC). SO2 emissions from 28 eastern States and DC were also limited under the Clean Air Interstate Rule (CAIR; 70 FR 25162 (May 12, 2005)), which created an allowance-based trading program. CAIR was remanded to the U.S. Environmental Protection Agency (EPA) by the U.S. Court of Appeals for the District of Columbia, but it remained in effect.50 See North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). In 2011, EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the DC Circuit issued a decision to vacate CSAPR.51 The court ordered EPA to continue administering CAIR. The AEO 2013 emissions factors used for today’s final rule assume that CAIR remains a binding regulation through 2040. The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of tradable emissions allowances. Under existing EPA regulations, any excess SO2 emissions allowances resulting from the lower electricity demand caused by the adoption of a new or amended efficiency standard could be used to allow 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 50 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). 51 See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12–1182). PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 (MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the final MATS rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for SO2 (a nonHAP 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. AEO2013 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 that would be established by CAIR, so it is unlikely that excess SO2 emissions allowances resulting from the lower electricity demand would be needed or used to allow offsetting increases in SO2 emissions by any regulated EGU. Therefore, DOE believes that energy efficiency standards will reduce SO2 emissions in 2015 and beyond. CAIR 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 CAIR because excess NOX emissions allowances resulting from the lower electricity demand could be used to allow offsetting increases in NOX emissions. However, standards would be expected to reduce NOX emissions in the States not affected by the caps, so DOE estimated NOX emissions reductions from the standards considered in today’s final rule for these States. The MATS limit mercury emissions from power plants, but they do not include emissions caps, and, as such, DOE’s energy conservation standards would likely reduce Hg emissions. DOE estimated mercury emissions reduction using emissions factors based on AEO 2013, which incorporates the MATS. JCI and EEI stated that DOE did not consider the impact of the EPA rulemakings on new and existing power plants, which likely will materially affect the projections of CO2 emissions reductions on which the DOE’s SCC benefit calculations are based. (JCI, No. 95 at p. 10–11; EEI, No. 87 at p. 9) Consistent with past practice, DOE has E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations concluded that it would not be appropriate for its analysis to assume implementation of regulations that are not in effect at this time. The shape of any final EPA regulations is uncertain, as is the outcome of potential legal challenges to those regulations. EEI stated that, to be consistent with other rulemakings, DOE should use modeling that calculates no emissions reductions as a result of efficiency standards where such emissions are capped by State, regional, or Federal regulations. In particular, DOE should eliminate any estimated CO2 reductions in California and in the Northeastern/ Mid-Atlantic states that participate in the Regional Greenhouse Gas Initiative (RGGI). (EEI, No. 87 at p. 10) Morrison stated that different agencies simultaneously addressing similar sources of CO2 emissions should not double-count emissions reductions. (Morrison, No. 108 at p. 10) As stated above, DOE based its emissions analysis on AEO 2013, which represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of December 31, 2012. AEO 2013 accounts for the implementation of regional and State air emissions regulations, including those cited by EEI.52 Its analysis also considers the impact of caps set by Federal regulations, as discussed above. Consequently, the emissions reductions estimated to result from today’s standards are over and above any reductions attributable to other State, regional, or Federal regulations. EEI stated that DOE’s analysis significantly overestimates the future emissions from power plants, as coalfired power plants are being retired and large amounts of wind and solar capacity are being added. It stated that due to these factors, along with EPA regulations, there will be a significant reduction in the baseline emissions from power plants and a reduced emissions impact from any efficiency standard. (EEI, No. 87 at p. 9) DOE bases its emissions analysis on the latest projections from the AEO, which consider retirement of coal-fired power plants, addition of wind and solar capacity, and current EPA regulations. Decline in baseline emissions from power plants does not mean that there would be reduced impact from any efficiency standard, however. The impact of standards on electricity demand takes place at the 52 See Assumptions to AEO 2013 (Available at: https://www.eia.gov/forecasts/aeo/assumptions/). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 margin, and DOE’s analysis endeavors to reflect this marginal impact. EEI stated that it is not clear how or why the power plant emissions factors would increase for any regulated emission (SO2, NOX, Hg, and CO2) after 2025 or 2030, based on current trends and Federal and State regulations. (EEI, No. 87 at p. 10) DOE agrees that average power plant emissions factors for the Nation as a whole would likely not increase after 2025 or 2030. DOE’s analysis uses marginal emissions factors, however, which depend on changes to the mix of generation capacity by fuel type induced by a marginal reduction in electricity demand for a particular end use (e.g., residential heating). The behavior of marginal emissions factors can be significantly different from the behavior of average emissions factors. Marginal emissions factors are very sensitive to shifts in the capacity mix relative to the AEO reference case, whereas average emissions factors are not affected by these small shifts. L. Monetizing Carbon Dioxide and Other Emissions Impacts As part of the development of the standards in this final rule, DOE considered the estimated monetary benefits from the reduced emissions of CO2 and NOX that are expected to result from each of the TSLs considered. In order to make this calculation analogous to the calculation of the NPV of consumer benefit, DOE considered the reduced emissions expected to result over the lifetime of equipment shipped in the forecast period for each TSL. This section summarizes the basis for the monetary values used for each of these emissions and presents the values considered in this final rule. For today’s final rule, DOE is relying on a set of values for the SCC that was developed by a Federal interagency process. The basis for these values is summarized below, and a more detailed description of the methodologies used is provided as an appendix to chapter 14 of the final rule 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 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 38177 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) of Executive Order 12866, agencies must, to the extent permitted by law, ‘‘assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.’’ The purpose of the SCC estimates presented here is to allow agencies to incorporate the monetized social benefits of reducing CO2 emissions into cost-benefit analyses of regulatory actions. The estimates are presented with an acknowledgement of the many uncertainties involved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts. As part of the interagency process that developed these SCC estimates, technical experts from numerous agencies met on a regular basis to consider public comments, explore the technical literature in relevant fields, and discuss key model inputs and assumptions. The main objective of this process was to develop a range of SCC values using a defensible set of input assumptions grounded in the existing scientific and economic literatures. In this way, key uncertainties and model differences transparently and consistently inform the range of SCC estimates used in the rulemaking process. Monetizing Carbon Dioxide Emissions When attempting to assess the incremental economic impacts of carbon dioxide emissions, the analyst faces a number of challenges. A report from the National Research Council 53 points out that any assessment will suffer from uncertainty, speculation, and lack of information about: (1) Future emissions of GHGs; (2) the effects of past and future emissions on the climate system; (3) the impact of changes in climate on the physical and biological environment; and (4) the translation of these environmental impacts into economic damages. As a result, any effort to quantify and monetize the harms associated with climate change will raise questions of science, economics, and ethics and should be viewed as provisional. 53 National Research Council. Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use (2009) National Academies Press: Washington, DC. E:\FR\FM\03JYR2.SGM 03JYR2 38178 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations Despite the limits of both quantification and monetization, SCC estimates can be useful in estimating the social benefits of reducing CO2 emissions. The agency can estimate the benefits from reduced (or costs from increased) emissions in any future year by multiplying the change in emissions in that year by the SCC values appropriate for that year. The net present value of the benefits can then be calculated by multiplying each of these future benefits by an appropriate discount factor and summing across all affected years. 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. Development of Social Cost of Carbon Values In 2009, an interagency process was initiated to offer a preliminary assessment of how best to quantify the benefits from reducing carbon dioxide emissions. To ensure consistency in how benefits are evaluated across Federal 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, models, while respecting the different approaches to quantifying damages taken by the key modelers in the field. An extensive review of the literature was conducted to select three sets of input parameters for these models: climate sensitivity, socio-economic and emissions trajectories, and discount rates. A probability distribution for climate sensitivity was specified as an input into all three models. In addition, the interagency group used a range of scenarios for the socio-economic parameters and a range of values for the discount rate. All other model features were left unchanged, relying on the model developers’ best estimates and judgments. The interagency group selected four sets of SCC values for use in regulatory analyses. Three sets of values are based on the average SCC from the three IAMs, at discount rates of 2.5, 3, and 5 percent. The fourth set, which represents the 95th percentile SCC estimate across all three models at a 3-percent discount rate, was included to represent higherthan-expected impacts from temperature 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,54 although preference is given to consideration of the global benefits of reducing CO2 emissions. Table IV.15 presents the values in the 2010 interagency group report,55 which is reproduced in appendix 14A of the DOE final rule TSD. 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 $5 per metric ton of CO2. These interim values represented the first sustained interagency effort within the U.S. government to develop an SCC for use in regulatory analysis. The results of this preliminary effort were presented in several proposed and final rules. Current Approach and Key Assumptions After the release of the interim values, the interagency group reconvened on a regular basis to generate improved SCC estimates. Specially, the group considered public comments and further explored the technical literature in relevant fields. The interagency group relied on three integrated assessment models commonly used to estimate the SCC: the FUND, DICE, and PAGE models. These models are frequently cited in the peer-reviewed literature and were used in the last assessment of the Intergovernmental Panel on Climate Change (IPCC). Each model was given equal weight in the SCC values that were developed. Each model takes a slightly different approach to model how changes in emissions result in changes in economic damages. A key objective of the interagency process was to enable a consistent exploration of the three TABLE IV.15—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 [2007$ per metric ton CO2] Discount rate Year mstockstill on DSK4VPTVN1PROD with RULES2 3% 2.5% 3% Average 2010 2015 2020 2025 2030 2035 2040 2045 2050 5% Average Average 95th percentile ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... 54 It is recognized that this calculation for domestic values is approximate, provisional, and highly speculative. There is no a priori reason why domestic benefits should be a constant fraction of net global damages over time. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 4.7 5.7 6.8 8.2 9.7 11.2 12.7 14.2 15.7 21.4 23.8 26.3 29.6 32.8 36.0 39.2 42.1 44.9 55 Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. Interagency Working Group on Social Cost of Carbon, United States Government (February 2010) (Available at: www.whitehouse.gov/sites/default/files/omb/ PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 35.1 38.4 41.7 45.9 50.0 54.2 58.4 61.7 65.0 64.9 72.8 80.7 90.4 100.0 109.7 119.3 127.8 136.2 inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf). E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations The SCC values used for today’s notice were generated using the most recent versions of the three integrated assessment models that have been published in the peer-reviewed literature.56 38179 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. Table IV.16 shows the updated sets of SCC estimates in 5-year increments from 2010 to 2050. The full set of annual SCC estimates between 2010 and 2050 is reported in appendix 14B of the DOE final rule TSD. The central value that emerges is the average SCC across TABLE IV.16—ANNUAL SCC VALUES FROM 2013 INTERAGENCY REPORT, 2010–2050 [2007$ per metric ton CO2] Discount rate Year mstockstill on DSK4VPTVN1PROD with RULES2 3% 2.5% 3% Average 2010 2015 2020 2025 2030 2035 2040 2045 2050 5% Average Average 95th percentile ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... ......................................................................................... 11 11 12 14 16 19 21 24 26 32 37 43 47 52 56 61 66 71 51 57 64 69 75 80 86 92 97 89 109 128 143 159 175 191 206 220 It is important to recognize that a number of key uncertainties remain, and that current SCC estimates should be treated as provisional and revisable because they will evolve with improved scientific and economic understanding. The interagency group also recognizes that the existing models are imperfect and incomplete. The 2009 National Research Council report mentioned above points out that there is tension between the goal of producing quantified estimates of the economic damages from an incremental ton of carbon and the limits of existing efforts to model these effects. There are a number of analytical challenges that are being addressed by the research community, including research programs housed in many of the Federal agencies participating in the interagency process to estimate the SCC. The interagency group intends to periodically review and reconsider those estimates to reflect increasing knowledge of the science and economics of climate impacts, as well as improvements in modeling. In summary, in considering the potential global benefits resulting from reduced CO2 emissions, DOE used the values from the 2013 interagency report adjusted to 2013$ using the GDP price deflator. For each of the four sets of SCC values, the values for emissions in 2015 were $12.0, $40.5, $62.4, and $119 per metric ton avoided (values expressed in 2013$). DOE derived values after 2050 using the relevant growth rates for the 2040–2050 period in the interagency update. DOE multiplied the CO2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calculate a present value 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. In responding to the NOPR, many commenters questioned the scientific and economic basis of the SCC values. A number of stakeholders stated that DOE should not use SCC values to establish monetary figures for emissions reductions until the SCC undergoes a more rigorous notice, review, and comment process. (Morrison, No. 108 at p. 9; JCI, No. 95 at p. 10; AHRI, No. 98 at pp. 12–13; The Associations, No. 99 at p. 2; NAM, No. 84 at p. 1–2; Cato Institute, No. 81 at p. 2) Ingersoll Rand agrees with AHRI’s comments. (Ingersoll Rand, No. 107 at p. 11) Rheem stated that the Federal Interagency Working Group has failed to disclose and quantify key uncertainties to inform decision makers and the public about the effects and uncertainties of alternative regulatory actions, as required by OMB. (Rheem, No. 83 at p. 9) NAM stated that the SCC estimates were developed without sufficient transparency, inadequate supporting information related to assumptions and other data, and a failure to peer-review critical model inputs. (NAM, No. 84 at pp. 1–2) Morrison stated that the SCC estimates are the product of an opaque process and that any pretensions to their supposed accuracy are unsupportable. (Morrison, No. 108 at p. 9) JCI stated that the SCC has not been adequately noticed and reviewed before being used in this NOPR or any other rulemaking. JCI added that it is aware that the SCC process is undergoing a current review and comment process, which has the potential for significant changes in how those SCC calculations are used in any rulemakings. (JCI, No. 95 at p. 10) Rheem stated that even if the SCC estimate development process were transparent, rigorous, and peerreviewed, the modeling conducted in this effort does not offer a reasonably acceptable range of accuracy for use in policymaking. (Rheem, No. 83 at p. 9) In conducting the interagency process that developed the SCC values, 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. Key uncertainties and model differences transparently and consistently inform the range of SCC estimates. These uncertainties and model differences are discussed in the interagency working group’s reports, which are reproduced in appendix 14A and 14B of the final rule TSD, as are the major assumptions. The 2010 SCC 56 Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon, United States Government (May 2013; revised November 2013) (Available at: https://www.whitehouse.gov/sites/default/files/omb/ assets/inforeg/technical-update-social-cost-ofcarbon-for-regulator-impact-analysis.pdf). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38180 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations values have been used in a number of Federal rulemakings in which the public had opportunity to comment. In November 2013, the OMB announced a new opportunity for public comment on the TSD underlying the revised SCC estimates. See 78 FR 70586 (Nov. 26, 2013). OMB is currently reviewing comments and considering whether further revisions to the 2013 SCC estimates are warranted. DOE stands ready to work with OMB and the other members of the interagency working group on further review and revision of the SCC estimates as appropriate. NAM stated that in using the SCC estimates, DOE fails to adhere to its own guidelines for ensuring and maximizing the quality, objectivity, utility, and integrity of information disseminated by the DOE. (NAM, No. 84 at pp. 1–2) DOE has sought to ensure that the data and research used to support its policy decisions—including the SCC values— are of high scientific and technical quality and objectivity, as called for by the Secretarial Policy Statement on Scientific Integrity.57 See section VI.J for DOE’s evaluation of today’s final rule and supporting analyses under the DOE and OMB information quality guidelines. Rheem stated that the modeling systems used for the SCC estimates and the subsequent analyses were not subject to peer review as appropriate. (Rheem, No. 83 at p. 9) The Cato Institute stated that the determination of the SCC is discordant with the best scientific literature on the equilibrium climate sensitivity and the fertilization effect of carbon dioxide—two critically important parameters for establishing the net externality of carbon dioxide emissions. (Cato Institute, No. 81 at p. 2) The three integrated assessment models used to estimate the SCC are frequently cited in the peer-reviewed literature and were used in the last assessment of the IPCC. In addition, new versions of the models that were used in 2013 to estimate revised SCC values were published in the peerreviewed literature (see appendix 14B of the final rule TSD). The revised estimates that were issued in November 2013 are based on the best available scientific information on the impacts of climate change. The issue of equilibrium climate sensitivity is addressed in section 14A.4 of appendix 14A in the final rule TSD. The EPA, in collaboration with other Federal agencies, continues to investigate potential improvements to the way in 57 See https://www.directives.doe.gov/directivesdocuments/0411.2-APolicy. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 which economic damages associated with changes in CO2 emissions are quantified. Morrison stated that the CO2 emissions reductions benefits are overestimated, because the SCC values do not account for any prior changes that impact the baseline emissions trends in previous years. According to the commenter, DOE fails to take into consideration EPA regulations of greenhouse gas emissions from power plants, which would affect the SCC values. (Morrison, No. 108 at p. 10) The SCC values are based on projections of global GHG emissions over many decades. Such projections are influenced by many factors, particularly economic growth rates and prices of different energy sources. In the context of these projections, the proposed EPA regulations of greenhouse gas emissions from new power plants are a minor factor. In any case, it would not be appropriate for DOE to account for regulations that are not currently in effect, because whether such regulations will be adopted and their final form are matters of speculation at this time. Miller stated that the Department appears to violate the directive in OMB Circular A–4, which states: ‘‘The analysis should focus on benefits and costs that accrue to citizens and residents of the United States. Where the agency chooses to evaluate a regulation that is likely to have effects beyond the borders of the United States, these effects should be reported separately.’’ Miller stated that instead of focusing on domestic benefits and separately reporting any international effects, the Department focused on much-larger global benefits in the text of the proposed rule and separately reported the (much smaller) domestic effects in a chapter of the TSD. (Miller, No. 79 at pp. 6–7) Similarly, Rheem stated that by presenting only global SCC estimates and downplaying domestic SCC estimates in 2013, the IWG has severely limited the utility of the SCC for use in benefit-cost analysis and policymaking. (Rheem, No. 83 at p. 9) Mercatus stated that OMB guidelines specifically require that benefit-cost analysis of Federal regulations be reported for domestic estimates, with global estimates being optional. Mercatus argued that by using the global estimate at a three-percent discount rate, DOE inflated the benefits of reducing carbon emissions by almost double compared to using a domestic SCC at five percent. (Mercatus, No. 82 at pp. 7–8) EEI stated that the use of global SCC values, which are estimates that are based on many global assumptions and are subject to a great PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 deal of uncertainty, may be important in assessing the overall costs and benefits of particular regulations, but using these values in the context of setting energy conservation standards is problematic, as the geographic and temporal scales of the LCC and SCC values are very different. (EEI, No. 87 at p. 10–11) Although the relevant analyses address both domestic and global impacts, the interagency group has determined that it is appropriate to focus on a global measure of SCC because of the distinctive nature of the climate change problem, which is highly unusual in at least two respects. First, it involves a global externality: Emissions of most greenhouse gases contribute to damages around the world when they are emitted in the United States. Second, climate change presents a problem that the United States alone cannot solve. The issue of global versus domestic measures of the SCC is further discussed in appendix 14A of the final rule TSD. NAM stated that under DOE’s analysis, the cost-benefit results and the proposed rule are legally sufficient without the inclusion of the SCC estimate. (NAM, No. 84 at p. 3) In contrast, JCI stated that the monetary value of the CO2 emissions reduction plays a significant role in DOE’s justification to set the TSL 4 levels as the national standards. (JCI, No. 95 at p. 10) DOE disagrees with NAM’s assessment, which suggests that consideration of the SCC in the context of this rulemaking is somehow unnecessary or unimportant. When selecting a proposed standard level or adopting a final standard level, DOE considers and carefully weighs all relevant factors. Thus, the monetary value of the CO2 emissions reduction did play a role in DOE’s decision to propose TSL 4 (and to adopt TSL 4 in today’s notice), as appropriate. DOE has determined that today’s standards are expected to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified, with or without consideration of the economic benefits associated with reduced CO2 emissions. Morrison stated that DOE does not conduct the cost-benefit analysis for NPV and SCC values over the same time frame and within the same scope, an important principle of cost-benefit analysis. (Morrison, No. 108 at p. 9) For the analysis of national impacts of standards, DOE considers the lifetime impacts of equipment shipped in a 30year period. With respect to energy and energy cost savings, impacts continue past 30 years until all of the equipment E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations shipped in the 30-year period is retired. With respect to the valuation of CO2 emissions reductions, the SCC estimates developed by the interagency working group are meant to represent the full discounted value (using an appropriate range of discount rates) of emissions reductions occurring in a given year. DOE is thus comparing the costs of achieving the emissions reductions in each year of the analysis, with the carbon reduction value of the emissions reductions in those same years. Neither the costs nor the benefits of emissions reductions outside the analytic time frame are included in the analysis. M. Utility Impact Analysis mstockstill on DSK4VPTVN1PROD with RULES2 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,58 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 final rule TSD describes the utility impact analysis in further detail. EEI stated that it is not possible under most operational scenarios to increase electric capacity and decrease the amount of electric generation, as is indicated by DOE’s analysis. (EEI, No. 87 at p. 8) In response, it would appear that the commenter has misinterpreted Table 15.3.1 in the NOPR TSD. The figure shows the capacity reduction as a positive value; it is not an increase as it might appear at first glance. EEI stated that it is ironic that DOE is showing that an estimated reduction of renewable power plants provides an economic benefit to the United States. (EEI, No. 87 at p. 9) DOE reports the 58 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). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 projected changes in the installed capacity of different types of power plants resulting from potential standards. Since the change in demand occurs at the margin, it is not surprising that plant types with relatively high first cost (such as solar and wind power) would be affected by standards. When assessing the energy savings associated with energy conservation standards, DOE does not claim that any particular changes in installed capacity of different types of power plants provide an economic benefit to the Nation relative to other types of power plant facilities. EEI stated that the analysis appears to ignore the impacts of renewable portfolio standards in 29 States and the District of Columbia (as well as the renewable power goals in 8 other States). (EEI, No. 87 at p. 9) DOE disagrees with EEI’s assertion regarding DOE’s consideration of renewable portfolio standards. In the utility impact analysis, DOE used the projections of electricity generation by plant type in AEO 2013. These projections account for the estimated impacts of all renewable portfolio standards that were in place at the end of 2012. Several stakeholders stated that DOE did not adequately consider power quality issues, specifically that DOE did not account for the effect of such a large number of non-linear power supplies (constant-torque BPM motors and multistaging controls) without power factor correction on the grid. Several of them stated that the non-linear loads produced by constant-torque and constant-airflow BPM motors tend to cause harmonic distortions in both voltage and current, and could potentially cause voltage control problems within a power grid system. (JCI, No. 95 at p. 9; Morrison, No. 108 at p. 7; AHRI, No. 98 at p. 11) JCI stated that the Electric Power Research Institute suggests that while harmonic emissions from a single system may not have a major impact on the grid, the cumulative impact of millions of furnaces could be significant on the grid systems within the U.S. (JCI, No. 95 at p. 9) Southern Company stated that the BPM motors considered in this rulemaking typically have poor power factors and emit strong 3rd and 5th order harmonics, which is likely to cause problems with utility systems at a future date when most of the older equipment has been retired and replaced by BPM motors. (Southern Company, No. 85 at p. 4) JCI, Morrison, and AHRI stated that the mitigation costs associated with harmonic distortions would have a significant impact on consumers, especially related to failure rates, maintenance and repair PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 38181 costs, and the overall economic analysis for life-cycle costs. (JCI, No. 95 at p. 9; Morrison, No. 108 at p. 7; AHRI, No. 98 at p. 11) Southern Company stated that, for furnace fans with BPM motors, DOE could assume a percentage of households would require wiring upgrades and some additional costs to either the utility or the homeowner for filtering of harmonics or power factor correction. (Southern Company, No. 85 at p. 4) APGA stated that DOE should include the cost of installation of harmonic filters in the LCC analysis and recalculate the economic justification of design options incorporating ECM motors. (APGA, No. 110 at p. 3) Regarding these comments, DOE notes that a number of studies assume that output from BPM motors is constant at full load at time of use, similar to operation of PSC motors. However, BPM motors are specifically designed to accommodate reduced-load operation, and, therefore, most of the time, they will operate at part load (i.e., at lower speeds and higher efficiency). The current of a BPM motor at lower-speed operation is significantly lower than a PSC motor at normal operation; therefore, total current contribution will not exceed the existing system grid capacity. In addition, the harmonic contribution is a small part of total circuit loading, at the lower current levels. For example, motor performance data from GE 59 shows an increase in power of 133 volt-amperes (VA) from a 1⁄3 HP PSC to BPM at full output. On average, 5 to 20 residential customers are served per distribution transformer, which are normally rated between 15 and 50 kVA.60 61 An increase of this current would result in an increase in loading less than 3 percent at the extreme case. (The extreme case is all HVAC at full load concurrently, served by the same distribution transformer.) The transformers are normally rated approximately 30 percent to 50 percent above predicted peak load.62 In this case, the increased current draw (VA) would have negligible impact. Measured 59 GE Industrial Systems, GE ECM 2.3 Series motors datasheet (Available at: https:// www.columbiaheating.com/page_images/file/GET8068.pdf). 60 Farmer, C., Hines, P., Dowds, J., Blumsack, S., Modeling the Impact of Increasing PHEV Loads on the Distribution Infrastructure, Proceedings of the 43rd International Conference on System Sciences (2010). 61 NEMA. NEMA TP 1–2002: Guide for Determining Energy Efficiency for Distribution Transformers. 62 NEMA Standards Publication TP 1–2002: Guide for Determining Energy Efficiency for Distribution Transformers (Available at: https:// www.nema.org/Standards/Pages/Guide-forDetermining-Energy-Efficiency-for-DistributionTransformers.aspx?#download). E:\FR\FM\03JYR2.SGM 03JYR2 38182 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 performance data 63 show a decrease in current drawn for cooling functionality (152 VA) and an increase for heating functionality (32 VA) from PSC to equivalent BPM, confirming the small BPM loading impact. In addition, an evaluation of increased penetration of BPM motors in commercial buildings was presented at the ASHRAE 6 ECM Motor Workshop at the CEC, which reviewed California Utility Codes with regards to the BPM-specific issue.64 It was stated in this study that while the power factor could be reduced to 50 percent, a BPM motor will have a lower current draw than a PSC motor at 100 percent power factor due to efficiency gains. Regarding the EPRI study 65 referenced in the JCI comment, DOE noticed that the power factor impacts are associated with several types of loads becoming common in the modern household: Low power factor lighting, modern entertainment systems, and electric vehicle chargers, as well as HVAC with BPM motors. This reference indicates that the power quality issues caused by the BPM motors are a small contributor to the total harmonic distortion experienced at the utility level compared to all contributing loads. The study indicated that for devices with an existing 3rd harmonic resonance, the contribution of all new devices would require filtering; however, this correction is not attributed to the high penetration of EC motors alone. The BPM’s third harmonic distortion contributed a 1.5percent current increase to the circuit. The study showed the overall impact on the 3rd, 5th, 7th order and included in total harmonic distortion (THD) was within 0.1 percent of the original harmonic profile applied to the studied feeder. In summary, the impact of introducing BPM motors for HVAC under a high penetration scenario on a residential line was negligible. 63 Gusdorf, J., M. Swinton, C. Simpson, E. Enchev, S. Hayden, D. Furdas, and B. Castellan, Saving Electricity and Reducing GHG Emissions with ECM Furnace Motors: Results from the CCHT and Projections to Various Houses and Locations (2004) ACEEE Proceedings (Available at: https://aceee.org/ files/proceedings/2004/data/papers/SS04_Panel1_ Paper12.pdf). 64 Taylor Engineering LLC, ASHRAE 6 ECM Motors, August 17th CEC Workshop (2011) California Statewide Utility Code and Standard Program (Available at: https://www.energy.ca.gov/ title24/2013standards/prerulemaking/documents/ 2011-08-17_workshop/presentations/ 08%20EC%20Motors.pdf). 65 Sharma, H. M. Rylander, and D. Dorr, Grid Impacts due to Increased Penetration of Newer Harmonic Sources, Proceedings of IEEE Rural Electric Power Conference (April 2013) pp. B5–1— B5–5 (Available at: https://ieeexplore.ieee.org/ stamp/stamp.jsp?tp=&arnumber=6681854). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 With regards to household power quality, furnaces have a minimum basic electrical requirement for THD of 5 percent, and individual harmonic distortion of 3 percent.66 67 Furnaces supplied with voltages with harmonic distortion greater than 8 percent THD may not be operated.68 The EPRI study, which simulates a harmonic spectrum of a large number of BPM-based HVAC, shows that the BPM-related harmonic distortions are within the 5 percent THD limit, and within the 3 percent individual harmonic limit. Therefore, DOE concludes the BPM-related harmonic distortions would not cause the problems cited by the commenters. In addition to the analysis described above, 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 final rule TSD. 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 66 IEEE Standard 519–1992—IEEE Recommended Practices and Requirements for Harmonic Control in Electric Power Systems (April 9 1993) pp. 1–112 (Available at: https://ieeexplore.ieee.org/stamp/ stamp.jsp?tp=&arnumber=210894). 67 Fluke Corporation, Generator power quality and furnaces: The effects of harmonic distortion (2009) (Available at: https://support.fluke.com/findsales/Download/Asset/3497420_6112_ENG_A_ W.PDF). 68 Id. PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 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.69 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. For the standard levels considered in today’s document, 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).70 ImSET is a special-purpose version of the ‘‘U.S. Benchmark National InputOutput’’ (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 69 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). 70 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/PNNL18412.pdf). E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 may over-estimate actual job impacts over the long run. For the final rule, DOE used ImSET only to estimate shortterm (2019 and 2024) employment impacts. For more details on the employment impact analysis, see chapter 16 of the final rule TSD. O. Comments on Proposed Standards NEEP, CA IOUs, and the Joint Advocates support the selection of DOE’s proposed trial standard level, given the limited impact on furnace fan manufacturers, positive benefits to consumers, and substantial energy savings. (NEEP, No. 109 at p. 2; CA IOUs, No. 106 at p. 2; Joint Advocates, No. 105 at p. 1) A number of stakeholders disagreed with the proposed selection of TSL 4. Rheem argued that TSL 4 is not economically justified. (Rheem, No. 83 at p. 7) Lennox stated that because TSL 4 likely has costs that are understated, and overly optimistic efficiency projections, DOE should not pursue TSL 4, and instead adopt standards based on a less-stringent, less-costly technology. (Lennox, No. 100 at p. 2) EEI suggested the adoption of TSL 1 or TSL 2 to conserve energy, minimize economic harm to consumers, and minimize the possible negative impacts on the electric grid from the motors that would be able to meet the proposed standard. (EEI, No. 87 at p. 2) DOE has addressed specific issues regarding costs, efficiency projections, and possible negative impacts on the electric grid in previous parts of section IV of this document. DOE addresses the economic justification for today’s standards in section V.C of this document. Southern Company believes that under TSL 4, too large a proportion of consumers have net costs. Southern Company would prefer that a substantial majority of consumers derive benefits from a proposed rule. (Southern Company, No. 85 at p. 3) EEI also stated that a much higher percentages of consumers will experience a net cost than is the case with many other DOE energy conservation standards. (EEI, No. 87 at p. 2) The Mercatus Center stated that the proposed rule will confer net benefits on a majority of the consumers for only one product class (i.e., nonweatherized, non-condensing gas furnace fans). It added that the aggregate financial benefits to consumers are not spread uniformly over the population, but instead are mostly concentrated in a minority of households. (Mercatus Center, No. 82 at p. 7) As shown in Table V.31 of today’s final rule, more consumers would have VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 a net benefit from standards at TSL 4 than would have a net cost for all of the considered product classes. For the two largest product classes (non-weatherized non-condensing gas furnace fans and non-weatherized condensing gas furnace fans), nearly twice as many consumers would have a net benefit from standards at TSL 4 as would have a net cost. The Mercatus Center stated that seven out of eight proposed standards at TSL 4 fail the rebuttable payback period benchmark, thereby making it difficult for DOE to demonstrate economic justification for the proposed rule. (Mercatus Center, No. 82 at p. 6) In response, the commenter has misinterpreted the role of the rebuttable payback period presumption. 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)(iii)) To determine economic justification, DOE routinely conducts an analysis that considers the full range of impacts, including those 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 to definitively evaluate the economic justification for a potential standard level, thereby supporting or rebutting the results of any preliminary determination of economic justification. Rheem and Miller stated that the proposed standard may act as a transfer payment from lower-income households, who are more likely to bear net costs as a result of this rule, to higher-income households; and that higher-priced furnace fans resulting from this rule will be out of reach for some consumers. They stated that these distributive impacts necessitate close scrutiny from the Department in order to determine whether the proposed standards will actually improve social welfare. (Rheem, No. 83 at p. 14; Miller, No. 79 at p. 14) DOE’s consumer subgroup analysis indicates that, for non-weatherized gas furnace fans, lower-income households would have positive average LCC savings and median PBPs less than five years (see section V.B.1). Furthermore, many lower-income households rent rather than own their dwelling, and are responsible for utility bills but not for purchase of a furnace. To the extent that PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 38183 there is delay in the landlords’ passing of extra costs into the rent, consumers that rent will benefit more those who own, all else being equal. Ingersoll Rand stated that promulgating a rule at TSL4 would force the future generation of furnaces sold in the U.S. to be less reliable than many of those on the market today as a result of eliminating PSC motors from the market. (Ingersoll Rand, No. 107 at p. 7) DOE notes that furnace fans meeting today’s standards are already widely available as a substitute for units with baseline motors. DOE evaluated issues related to reliability, as discussed in section IV.F.2, and concluded that the benefits to consumers outweigh any costs related to reliability that may be associated with products meeting the standards. 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 standard levels ultimately adopted by DOE in today’s final rule. Additional details regarding DOE’s analyses are contained in the TSD supporting this document. 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 mobile home furnace fans. TSL 1 consists of the most common efficiency levels in the current 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 E:\FR\FM\03JYR2.SGM 03JYR2 38184 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 Non-Weatherized, Non-Condensing Gas Furnace Fan .......................... Non-Weatherized, Condensing Gas Furnace Fan .................................. Weatherized Non-Condensing Gas Furnace Fan ................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ............................. Non-Weatherized Electric Furnace/Modular Blower Fan ........................ Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan .... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ............ Mobile Home Electric Furnace/Modular Blower Fan ............................... 2 1 1 1 1 1 1 1 1 3 4 3 3 3 1 3 1 1 1 5 3 3 3 3 3 3 3 3 6 4 4 4 1 4 1 1 4 4 4 4 3 4 3 3 4 6 6 6 6 6 6 6 6 * 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 + MultiStaging (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 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. Moreefficient 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 final rule 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 final rule 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 standardscompliant 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 2013$ Efficiency level TSL Discounted operating cost Installed cost mstockstill on DSK4VPTVN1PROD with RULES2 Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... VerDate Mar<15>2010 17:09 Jul 02, 2014 .............. 1 ........... .............. 2, 3 ....... 4, 5 ....... .............. 6 ........... Jkt 232001 $347 359 408 423 501 658 694 PO 00000 Frm 00056 $2,194 1,933 1,655 1,367 1,249 1,244 1,150 Fmt 4701 Life-cycle cost savings Average savings 2013$ LCC $2,541 2,292 2,063 1,791 1,750 1,902 1,844 Sfmt 4700 Percent of consumers that experience Net cost $0 85 263 471 506 373 431 E:\FR\FM\03JYR2.SGM No impact 0 1 25 17 30 47 50 03JYR2 100 68 25 25 14 12 0 Net benefit 0 30 50 58 56 41 50 Median payback period years ................ 1.1 3.8 2.6 5.4 10.6 10.2 38185 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.3—LCC AND PBP RESULTS FOR NON-WEATHERIZED, CONDENSING GAS FURNACE FANS Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... .............. 1 ........... .............. 2, 3 ....... 4, 5 ....... .............. 6 ........... $343 355 403 416 493 652 687 $2,134 1,909 1,666 1,402 1,319 1,334 1,250 Life-cycle cost savings Average savings 2013$ LCC $2,478 2,264 2,070 1,818 1,812 1,987 1,937 Percent of consumers that experience Net cost $0 58 182 335 341 219 268 No impact 0 1 21 11 23 42 51 Net benefit 100 75 41 41 34 29 0 0 24 38 48 43 30 49 Median payback period years ................ 1.2 4.2 2.9 5.8 12.0 11.0 TABLE V.4—LCC AND PBP RESULTS FOR WEATHERIZED, NON-CONDENSING GAS FURNACE FANS Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... .............. 1 ........... .............. 2, 3 ....... 4, 5 ....... .............. 6 ........... $333 345 393 406 481 633 668 $2,667 2,329 2,025 1,609 1,434 1,476 1,354 Life-cycle cost savings Average savings 2013$ LCC $3,000 2,674 2,418 2,015 1,914 2,109 2,022 Percent of consumers that experience Net cost $0 67 189 378 447 304 391 No Impact 0 0 8 3 16 38 41 Net benefit 100 81 56 56 33 27 0 0 19 36 41 51 35 59 Median payback period years ................ 0.7 3.2 1.8 4.4 10.3 8.2 TABLE V.5—LCC AND PBP RESULTS FOR NON-WEATHERIZED, NON-CONDENSING OIL FURNACE FANS Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... .............. 1, 2, 4 ... .............. 3, 5 ....... .............. .............. 6 ........... $417 427 501 507 589 813 863 $2,510 2,356 2,090 1,979 1,920 1,922 1,873 Life-cycle cost savings Average savings 2013$ LCC $2,927 2,783 2,592 2,486 2,509 2,736 2,736 Percent of consumers that experience Net cost $0 46 181 259 244 80 80 No impact 0 13 46 44 48 56 78 Net benefit 100 71 28 28 28 28 0 0 17 26 28 24 16 22 Median payback period years ................ 1.7 10.3 4.6 8.1 18.3 18.6 TABLE V.6—LCC AND PBP RESULTS FOR NON-WEATHERIZED ELECTRIC FURNACE/MODULAR BLOWER FANS Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost mstockstill on DSK4VPTVN1PROD with RULES2 Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... VerDate Mar<15>2010 17:09 Jul 02, 2014 .............. 1 ........... .............. 2, 3 ....... 4, 5 ....... .............. 6 ........... Jkt 232001 $244 255 299 292 309 444 477 PO 00000 Frm 00057 $1,211 1,079 941 797 747 796 748 Fmt 4701 Life-cycle cost savings Average savings 2013$ LCC $1,455 1,335 1,241 1,089 1,055 1,240 1,225 Sfmt 4700 Percent of consumers that experience Net cost $0 29 88 181 204 66 81 E:\FR\FM\03JYR2.SGM No impact 0 4 27 17 23 48 60 03JYR2 100 73 37 37 25 25 0 Net benefit 0 22 36 45 51 27 39 Median payback period years ................ 1.9 6.2 2.6 3.2 12.0 11.5 38186 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.7—LCC AND PBP RESULTS FOR MOBILE HOME NON-WEATHERIZED, NON-CONDENSING GAS FURNACE FANS Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... .............. 1, 2, 4 ... .............. 3, 5 ....... .............. .............. 6 ........... $256 268 313 318 390 530 563 $1,118 1,026 930 867 831 853 824 Life-cycle cost savings Average savings 2013$ LCC $1,374 1,293 1,243 1,185 1,222 1,383 1,388 Percent of consumers that experience Net cost $0 36 87 144 108 (54) (58) No impact 0 10 62 55 67 81 80 Net benefit 100 56 0 0 0 0 0 0 34 38 45 33 19 20 Median payback period years ................ 2.7 10.2 6.8 12.7 24.3 24.4 * Parentheses indicate negative values. TABLE V.8—LCC AND PBP RESULTS FOR MOBILE HOME NON-WEATHERIZED, CONDENSING GAS FURNACE FANS Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... .............. 1, 2, 4 ... .............. 3, 5 ....... .............. .............. 6 ........... $274 285 330 339 411 558 591 $1,283 1,170 1,061 977 936 953 917 Life-cycle cost savings Average savings 2013$ LCC $1,556 1,454 1,391 1,316 1,347 1,510 1,508 Percent of consumers that experience Net cost $0 35 79 133 103 (53) (51) No impact 0 5 43 37 66 80 82 Net benefit 100 68 29 29 4 4 0 0 27 28 33 29 16 18 Median payback period years ................ 2.3 9.7 6.6 15.8 33.3 31.3 * Parentheses indicate negative values. TABLE V.9—LCC AND PBP RESULTS FOR MOBILE HOME ELECTRIC FURNACE/MODULAR BLOWER FAN Life-cycle cost 2013$ Efficiency level TSL Discounted operating cost Installed cost Baseline ............................... 1 ........................................... 2 ........................................... 3 ........................................... 4 ........................................... 5 ........................................... 6 ........................................... .............. 1, 2 ....... .............. 3 ........... 4, 5 ....... .............. 6 ........... $194 204 245 237 251 375 406 $643 575 531 466 433 487 462 Life-cycle cost savings Average savings 2013$ LCC $837 778 777 702 685 862 868 Percent of consumers that experience Net cost $0 19 20 70 85 (48) (54) No impact 0 7 36 26 32 57 75 100 71 38 38 26 26 0 Net benefit 0 22 26 37 43 18 25 Median payback period years ................ 2.1 8.9 3.6 4.1 15.0 14.9 * Parentheses indicate negative values. mstockstill on DSK4VPTVN1PROD with RULES2 Consumer Subgroup Analysis DOE estimated the impacts of the considered efficiency levels (TSLs) on the following consumer subgroups: (1) Senior-only households; and (2) lowincome households. The results of the consumer subgroup analysis indicate VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 that for residential furnace fans, senioronly households and low-income households experience lower average LCC savings and longer payback periods than consumers overall, with the difference being larger for low-income households. The difference between the two subgroups and all consumers is PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 larger for non-weatherized, noncondensing gas furnace fans (see Table V.10) than for non-weatherized, condensing gas furnace fans (see Table V.11). Chapter 11 of the final rule TSD provides more detailed discussion on the consumer subgroup analysis and results for the other product classes. E:\FR\FM\03JYR2.SGM 03JYR2 38187 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.10—COMPARISON OF IMPACTS FOR CONSUMER SUBGROUPS WITH ALL CONSUMERS, NON-WEATHERIZED, NONCONDENSING GAS FURNACE FANS Average life-cycle cost savings (2013$) Median payback period (years) Efficiency level Senior-only TSL 1 2 3 4 5 6 ................................................................. ................................................................. ................................................................. ................................................................. ................................................................. ................................................................. Low-income All consumers Senior-only Low-income All consumers $65 209 366 373 226 264 $48 133 251 234 77 96 $85 263 471 506 373 431 1.6 5.2 3.7 7.6 14.5 13.7 1.7 6.3 3.6 7.8 15.9 15.3 1.1 3.8 2.6 5.4 10.6 10.2 1 ............... .................. 2, 3 .......... 4, 5 .......... .................. 6 ............... TABLE V.11—COMPARISON OF IMPACTS FOR CONSUMER SUBGROUPS WITH ALL CONSUMERS, NON-WEATHERIZED, CONDENSING GAS FURNACE FANS Average life-cycle cost savings (2013$) Median payback period (years) Efficiency level Senior-only TSL 1 2 3 4 5 6 ................................................................. ................................................................. ................................................................. ................................................................. ................................................................. ................................................................. Low-income All consumers Senior-only Low-income All consumers $49 155 288 275 141 178 $38 121 230 202 66 90 $58 182 335 341 219 268 1.5 5.5 3.7 7.5 15.4 12.2 2.0 7.1 4.4 9.7 19.5 17.0 1.2 4.2 2.9 5.8 12.0 11.0 1 ............... .................. 2, 3 .......... 4, 5 .......... .................. 6 ............... Rebuttable Presumption Payback As discussed in section III.E.2, 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.12 shows the rebuttable presumption payback results to determine whether any of them meet the rebuttable presumption conditions for the residential furnace fans product classes. TABLE V.12—REBUTTABLE PRESUMPTION PAYBACK PERIODS FOR RESIDENTIAL FURNACE FAN PRODUCT CLASSES Rebuttable presumption payback (years) Product class TSL 1 Non-Weatherized, Non-Condensing Gas Furnace Fan .......................... Non-Weatherized, Condensing Gas Furnace Fan .................................. Weatherized Non-Condensing Gas Furnace Fan ................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ............................. Non-Weatherized Electric Furnace/Modular Blower Fan ........................ Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan .... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ............ Mobile Home Electric Furnace/Modular Blower Fan ............................... mstockstill on DSK4VPTVN1PROD with RULES2 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 TSL 2 3.3 3.1 3.0 2.3 3.2 3.8 3.5 4.3 5.3 4.9 4.8 2.3 5.1 3.8 3.5 4.3 the final rule TSD explains the analysis in further detail. Industry Cash-Flow Analysis Results Table V.13 and Table V.14 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 PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 TSL 3 5.3 4.9 4.8 5.9 5.1 6.1 5.7 6.8 TSL 4 10.3 9.6 9.4 2.3 5.8 3.8 3.5 7.7 TSL 5 10.3 9.6 9.4 5.9 5.8 6.1 5.7 7.7 TSL 6 19.4 18.2 17.6 19.8 15.4 22.1 20.9 20.2 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 E:\FR\FM\03JYR2.SGM 03JYR2 38188 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations margin percentage; and (2) the preservation of per-unit 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 per-unit operating profit markup scenario, which assumes that manufacturers would be able to earn the same operating margin in absolute dollars per-unit 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 per unit and decreases as a percentage of revenue. The set of results below shows potential INPV impacts for residential furnace fan manufacturers; Table V.13 reflects the lower bound of impacts, and Table V.14 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 2014 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. TABLE V.13—MANUFACTURER IMPACT ANALYSIS FOR RESIDENTIAL FURNACE FANS—PRESERVATION OF GROSS MARGIN PERCENTAGE MARKUP SCENARIO * Base case Units INPV .................................................................. Change in INPV ................................................. Product Conversion Costs ................................. Capital Conversion Costs .................................. Total Conversion Costs ..................................... Free Cash Flow (2018) ..................................... Free Cash Flow (change from Base Case) (2018). $M ........ $M ........ (%) ....... $M ........ $M ........ $M ........ $M ........ % .......... 349.6 ................ ................ 2.2 ................ 2.2 20.3 0.0 Trial standard level 1 2 3 4 5 336.6 (13.0) (3.7) 18.8 8.8 27.7 11.3 (44.5) 360.0 10.4 3.0 23.6 11.1 34.7 8.8 (56.7) 359.1 9.4 2.7 25.3 11.8 37.1 8.0 (60.8) 397.8 48.2 13.8 25.5 15.1 40.6 6.4 (68.3) 397.6 48.0 13.7 27.1 15.7 42.8 5.6 (72.2) 6 422.4 72.8 20.8 29.4 134.7 164.2 (48.6) (339.8) * Values in parentheses are negative values. All values have been rounded to the nearest tenth. M = millions. TABLE V.14—MANUFACTURER IMPACT ANALYSIS FOR RESIDENTIAL FURNACE FANS—PRESERVATION OF OPERATING PROFIT MARKUP SCENARIO * Base case Units INPV .................................................................. Change in INPV ................................................. Product Conversion Costs ................................. Capital Conversion Costs .................................. Total Conversion Costs ..................................... Free Cash Flow ................................................. Free Cash Flow (change from Base Case) ...... $M ........ $M ........ (%) ....... $M ........ $M ........ $M ........ $M ........ % .......... 349.6 ................ ................ 2.2 ................ 2.2 20.3 0.0 Trial standard level 1 2 3 4 5 332.3 (17.3) (5.0) 18.8 8.8 27.7 11.3 (44.5) 313.2 (36.4) (10.4) 23.6 11.1 34.7 8.8 (56.7) 311.0 (38.6) (11.0) 25.3 11.8 37.1 8.0 (60.8) 290.6 (59.0) (16.9) 25.5 15.1 40.6 6.4 (68.3) 288.8 (60.8) (17.4) 27.1 15.7 42.8 5.6 (72.2) 6 147.2 (202.5) (57.9) 29.4 134.7 164.2 (48.6) (339.8) mstockstill on DSK4VPTVN1PROD with RULES2 * Values in parentheses are negative values. All values have been rounded to the nearest tenth. M = millions. 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 ¥$17.3 million to ¥$13.0 million, or a change in INPV of ¥5.0 percent to ¥3.7 percent. At this potential standard level, industry free cash flow is estimated to decrease by as much as 44.5 percent to $11.3 million, compared to the base-case value of $20.3 million in the year before the VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 compliance date (2018). DOE anticipates industry conversion costs totaling $27.7 million at TSL 1. TSL 2 represents EL 1 for the oil and mobile 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 ¥$36.4 million to $10.4 million, or a change in INPV of ¥10.4 percent to 3.0 percent. At this potential standard level, industry free cash flow is estimated to decrease by as much as PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 56.7 percent to $8.8 million, compared to the base-case value of $20.3 million in the year before the compliance date (2018). DOE anticipates industry conversion costs of $34.7 million at TSL 2. 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 ¥$38.6 million to $9.4 million, or a change in INPV of ¥11.0 percent to 2.7 percent. At this potential standard level, E:\FR\FM\03JYR2.SGM 03JYR2 38189 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations industry free cash flow is estimated to decrease by as much as 60.8 percent to $8.0 million, compared to the base-case value of $20.3 million in the year before the compliance date (2018). DOE anticipates industry conversion costs of $37.1 million at TSL 3. TSL 4 represents the efficiency levels that provide the highest NPV using a 7percent 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 ¥$59.0 million to $48.2 million, or a change in INPV of ¥16.9 percent to 13.8 percent. At this potential standard level, industry free cash flow is estimated to decrease by as much as 68.3 percent to $6.4 million, compared to the base-case value of $20.3 million in the year before the compliance date (2018). DOE anticipates industry conversion costs totaling $40.6 million at TSL 4. 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 ¥$60.8 million to $48.0 million, or a change in INPV of ¥17.4 percent to 13.7 percent. At this potential standard level, industry free cash flow is estimated to decrease by as much as 72.2 percent to $5.6 million, compared to the base-case value of $20.3 million in the year before the compliance date (2018). DOE anticipates industry conversion costs of $42.8 million at TSL 5. 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 ¥$202.5 million to $72.8 million, or a change in INPV of ¥57.9 percent to 20.8 percent. At this potential standard level, industry free cash flow is estimated to decrease by as much as 339.8 percent to ¥$48.6 million, compared to the basecase value of $20.3 million in the year before the compliance date (2018). DOE anticipates industry conversion costs totaling $164.2 million at TSL 6. 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 backwardinclined 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. 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 2014 through 2048. DOE used statistical data from the U.S. Census Bureau’s 2011 Annual Survey of Manufacturers (ASM),71 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. 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. TABLE V.15—POTENTIAL CHANGES IN THE NUMBER OF FURNACE FAN INDUSTRY EMPLOYMENT IN 2019 Trial standard level * Base case Total Number of Domestic Production Workers in 2019 (assuming no changes in production locations). Total Number of Domestic Non-Production Workers in 2019. Range of Potential Changes in Domestic Workers in 2019 **. 1 2 3 4 5 6 303 303 ......... 303 ......... 303 ......... 301 .............. 301 .............. 349. 107 107 ......... 107 ......... 107 ......... 106 .............. 106 .............. 123. .................. (410) to 0 (410) to 0 (410) to 0 (410) to (3) .. (410) to (3) .. (410) to 62. mstockstill on DSK4VPTVN1PROD with RULES2 * Numbers in parentheses represent negative values. ** DOE presents a range of potential employment impacts, where the lower range represents the scenario in which all domestic manufacturers move production to other countries. The employment impacts shown in Table V.15 represent the potential production and non-production employment changes that could result following the compliance date of a new energy conservation standard for residential furnace fans. The upper end of the results in the table estimates the maximum increase in the number of production and non-production workers after the implementation of new energy conservation standards, and it assumes 71 ‘‘Annual Survey of Manufactures (ASM),’’ U.S. Census Bureau (2011) (Available at: https:// www.census.gov/manufacturing/asm/). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 mstockstill on DSK4VPTVN1PROD with RULES2 38190 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations that manufacturers would continue to produce the same scope of covered products within the United States. The lower end of the range indicates the total number of U.S. production and non-production workers in the industry who could lose their jobs if all existing production were moved outside of the United States or if companies exited the market. This scenario is highly conservative. Even if all production was relocated overseas, manufacturers would likely maintain large portions of domestic non-production staff (e.g., sales, marketing, technical, and management employees). The industry did not provide sufficient information for DOE fully quantify the percentage of the non-production workers that would leave the country or be eliminated at each evaluated standard level. For residential furnace fans, DOE does not expect significant changes in domestic employment levels from baseline to TSL 5. Based on the engineering analysis, DOE has concluded that most product lines could be converted to meet the standard with changes in motor technology and the application of multi-staging designs. While such designs require more controls and have more complex assembly, DOE does not believe the perunit labor requirements for the furnace fan assembly would change significantly. The only standard level at which significant changes in employment would be expected is at TSL 6, the maxtech level. At TSL 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. Backward-inclined impeller assemblies could require manufacturers to adjust their assembly processes, with the potential for increases in per-unit labor requirements. However, DOE received limited feedback from manufacturers regarding the labor required to produce furnace 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 final rule TSD. Impacts on Manufacturing Capacity According to the residential furnace fan manufacturers interviewed, the new energy conservation standards being VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 adopted in today’s final rule would not significantly affect manufacturers’ production capacity, or throughput levels. Some manufacturers noted in interviews that testing resources could potentially be a bottleneck to the conversion process and cited the potential need for adding in-house testing capacity. However, in written comments, stakeholders generally agreed that a five-year lead time between the publication date and compliance date is appropriate for this rulemaking. 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 15 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 final rule TSD. 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 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 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. While the cumulative regulatory burden analysis contained in the NOPR reflects manufacturers’ concerns regarding CC&E costs, DOE has decided to exclude CC&E costs from the cumulative burden analysis for the final rule. The furnace fan test procedure changed from the NOPR to the final rule. Much of the concern relating to CC&E costs expressed by stakeholders, and summarized in the NOPR, had to do with the old test procedure. The new test procedure reduces burden substantially. Also, for the final rule, CC&E costs have been explicitly incorporated into product conversion costs inputted into the GRIM, so they are no longer considered separately in the cumulative regulatory burdens section. DOE Energy Conservation Standards Companies that produce a wide range of regulated products and equipment may face more capital and product development expenditures than competitors with a narrower scope of products and equipment. Many furnace fan manufacturers also produce other residential and commercial equipment. In addition to the amended energy conservation standards for furnace fans, these manufacturers contend with several other Federal regulations and pending regulations that apply to other products and equipment. DOE recognizes that each regulation can significantly affect a manufacturer’s financial operations. Multiple regulations affecting the same manufacturer can quickly strain manufacturers’ profits and possibly cause an exit from the market. Table V.16 lists the other DOE energy conservation standards that could also affect manufacturers of furnace fans in the 3 years leading up to and after the compliance date of the new energy conservation standards for this equipment. Additionally, at the request of stakeholders, DOE has listed several DOE rulemakings in the table below that are currently in process but that have not been finalized. E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 38191 TABLE V.16—OTHER DOE REGULATIONS IMPACTING FURNACE FAN MANUFACTURERS Number of impacted companies Compliance year Regulation Commercial Refrigeration Equipment ..................................................................... Commercial Packaged Air-Conditioning and Heating Equipment .......................... Commercial/Industrial Fans and Blowers ............................................................... Residential Boilers .................................................................................................. Residential Non-Weatherized Gas Furnaces ......................................................... 2017 * 2018 * 2019 * 2019 n/a 4 24 29 9 38 Estimated total industry conversion costs $184.0 million (2012$). N/A.** N/A.** N/A.** N/A.** * The dates listed are an approximation. The exact dates are pending final DOE action. ** For energy conservation standards that have not been issued, DOE does not have finalized industry conversion cost data available. EPA ENERGY STAR cumulative regulatory burden. ENERGY STAR specifications are as follows: STAR specifications for residential furnaces, central air conditioners, and heat pumps would be a source of During interviews, some manufacturers stated that ENERGY TABLE V.17—ENERGY STAR SPECIFICATIONS FOR HVAC PRODUCTS THAT USE FURNACE FANS Gas Furnaces ................................. Oil Furnaces .................................... Air-Source Heat Pumps .................. Central Air Conditioners .................. 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.* Rating of 85% AFUE or greater. Less than or equal to 2.0% furnace fan efficiency.* >= 8.2 HSPF/>= 14.5 SEER/>= 12 EER for split systems. >= 8.0 HSPF/>= 14 SEER/>=11 EER for single-package equipment. >= 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. As they are voluntary standards, they are not considered by DOE to be part of manufacturers’ cumulative regulatory burden. DOE discusses these and other requirements (e.g., Canadian Energy Efficiency Regulations, California Title 24, Low NOX requirements), and includes the full details of the cumulative regulatory burden analysis, in chapter 12 of the final rule TSD. DOE also discusses the impacts on the small manufacturer subgroup in the regulatory flexibility analysis in section VI.B of this final rule. 3. National Impact Analysis 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.18 presents the estimated primary energy savings for each considered TSL, and Table V.19 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 higherefficiency furnace fans. 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 percent), because the upstream energy savings associated with the electricity savings are partially or fully offset by the upstream energy use from the additional gas or oil used by the furnace due to higher-efficiency furnace fans. TABLE V.18—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2048 Trial standard level Product class mstockstill on DSK4VPTVN1PROD with RULES2 1 2 3 4 5 6 quads Non-Weatherized, Non-Condensing Gas Furnace Fan .. Non-Weatherized, Condensing Gas Furnace Fan .......... Weatherized Non-Condensing Gas Furnace Fan ........... Non-Weatherized, Non-Condensing Oil Furnace Fan ..... Non-Weatherized Electric Furnace/Modular Blower Fan Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ................................................................. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00063 0.296 0.278 0.048 0.006 0.032 1.341 1.188 0.224 0.006 0.143 1.341 1.188 0.224 0.022 0.143 1.796 1.614 0.330 0.006 0.193 1.796 1.614 0.330 0.022 0.193 2.426 2.324 0.462 0.046 0.264 0.009 0.009 0.023 0.009 0.023 0.053 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 38192 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.18—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2048—Continued Trial standard level Product class 1 2 3 4 5 6 quads Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ...................................................................... Mobile Home Electric Furnace/Modular Blower Fan ....... 0.001 0.009 0.001 0.009 0.003 0.030 0.001 0.044 0.003 0.044 0.008 0.055 Total—All Classes .................................................... 0.679 2.922 2.974 3.994 4.024 5.639 Note: Components may not sum to total due to rounding. TABLE V.19—CUMULATIVE NATIONAL FULL-FUEL-CYCLE ENERGY SAVINGS FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2048 Trial standard level Product class 1 2 3 4 5 6 quads Non-Weatherized, Non-Condensing Gas Furnace Fan .. Non-Weatherized, Condensing Gas Furnace Fan .......... Weatherized Non-Condensing Gas Furnace Fan ........... Non-Weatherized, Non-Condensing Oil Furnace Fan ..... Non-Weatherized Electric Furnace/Modular Blower Fan Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ................................................................. Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ...................................................................... Mobile Home Electric Furnace/Modular Blower Fan ....... Total—All Classes .................................................... 0.297 0.278 0.048 0.006 0.032 1.338 1.176 0.225 0.006 0.145 1.338 1.176 0.225 0.020 0.145 1.793 1.604 0.331 0.006 0.196 1.793 1.604 0.331 0.020 0.196 2.428 2.314 0.463 0.044 0.268 0.009 0.009 0.022 0.009 0.022 0.052 0.001 0.010 0.680 0.001 0.010 2.909 0.003 0.030 2.958 0.001 0.045 3.986 0.003 0.045 4.014 0.008 0.056 5.635 Note: Components may not sum to total due to rounding. OMB Circular A–4 72 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 nine, rather than 30, years of product shipments. The choice of a ninyear 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.73 The review timeframe established in EPCA is generally not synchronized 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.20. The impacts are counted over the lifetime of products purchased in 2019–2027. TABLE V.20—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2027 Trial standard level Product class 1 2 3 4 5 6 mstockstill on DSK4VPTVN1PROD with RULES2 quads Non-Weatherized, Non-Condensing Gas Furnace Fan .. Non-Weatherized, Condensing Gas Furnace Fan .......... Weatherized Non-Condensing Gas Furnace Fan ........... Non-Weatherized, Non-Condensing Oil Furnace Fan ..... Non-Weatherized Electric Furnace/Modular Blower Fan 72 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_a4/.) 73 Section 325(m) of EPCA requires DOE to review its standards at least once every 6 years, and VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 0.099 0.075 0.016 0.002 0.009 0.454 0.316 0.075 0.002 0.043 0.454 0.316 0.075 0.009 0.043 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. While adding a 6-year review to the 3-year compliance period adds up to 9 years, DOE notes that it may PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 0.611 0.429 0.108 0.002 0.058 0.611 0.429 0.108 0.009 0.058 0.838 0.612 0.150 0.020 0.080 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. E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 38193 TABLE V.20—CUMULATIVE NATIONAL PRIMARY ENERGY SAVINGS FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2027—Continued Trial standard level Product class 1 2 3 4 5 6 quads Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ................................................................. Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ...................................................................... Mobile Home Electric Furnace/Modular Blower Fan ....... 0.003 0.003 0.007 0.003 0.007 0.018 0.000 0.003 0.000 0.003 0.001 0.009 0.000 0.013 0.001 0.013 0.002 0.017 Total—All Classes .................................................... 0.207 0.897 0.914 1.225 1.236 1.737 Note: Components may not sum to total due to rounding. 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,74 DOE calculated NPV using both a 7percent and a 3-percent real discount rate. Table V.21 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. TABLE V.21—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFIT FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2048 Discount rate % Product class Trial standard level 1 2 3 4 5 6 billion 2013$ * Non-Weatherized, Non-Condensing Gas Furnace Fan ............................... Non-Weatherized, Condensing Gas Furnace Fan ....................................... Weatherized Non-Condensing Gas Furnace Fan ............................................ Non-Weatherized, Non-Condensing Oil Furnace Fan ....................................... Non-Weatherized Electric Furnace/Modular Blower Fan .................................. Mobile Home Non-Weatherized, NonCondensing Gas Furnace Fan ........... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ................. Mobile Home Electric Furnace/Modular Blower Fan ......................................... 3 mstockstill on DSK4VPTVN1PROD with RULES2 13.309 13.309 11.943 10.769 10.769 11.444 11.444 10.156 1.849 1.849 2.288 2.288 2.082 0.028 0.028 0.154 0.028 0.154 0.078 0.215 1.237 1.237 1.480 1.480 0.615 0.045 0.045 0.171 0.045 0.171 (0.039) 0.007 0.007 0.025 0.007 0.025 (0.005) 0.047 0.047 0.168 0.209 0.209 (0.099) 4.668 26.013 26.403 28.810 29.079 24.731 0.823 4.502 4.502 4.713 4.713 3.381 0.677 3.856 3.856 3.876 3.876 2.686 0.129 0.702 0.702 0.825 0.825 0.604 0.012 0.012 0.061 0.012 0.061 0.006 0.078 0.438 0.438 0.515 0.515 0.014 0.017 0.017 0.058 0.017 0.058 (0.071) 0.003 0.003 0.008 0.003 0.008 (0.010) 0.017 7 12.031 0.335 Non-Weatherized, Non-Condensing Gas Furnace Fan ............................... Non-Weatherized, Condensing Gas Furnace Fan ....................................... Weatherized Non-Condensing Gas Furnace Fan ............................................ Non-Weatherized, Non-Condensing Oil Furnace Fan ....................................... Non-Weatherized Electric Furnace/Modular Blower Fan .................................. Mobile Home Non-Weatherized, NonCondensing Gas Furnace Fan ........... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ................. Mobile Home Electric Furnace/Modular Blower Fan ......................................... 12.031 1.842 Total—All Classes .......................... 2.150 0.017 0.054 0.065 0.065 (0.102) 74 OMB Circular A–4, section E (Sept. 17, 2003) (Available at: https://www.whitehouse.gov/omb/ circulars_a004_a-4). VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 38194 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.21—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFIT FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2048—Continued Discount rate % Product class Trial standard level 1 2 3 4 5 6 10.120 6.509 billion 2013$ * Total—All Classes .......................... 1.754 9.545 9.679 10.024 * Numbers in parentheses indicate negative NPV. The NPV results based on the aforementioned 9-year analytical period are presented in Table V.22. 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.22—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFIT FOR TRIAL STANDARD LEVELS FOR RESIDENTIAL FURNACE FANS SOLD IN 2019–2027 Discount rate % Product class Trial standard level 1 2 3 4 5 6 billion 2013$ * Non-Weatherized, Non-Condensing Gas Furnace Fan ............................... Non-Weatherized, Condensing Gas Furnace Fan ....................................... Weatherized Non-Condensing Gas Furnace Fan ............................................ Non-Weatherized, Non-Condensing Oil Furnace Fan ....................................... Non-Weatherized Electric Furnace/Modular Blower Fan .................................. Mobile Home Non-Weatherized, NonCondensing Gas Furnace Fan ........... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ................. Mobile Home Electric Furnace/Modular Blower Fan ......................................... 3 5.527 4.908 3.784 3.784 4.005 4.005 3.550 0.777 0.777 0.945 0.945 0.864 0.015 0.082 0.015 0.082 0.064 0.080 0.463 0.463 0.549 0.549 0.217 0.019 0.019 0.073 0.019 0.073 (0.012) 0.003 0.003 0.010 0.003 0.010 (0.001) 0.017 0.017 0.061 0.074 0.074 (0.052) 1.819 10.106 10.278 11.137 11.266 9.537 0.444 2.433 2.433 2.531 2.531 1.799 0.325 1.840 1.840 1.845 1.845 1.290 0.070 0.384 0.384 0.446 0.446 0.333 0.008 0.008 0.040 0.008 0.040 0.015 0.039 0.220 0.220 0.257 0.257 0.001 0.009 0.009 0.033 0.009 0.033 (0.037) 0.001 0.001 0.004 0.001 0.004 (0.005) 0.008 0.008 0.026 0.031 0.031 (0.059) 0.905 Total—All Classes .......................... 5.527 0.015 7 5.028 0.139 Non-Weatherized, Non-Condensing Gas Furnace Fan ............................... Non-Weatherized, Condensing Gas Furnace Fan ....................................... Weatherized Non-Condensing Gas Furnace Fan ............................................ Non-Weatherized, Non-Condensing Oil Furnace Fan ....................................... Non-Weatherized Electric Furnace/Modular Blower Fan .................................. Mobile Home Non-Weatherized, NonCondensing Gas Furnace Fan ........... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan ................. Mobile Home Electric Furnace/Modular Blower Fan ......................................... 5.028 0.652 Total—All Classes .......................... 0.893 4.904 4.980 5.128 5.186 3.338 mstockstill on DSK4VPTVN1PROD with RULES2 * 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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 final rule TSD. PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 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 E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 today’s 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 final rule TSD presents more detailed results about anticipated indirect employment impacts. 4. Impact on Product Utility or Performance DOE has concluded that the standards it is adopting in this final rule would not lessen the utility or performance of residential furnace fans. 5. 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 in writing 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)) To assist the Attorney General in making such a determination for today’s standards, DOE provided the Department of Justice (DOJ) with copies of the NOPR and the TSD for review. In its assessment letter responding to DOE, DOJ concluded that the proposed energy conservation standards for residential furnace fans are unlikely to have a significant adverse impact on competition. DOE is publishing the Attorney General’s assessment at the end of this final rule. 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 38195 generating capacity estimated for each considered TSL are reported in chapter 15 of the final rule TSD. Energy savings from standards for the residential furnace fan products covered in today’s final rule could also produce environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases associated with electricity production. Table V.23 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 final rule TSD. As discussed in section IV.K, DOE did not include NOX emissions reduction from power plants in States subject to CAIR, because an energy conservation standard would not affect the overall level of NOX emissions in those States due to the emissions caps mandated by CAIR. For SO2, under the MATS, projected emissions will be far below the cap established by CAIR, so it is unlikely that excess SO2 emissions allowances resulting from 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. TABLE V.23—CUMULATIVE EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR RESIDENTIAL FURNACE FANS TSL 1 2 3 4 5 6 126.3 178.0 (33.8) 0.3 4.6 23.9 171.1 232.5 (38.7) 0.4 6.0 31.3 172.0 235.2 (40.2) 0.4 6.1 31.6 241.5 323.5 (51.1) 0.5 8.4 43.7 6.7 2.4 85.0 0.0 0.1 455.4 9.6 3.2 122.8 0.0 0.1 663.7 9.5 3.2 122.0 0.0 0.1 666.1 13.7 4.4 177.5 0.0 0.2 984.3 133.1 180.4 51.2 0.3 4.7 1402.4 479.3 180.6 235.7 84.0 0.4 6.2 1843.7 695.0 181.5 238.4 81.8 0.4 6.2 1859.3 697.7 255.2 327.9 126.4 0.5 8.6 2569.2 1028.0 Primary Energy Emissions * CO2 (million metric tons) ...................................... SO2 (thousand tons) ............................................ NOX (thousand tons) ........................................... Hg (tons) .............................................................. N2O (thousand tons) ............................................ CH4 (thousand tons) ............................................ 29.3 38.1 (5.2) 0.1 1.0 5.2 124.5 174.3 (32.4) 0.3 4.5 23.4 Upstream Emissions mstockstill on DSK4VPTVN1PROD with RULES2 CO2 (million metric tons) ...................................... SO2 (thousand tons) ............................................ NOX (thousand tons) ........................................... Hg (tons) .............................................................. N2O (thousand tons) ............................................ CH4 (thousand tons) ............................................ 1.7 0.5 22.5 0.0 0.0 127.0 6.7 2.4 84.9 0.0 0.1 447.7 Total FFC Emissions CO2 (million metric tons) ...................................... SO2 (thousand tons) ............................................ NOX (thousand tons) ........................................... Hg (tons) .............................................................. N2O (thousand tons) ............................................ N2O thousand tons CO2eq ** ............................... CH4 (thousand tons) ............................................ VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 31.0 38.6 17.2 0.1 1.0 302.2 132.1 Frm 00067 Fmt 4701 131.2 176.7 52.6 0.3 4.6 1378.9 471.1 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 38196 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.23—CUMULATIVE EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR RESIDENTIAL FURNACE FANS— Continued TSL 1 CH4 million tons CO2eq ** .................................... 2 3303.3 3 4 5 6 11778 11982 17375 17442 25700 * 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). Note: Parentheses indicate negative values. As part of the analysis for this final rule, 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 3percent discount rate. The SCC values for CO2 emissions reductions in 2015, expressed in 2013$, are $12.0/ton, $40.5/ton, $62.4/ton, and $119/ton. The values for later years are higher due to increasing damages as the magnitude of projected climate change increases. Table V.24 presents the global value of CO2 emissions reductions at each TSL. DOE calculated domestic values as a range from 7 percent to 23 percent of the global values, and these results are presented in chapter 14 of the final rule TSD. TABLE V.24—GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR RESIDENTIAL FURNACE FANS SCC Case * TSL 5% discount rate, average 3% discount rate, average 2.5% discount rate, average 3% discount rate, 95th percentile million 2013$ Primary Energy Emissions ** 1 2 3 4 5 6 ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... 184 785 797 1,077 1,083 1,517 880 3,755 3,811 5,152 5,181 7,265 1,409 6,007 6,096 8,245 8,291 11,628 2,722 11,612 11,784 15,934 16,023 22,467 10.2 40.0 40.0 57.0 56.6 81.7 50.1 196 196 279 278 401 81 315 316 449 447 644 155 607 608 866 861 1,241 194 825 837 1,134 1,140 1,599 930 3,951 4,007 5,432 5,459 7,666 1,489 6,323 6,412 8,694 8,737 12,272 2,878 12,219 12,392 16,799 16,884 23,709 Upstream Emissions 1 2 3 4 5 6 ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... Total FFC Emissions 1 2 3 4 5 6 ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... ....................................................................................................................... mstockstill on DSK4VPTVN1PROD with RULES2 * For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119 per metric ton (2013$). 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 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 PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 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 E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations uncertainty involved with this particular issue, DOE has included in this final rule 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 final rule. The dollar-per-ton values that DOE used are discussed in 38197 section IV.L. Table V.25 presents the present value of cumulative NOX emissions reductions for each TSL calculated using the average dollar-perton values and 7-percent and 3-percent discount rates. TABLE V.25—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR RESIDENTIAL FURNACE FANS TSL 3% Discount rate 7% Discount rate million 2013$ Power Sector and Site Emissions * 1 2 3 4 5 6 ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... (3.8) (27.1) (28.6) (31.0) (32.5) (39.4) 0.0 (3.7) (4.1) (2.8) (3.3) (2.1) 25.9 98.1 98.3 141.8 140.9 205.5 10.2 38.7 38.8 55.9 55.6 81.4 22.1 71.0 69.7 110.8 108.4 166.1 10.2 35.1 34.7 53.1 52.3 79.3 Upstream Emissions 1 2 3 4 5 6 ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... Total FFC Emissions ** 1 2 3 4 5 6 ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... * Includes site emissions from additional use of natural gas associated with more-efficient furnace fans. ** Components may not sum to total due to rounding. Note: Parentheses indicate negative values. 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.26 presents the NPV values that result from adding the estimates of the potential economic benefits resulting from reduced fullfuel-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. TABLE V.26—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 $12.0/ metric ton CO2* and low value for NOX** TSL SCC Case $40.5/ metric ton CO2* and medium value for NOX** SCC Case $62.4/ metric ton CO2* and medium value for NOX** SCC Case $119/ metric ton CO2* and high value for NOX** mstockstill on DSK4VPTVN1PROD with RULES2 billion 2013$ 1 2 3 4 5 6 ............................................................................................... ............................................................................................... ............................................................................................... ............................................................................................... ............................................................................................... ............................................................................................... VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00069 4.9 26.9 27.3 30.1 30.3 26.5 Fmt 4701 Sfmt 4700 5.6 30.0 30.5 34.4 34.6 32.6 E:\FR\FM\03JYR2.SGM 6.2 32.4 32.9 37.6 37.9 37.2 03JYR2 7.6 38.3 38.9 45.7 46.1 48.6 38198 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations Consumer NPV at 7% Discount Rate added with: SCC Case $12.0/ metric ton CO2* and low value for NOX** TSL SCC Case $40.5/ metric ton CO2* and medium value for NOX** SCC Case $62.4/ metric ton CO2* and medium value for NOX** SCC Case $119/ metric ton CO2* and high value for NOX** billion 2013$ 1 2 3 4 5 6 ............................................................................................... ............................................................................................... ............................................................................................... ............................................................................................... ............................................................................................... ............................................................................................... 2.0 10.4 10.6 11.2 11.3 8.2 2.7 13.5 13.7 15.5 15.6 14.3 3.3 15.9 16.1 18.8 18.9 18.9 4.6 21.8 22.1 26.9 27.1 30.3 * These label values represent the global SCC in 2015, in 2013$. ** Low Value corresponds to $476 per ton of NOX emissions. Medium Value corresponds to $2,684 per ton, and High Value corresponds to $4,893 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 climaterelated 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. mstockstill on DSK4VPTVN1PROD with RULES2 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. Conclusions 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 VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 amended standard must also result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) For today’s final rule, 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 maxtech 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 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 PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 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 final rule TSD. DOE’s current analysis does not explicitly control for heterogeneity in consumer preferences, preferences across subcategories of products or specific features, or E:\FR\FM\03JYR2.SGM 03JYR2 38199 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations consumer price sensitivity variation according to household income.75 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.76 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. 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-fuelcycle results. Results that refer to primary energy savings are presented in chapter 10 of the final rule TSD. 1. Benefits and Burdens of Trial Standard Levels Considered for Residential Furnace Fans Table V.27 through Table V.29 summarize the quantitative impacts TABLE V.27—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 0.680 2.909 2.958 3.986 4.014 5.635 26.013 9.545 26.403 9.679 28.810 10.024 29.079 10.120 24.731 6.509 131.2 176.7 52.6 0.3 4.6 1378.9 471.1 11778 133.1 180.4 51.2 0.3 4.7 1402.4 479.3 11982 180.6 235.7 84.0 0.4 6.2 1843.7 695.0 17375 181.5 238.4 81.8 0.4 6.2 1859.3 697.7 17442 255.2 327.9 126.4 0.5 8.6 2569.2 1028.0 25700 0.837 to 12.392 0.0697 0.0347 1.134 to 16.799 0.1108 0.0531 1.140 to 16.884 0.1084 0.0523 1.599 to 23.709 0.1661 0.0793 NPV of Consumer Benefits 2013$ billion 3% discount rate .................... 7% discount rate .................... 4.668 1.754 Cumulative Emissions Reduction (FFC Emissions) CO2 million metric tons .......... SO2 thousand tons ................. NOX thousand tons ................ Hg tons ................................... N2O thousand tons ................ N2O thousand tons CO2eq * .. CH4 thousand tons ................. CH4 million tons CO2eq * ....... 31.0 38.6 17.2 0.1 1.0 302.2 132.1 3303 Value of Emissions Reduction (FFC Emissions) 2013$ billion CO2 ** ..................................... NOX—3% discount rate ......... NOX—7% discount rate ......... 0.194 to 2.878 0.0221 0.0102 0.825 to 12.219 0.0710 0.0351 * 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. TABLE V.28—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 6 311.0 to 359.1 (11.0) to 2.7 290.6 to 397.8 (16.9) to 13.8 288.8 to 397.6 (17.4) to 13.7 147.2 to 422.4 (57.9) to 20.8 Manufacturer Impacts Industry NPV (baseline value is 349.6) (2013$ in millions) ........ Change in Industry NPV (% change) .......................................... 332.3 to 336.6 (5.0) to (3.7) 313.2 to 360.0 (10.4) to 3.0 mstockstill on DSK4VPTVN1PROD with RULES2 Consumer Average LCC Savings (2013$) Non-Weatherized, Non-condensing Gas Furnace Fan ............... Non-Weatherized, Condensing Gas Furnace Fan ...................... Weatherized Non-Condensing Gas Furnace Fan ....................... Non-Weatherized, Non-Condensing Oil Furnace Fan ................. Non-Weatherized Electric Furnace/Modular Blower Fan ............ Mobile Home Non-Weatherized, Non-condensing Gas Furnace Fan ........................................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan 75 P.C. Reiss and M.W. White, Household Electricity Demand, Revisited, Review of Economic Studies (2005) 72, 853–883. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 $85 $58 $67 $46 $29 $471 $335 $378 $46 $181 $471 $335 $378 $259 $181 $506 $341 $447 $46 $204 $506 $341 $447 $259 $204 $431 $268 $391 $80 $81 $36 $35 $36 $35 $144 $133 $36 $35 $144 $133 ($58) ($51) 76 Alan Sanstad, Notes on the Economics of Household Energy Consumption and Technology Choice. Lawrence Berkeley National Laboratory PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 (2010) (Available at: https://www1.eere.energy.gov/ buildings/appliance_standards/pdfs/consumer_ee_ theory.pdf (Last accessed May 3, 2013). E:\FR\FM\03JYR2.SGM 03JYR2 38200 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.28—SUMMARY OF ANALYTICAL RESULTS FOR RESIDENTIAL FURNACE FAN STANDARDS: MANUFACTURER AND AVERAGE OR MEDIAN CONSUMER IMPACTS—Continued Category TSL 1 Mobile Home Electric Furnace/Modular Blower Fan ................... TSL 2 $19 TSL 3 $19 TSL 4 TSL 5 TSL 6 $70 $85 $85 ($54) Consumer Median PBP (years) Non-Weatherized, Non-condensing Gas Furnace Fan ............... Non-Weatherized, Condensing Gas Furnace Fan ...................... Weatherized Non-Condensing Gas Furnace Fan ....................... Non-Weatherized, Non-Condensing Oil Furnace Fan ................. Non-Weatherized Electric Furnace/Modular Blower Fan ............ Mobile Home Non-Weatherized, Non-condensing Gas Furnace Fan ........................................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan Mobile Home Electric Furnace/Modular Blower Fan ................... 1.12 1.18 0.73 1.70 1.94 2.60 2.87 1.79 1.70 2.64 2.60 2.87 1.79 4.65 2.64 5.41 5.78 4.42 1.70 3.21 5.41 5.78 4.42 4.65 3.21 10.16 11.01 8.19 18.56 11.45 2.72 2.31 2.07 2.72 2.31 2.07 6.84 6.65 3.58 2.72 2.31 4.09 6.84 6.65 4.09 24.38 31.27 14.90 Note: Parentheses indicate negative values. TABLE V.29—SUMMARY OF ANALYTICAL RESULTS FOR RESIDENTIAL FURNACE FAN STANDARDS: DISTRIBUTION OF CONSUMER LCC IMPACTS Product Class TSL 1 Non-Weatherized, Non-Condensing Gas Furnace Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Non-Weatherized, Condensing Gas Furnace Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Weatherized Non-Condensing Gas Furnace Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Non-Weatherized, Non-Condensing Oil Furnace Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Non-Weatherized Electric Furnace/Modular Blower Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Mobile Home Non-Weatherized, Condensing Gas Furnace Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ Mobile Home Electric Furnace/Modular Blower Fan: Net Cost ............................................................................................ No Impact ......................................................................................... Net Benefit ........................................................................................ TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 1% 68% 30% 17% 25% 58% 17% 25% 58% 30% 14% 56% 30% 14% 56% 50% 0% 50% 1% 75% 24% 11% 41% 48% 11% 41% 48% 23% 34% 43% 23% 34% 43% 51% 0% 49% 0% 81% 19% 3% 56% 41% 3% 56% 41% 16% 33% 51% 16% 33% 51% 41% 0% 59% 13% 71% 17% 13% 71% 17% 44% 28% 28% 13% 71% 17% 44% 28% 28% 78% 0% 22% 4% 73% 22% 17% 37% 45% 17% 37% 45% 23% 25% 51% 23% 25% 51% 60% 0% 39% 10% 56% 34% 10% 56% 34% 55% 0% 45% 10% 56% 34% 55% 0% 45% 80% 0% 20% 5% 68% 27% 5% 68% 27% 37% 29% 33% 5% 68% 27% 37% 29% 33% 82% 0% 18% 7% 71% 22% 7% 71% 22% 26% 38% 37% 32% 26% 43% 32% 26% 43% 75% 0% 25% mstockstill on DSK4VPTVN1PROD with RULES2 Note: Components may not sum to total due to rounding. First, DOE considered TSL 6, which would save an estimated total of 5.63 quads of energy, an amount DOE considers significant. TSL 6 has an estimated NPV of consumer benefit of $6.51 billion using a 7-percent discount rate, and $24.7 billion using a 3-percent discount rate. The cumulative CO2 emissions reduction at TSL 6 is 255.2 million metric tons. The estimated monetary value of the CO2 emissions reductions VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 ranges from $1.60 billion to $23.71 billion. The other emissions reductions are 327.9 thousand tons of SO2, 126.4 thousand tons of NOX, 0.5 tons of Hg, 8.6 thousand tons of N2O, and 1,028.0 thousand tons of CH4. At TSL 6, the average LCC savings are positive for: (1) Non-weatherized, noncondensing gas furnace fans; (2) nonweatherized, condensing gas furnace fans; (3) weatherized non-condensing gas furnace fans; (4) non-weatherized, PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 non-condensing oil furnace fans; and (5) non-weatherized electric furnace/ modular blower fans. The LCC savings are negative for: (1) Mobile home nonweatherized, non-condensing gas furnace fans; (2) mobile home nonweatherized, condensing gas furnace fans; and (3) mobile home electric furnace/modular blower fans. The median payback period is lower than the median product lifetime (which is 21.2 years for gas and electric furnace E:\FR\FM\03JYR2.SGM 03JYR2 38201 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations fans) for all of the product classes except for: (1) Mobile home nonweatherized, non-condensing gas furnace fans, and (2) mobile home nonweatherized, condensing. 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 except for weatherized noncondensing gas furnace fans. At TSL 6, manufacturers may expect diminished profitability due to increases in product costs, stranded assets, capital investments in equipment and tooling, decreases in unit shipments, and expenditures related to engineering and testing. The projected change in INPV ranges from a decrease of $202.5 million to an increase of $72.8 million based on DOE’s manufacturer markup scenarios. The upper bound of $72.8 million is considered an optimistic scenario for manufacturers because it assumes manufacturers can fully pass on substantial increases in product costs and maintain existing mark ups. 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 57.9 percent if impacts reach the lower bound of the range. Accordingly, the Secretary 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 4.01 quads of energy, an amount DOE considers significant. TSL 5 has an estimated NPV of consumer benefit of $10.1 billion using a 7-percent discount rate, and $29.1 billion using a 3-percent discount rate. The cumulative CO2 emissions reduction at TSL 5 is 181.5 million metric tons. The estimated monetary value of the CO2 emissions reductions ranges from $1.14 billion to $16.88 billion. The other emissions reductions are 238.4 thousand tons of SO2, 81.8 thousand tons of NOX, 0.4 tons of Hg, 6.2 thousand tons of N2O, and 697.7 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, noncondensing gas furnace fans; nonweatherized, condensing gas furnace fans; weatherized non-condensing gas furnace fans; non-weatherized electric furnace/modular blower fans; and mobile 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 $60.8 million to an increase of $48.0 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 17.4 percent in INPV for residential furnace fan manufacturers. Accordingly, the Secretary 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 3.99 quads of energy, an amount DOE considers significant. TSL 4 has an estimated NPV of consumer benefit of $10.0 billion using a 7-percent discount rate, and $28.8 billion using a 3-percent discount rate. The cumulative CO2 emissions reduction at TSL 4 is 180.6 million metric tons. The estimated monetary value of the CO2 emissions reductions ranges from $1.13 billion to $16.8 billion. The other emissions reductions are 235.7 thousand tons of SO2, 84.0 thousand tons of NOX, 0.4 tons of Hg, 6.2 thousand tons of N2O, and 695.0 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 $59.0 million to an increase of $48.2 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 16.9 percent in INPV for residential furnace fan manufacturers. After considering the analysis and weighing the benefits and the burdens, the Secretary 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 concluded that TSL 4 would save a significant amount of energy and is technologically feasible and economically justified. Therefore, DOE today is adopting the energy conservation standards for residential furnace fans at TSL 4. Table V.30 presents the energy conservation standards for residential furnace fans. mstockstill on DSK4VPTVN1PROD with RULES2 TABLE V.30—ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACE FANS Product class Standard: FER * (W/1000 cfm) Non-Weatherized, Non-Condensing Gas Furnace Fan ............................................................................................. Non-Weatherized, Condensing Gas Furnace Fan .................................................................................................... Weatherized Non-Condensing Gas Furnace Fan ..................................................................................................... Non-Weatherized, Non-Condensing Oil Furnace Fan ............................................................................................... Non-Weatherized Electric Furnace/Modular Blower Fan ........................................................................................... Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan ...................................................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan .............................................................................. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 FER FER FER FER FER FER FER = = = = = = = 0.044 0.044 0.044 0.071 0.044 0.071 0.071 × × × × × × × QMax QMax QMax QMax QMax QMax QMax + + + + + + + 182 195 199 382 165 222 240 38202 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.30—ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACE FANS—Continued Product class Standard: FER * (W/1000 cfm) Mobile Home Electric Furnace/Modular Blower Fan ................................................................................................. Mobile Home Weatherized Non-Condensing Gas Furnace Fan ............................................................................... Mobile Home Non-Weatherized Non-Condensing Oil Furnace Fan ......................................................................... FER = 0.044 × QMax + 101 Reserved Reserved * QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the final DOE test procedure. 79 FR 500, 524 (Jan. 3, 2014). 2. Summary of Benefits and Costs (Annualized) of Today’s Standards The benefits and costs of today’s 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 2013$, of the benefits from operating products that meet the 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.77 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. 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 climaterelated impacts resulting from the emission of one metric ton of CO2 in each year over a very long period. Table V.31 shows the annualized values for today’s standards for residential furnace fans. The results under the primary estimate are as follows. (All monetary values below are expressed in 2013$.) Using a 7-percent discount rate for benefits and costs other than CO2 reduction (for which DOE used a 3-percent discount rate along with the SCC series corresponding to a value of $40.5/ton in 2015), the cost of the residential furnace fan standards in today’s rule is $358 million per year in increased equipment costs, while the benefits are $1,416 million per year in reduced equipment operating costs, $312 million in CO2 reductions, and $5.61 million in reduced NOX emissions. In this case, the net benefit amounts to $1,376 million per year. Using a 3-percent discount rate for all benefits and costs and the SCC series corresponding to a value of $40.5/ton in 2015, Table V.31 shows the cost of the residential furnace fans standards in today’s rule is $355 million per year in increased equipment costs, while the benefits are $2010 million per year in reduced operating costs, $312 million in CO2 reductions, and $6.36 million in reduced NOX emissions. In this case, the net benefit amounts to $1,973 million per year. TABLE V.31—ANNUALIZED BENEFITS AND COSTS OF STANDARDS (TSL 4) FOR RESIDENTIAL FURNACE FANS Primary estimate * Discount rate Low net benefits estimate High net benefits estimate million 2013$/year Benefits: Consumer Operating Cost Savings ..................................................... 7% 3% 5% 3% 2.5% 3% 7% 3% 1416 2010 90 312 459 965 5.61 6.36 1167 1626 77 268 393 828 4.80 5.35 1718 2467 108 377 555 1166 6.82 7.86 7% plus CO2 range 7% 3% plus CO2 range 3% 1,512 to 2,387 1,734 2,106 to 2,981 2,328 1,249 to 2,000 1,439 1,708 to 2,459 1,899 1,833 to 2,891 2,102 2,583 to 3,641 2,852 7% 3% 358 355 314 304 410 419 7% plus CO2 range 7% 1,154 to 2,029 1,376 935 to 1,685 1,125 1,423 to 2,481 1,692 CO2 Reduction Monetized Value ($12.0/t case) ** .............................. CO2 Reduction Monetized Value ($40.5/t case) ** .............................. CO2 Reduction Monetized Value ($62.4/t case) ** .............................. CO2 Reduction Monetized Value ($119/t case) ** ............................... NOX Reduction Monetized Value (at $2,684/ton) ** ............................ Total Benefits † ................................................................................. Costs: Consumer Incremental Product Costs ................................................. mstockstill on DSK4VPTVN1PROD with RULES2 Net Benefits: Total † ............................................................................................... 77 DOE used a two-step calculation process to convert the time-series of costs and benefits into annualized values. First, DOE calculated a present value in 2013, the year used for discounting the NPV of total consumer costs and savings, for the time-series of costs and benefits using discount VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 rates of 3 and 7 percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used a range of discount rates. From the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in 2013, that yields the same present value. The fixed annual PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 payment is the annualized value. Although DOE calculated annualized values, this does not imply that the time-series of cost and benefits from which the annualized values were determined would be a steady stream of payments. E:\FR\FM\03JYR2.SGM 03JYR2 38203 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE V.31—ANNUALIZED BENEFITS AND COSTS OF STANDARDS (TSL 4) FOR RESIDENTIAL FURNACE FANS—Continued Discount rate Primary estimate * Low net benefits estimate High net benefits estimate million 2013$/year 3% plus CO2 range 3% 1,750 to 2,625 1,973 1,404 to 2,155 1,595 2,164 to 3,222 2,433 * 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 2013 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 2013$, in 2015 under several scenarios. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate. The SCC values increase over time. The value for NOX (in 2013$) is the average of the low and high values used in DOE’s analysis. † Total Benefits for both the 3% and 7% cases are derived using the series corresponding to the SCC value of $40.5/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 that today’s standards address, are as follows: mstockstill on DSK4VPTVN1PROD with RULES2 (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 today’s regulatory action is an ‘‘economically significant regulatory action’’ under section 3(f) of Executive Order 12866. Accordingly, section 6(a)(3) of the Executive Order requires that DOE prepare a regulatory impact analysis (RIA) for this rule and that the Office of Information and Regulatory Affairs (OIRA) in the 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 VerDate Mar<15>2010 18:02 Jul 02, 2014 Jkt 232001 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 PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 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 today’s final rule 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 a final regulatory flexibility analysis (FRFA) 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 FRFA for the products that are the subject of this rulemaking. E:\FR\FM\03JYR2.SGM 03JYR2 38204 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 1. Description and Estimated Number of Small Entities Regulated mstockstill on DSK4VPTVN1PROD with RULES2 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: https:// www.sba.gov/sites/default/files/files/ Size_Standards_Table.pdf. Residential furnace fan manufacturing is classified under NAICS 333415, ‘‘AirConditioning 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 public databases (e.g., AHRI Directory,78 the SBA Database 79), individual company Web sites, and market research tools (e.g., Hoovers Web site 80) 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. DOE initially identified 38 manufacturers of residential furnace fan products sold in the U.S. DOE then determined that 23 were large 78 See https://www.ahridirectory.org/ ahriDirectory/pages/home.aspx. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 manufacturers or manufacturers that are foreign owned and operated. DOE was able to determine that 15 domestic manufacturers meet the SBA’s definition of a ‘‘small business’’ and manufacture products covered by this rulemaking. Manufacturer Participation Before issuing this Notice, 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. Industry Structure The 15 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 residential gas furnaces is almost completely held by seven large manufacturers, and small manufacturers in total account for only 1 percent of unit sales in the market. These seven large manufacturers also control 97 percent of the market for central air conditioners. The market for mobile home furnaces is primarily held by one large manufacturer. In contrast, the market for domestic oil furnaces is almost entirely comprised of small manufacturers. Comparison Between Large and Small Entities Today’s 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 per basic model and do not scale with sales volume. For each 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 79 See https://dsbs.sba.gov/dsbs/search/dsp_ dsbs.cfm. PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 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 standard in today’s final rule for residential furnace fans could cause small manufacturers to be at a disadvantage relative to large manufacturers, DOE cannot certify that today’s standards would not have a significant impact on a significant number of small businesses, and consequently, DOE has prepared this FRFA. At TSL 4, the level adopted in today’s document, DOE estimates capital conversion costs of $0.14 million and product conversion costs of $0.23 million over a five-year conversion period for a typical small manufacturer. This is compared to capital conversion costs of $0.59 and product conversion costs of $1.00 million over a five-year conversion period for a typical large manufacturer. These costs and their impacts are described in detail below. To estimate how small manufacturers would be potentially impacted, DOE used the market share of small manufacturers to estimate the annual revenue, earnings before interest and tax (EBIT), and research and development (R&D) expense for a typical small manufacturer. DOE then compared these costs to the required product conversion costs at each TSL for both an average small manufacturer and an average large manufacturer. Table VI.1 and VI.2 show the capital and product conversion costs for a typical small manufacturer versus those of a typical large manufacturer. Tables VI.3 and VI.4 report the total conversion costs as a percentage of annual R&D expense, annual revenue, and EBIT for a typical small and large manufacturer, respectively. In the following tables, TSL 4 represents the adopted standard. 80 See E:\FR\FM\03JYR2.SGM Hoovers: https://www.hoovers.com./. 03JYR2 38205 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations TABLE VI.1—COMPARISON OF TYPICAL SMALL AND LARGE MANUFACTURER’S CAPITAL CONVERSION COSTS Capital conversion costs for typical small manufacturer (in 2013$ millions) TSL TSL TSL TSL TSL TSL 1 2 3 4 5 6 ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... Capital conversion costs for typical large manufacturer (in 2013$ millions) 0.08 0.10 0.11 0.14 0.14 1.24 0.35 0.44 0.46 0.59 0.62 5.28 TABLE VI.2:—COMPARISON OF TYPICAL SMALL AND LARGE MANUFACTURER’S PRODUCT CONVERSION COSTS Product conversion costs for typical small manufacturer (in 2013$ millions) TSL TSL TSL TSL TSL TSL 1 2 3 4 5 6 ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... ....................................................................................................................................................................... Product conversion costs for typical large manufacturer (in 2013$ millions) 0.17 0.22 0.23 0.23 0.25 0.27 0.74 0.93 0.99 1.00 1.06 1.15 TABLE VI.3—IMPACTS OF CONVERSION COSTS ON A SMALL MANUFACTURER Capital conversion cost as a percentage of annual capital expenditures TSL TSL TSL TSL TSL TSL 1 2 3 4 5 6 Product conversion cost as a percentage of annual R&D expense Total conversion cost as a percentage of annual revenue Total conversion cost as a percentage of annual EBIT 69% 86% 92% 117% 122% 1048% 185% 232% 249% 250% 266% 289% 5% 6% 7% 8% 8% 31% 72% 90% 96% 105% 111% 427% ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... TABLE VI.4—IMPACTS OF CONVERSION COSTS ON A LARGE MANUFACTURER Capital conversion cost as a percentage of annual capital expenditures mstockstill on DSK4VPTVN1PROD with RULES2 TSL TSL TSL TSL TSL TSL 1 2 3 4 5 6 Product conversion cost as a percentage of annual R&D expense Total conversion cost as a percentage of annual revenue Total conversion cost as a percentage of annual EBIT 3% 4% 4% 5% 5% 45% 8% 10% 11% 11% 11% 12% 0% 0% 0% 0% 0% 1% 3% 4% 4% 5% 5% 18% ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... ............................................................................................................... Based on the results in Table VI.1 and Table VI.2, DOE understands that the potential conversions costs faced by small manufacturers may be proportionally greater than those faced by larger manufacturers. Small VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 manufacturers have less engineering staff and lower R&D budgets. They also have lower capital expenditures annually. As a result, the conversion costs incurred by a small manufacturer would likely be a larger percentage of its PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 annual capital expenditures, R&D expenses, revenue, and EBIT, than those for a large manufacturer. E:\FR\FM\03JYR2.SGM 03JYR2 38206 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 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 adopted 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 technologically 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 less than 31 percent) than those that would be achieved by the considered energy conservation standards. mstockstill on DSK4VPTVN1PROD with RULES2 C. Review Under the Paperwork Reduction Act Manufacturers of furnace fans, or their third party representatives, must certify to DOE that their products comply with any applicable energy conservation standard. In certifying compliance, manufacturers or their third-party representatives must test their equipment according to the DOE test procedure for furnace fans, including any amendments adopted for that test procedure. Manufacturers or their thirdparty representatives must then submit certification reports and compliance statements using DOE’s electronic Webbased tool, the Compliance and Certification Management System (CCMS), regarding product characteristics and energy consumption information regarding basic models of furnace fans distributed in commerce in the U.S. CCMS uses product-specific templates that manufacturers are required to use when submitting certification data to DOE. See https:// www.regulations.doe.gov/ccms. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 The collection-of-information requirement for furnace fan certification is subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been submitted to OMB for approval. Public reporting burden for the certification is estimated to average 30 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Note that the certification and recordkeeping requirements for certain consumer products in 10 CFR part 430 have previously been approved by OMB and assigned OMB control number 1910– 1400; the certification requirement for furnace fans will be included in this collection once approved by OMB. DOE will notify the public of OMB approval through a Federal Register notice. Public comment is sought regarding: whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Send comments on these or any other aspects of the collection of information to the DOE program official listed in the ADDRESSES section above, and email to Chad_S._ Whiteman@omb.eop.gov. 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. 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 rule. DOE’s CX determination for this rule is available at https:// cxnepa.energy.gov/. D. Review Under the National Environmental Policy Act of 1969 Pursuant to the National Environmental Policy Act (NEPA) of 1969, DOE has determined that this 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 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 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 PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 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 it will follow in the development of such regulations. 65 FR 13735. DOE has examined this final rule and has determined that it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of today’s final rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) No further action is required by Executive Order 13132. E:\FR\FM\03JYR2.SGM 03JYR2 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations mstockstill on DSK4VPTVN1PROD with RULES2 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 final 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 ‘‘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 today’s final rule, which adopts new energy conservation standards for residential furnace fans, does not contain a Federal VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 intergovernmental mandate, it may require annual expenditures of $100 million or more by the private sector. Specifically, the final rule could 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 final 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 this final rule and the ‘‘Regulatory Impact Analysis’’ section of the TSD for this final 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 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), today’s final rule establishes 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 final 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 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 38207 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 18, 1988), DOE has determined that this regulation 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 today’s final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines. K. Review Under Executive Order 13211 Executive Order 13211, ‘‘Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,’’ 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to 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 concluded that today’s regulatory action, which sets forth energy conservation standards for residential furnace fans, is not a significant energy action because the E:\FR\FM\03JYR2.SGM 03JYR2 38208 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations new 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 the final rule. L. Review Under the Information Quality Bulletin for Peer Review mstockstill on DSK4VPTVN1PROD with RULES2 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. M. Congressional Notification 17:09 Jul 02, 2014 Jkt 232001 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 June 25, 2014. David T. Danielson, Assistant Secretary, Energy Efficiency and Renewable Energy. For the reasons stated in the preamble, DOE amends 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 1. The authority citation for part 429 continues to read as follows: ■ Authority: 42 U.S.C. 6291–6317. § 429.12 [Amended] 2. Section 429.12 is amended by: a. Removing in paragraph (b)(13) ‘‘429.54’’ and adding in its place ‘‘429.58’’; ■ b. Removing in paragraph (d) table, first column, second row (i.e., for products with a submission deadline of May 1st) the word ‘‘and’’ and adding ‘‘and Residential furnace fans’’ at the end of the listed products. ■ 3. Section 429.58 is amended by: ■ a. Adding in paragraph (a)(2) introductory text ‘‘within the scope of appendix AA of subpart B of part 430’’ after ‘‘basic model of furnace fan’’; and ■ b. Adding paragraph (b). The addition reads as follows: ■ ■ § 429.58 As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this rule prior to its effective date. The report will state that it has been determined that the rule is a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). VerDate Mar<15>2010 VII. Approval of the Office of the Secretary The Secretary of Energy has approved publication of this final rule. Furnace fans. * * * * * (b) Certification reports. (1) The requirements of § 429.12 are applicable to residential furnace fans; and (2) Pursuant to § 429.12(b)(13), a certification report shall include the PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 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 4. The authority citation for part 430 continues to read as follows: ■ Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 2461 note. 5. Section 430.2 is amended by adding definitions for ‘‘small-duct high-velocity (SDHV) electric furnace’’ and ‘‘smallduct high-velocity (SDHV) modular blower’’ in alphabetical order to read as follows: ■ § 430.2 Definitions. * * * * * Small-duct high-velocity (SDHV) electric furnace means an electric furnace that: (1) Is designed for, and produces, at least 1.2 inches of external static pressure when operated at the certified air volume rate of 220–350 CFM per rated ton of cooling in the highest default cooling airflow-control setting; and (2) When applied in the field, uses high velocity room outlets generally greater than 1,000 fpm that have less than 6.0 square inches of free area. Small-duct high-velocity (SDHV) modular blower means a modular blower that: (1) Is designed for, and produces, at least 1.2 inches of external static pressure when operated at the certified air volume rate of 220–350 CFM per rated ton of cooling in the highest default cooling airflow-controls setting; and (2) When applied in the field, uses high velocity room outlets generally greater than 1,000 fpm that have less than 6.0 square inches of free area. * * * * * ■ 6. Section 430.32 is amended by adding paragraph (y) to read as follows: E:\FR\FM\03JYR2.SGM 03JYR2 38209 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations § 430.32 Energy and water conservation standards and their effective dates. * * * * * (y) Residential furnace fans. Residential furnace fans incorporated in the products listed in Table 1 of this paragraph and manufactured on and after July 3, 2019, shall have a fan energy rating (FER) value that meets or is less than the following values: TABLE 1—ENERGY CONSERVATION STANDARDS FOR COVERED RESIDENTIAL FURNACE FANS* Product class FER ** (Watts/cfm) 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) ........................................................... Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan (MH–NWG–NC) ...................................... Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH–NWG–C) ................................................. Mobile Home Electric Furnace/Modular Blower Fan (MH–EF/MB) ...................................................................... Mobile Home Non-Weatherized Oil Furnace Fan (MH–NWO) ............................................................................. Mobile Home Weatherized Gas Furnace Fan (MH–WG) ** .................................................................................. FER = 0.044 FER = 0.044 FER = 0.044 FER = 0.071 FER = 0.044 FER = 0.071 FER = 0.071 FER = 0.044 Reserved Reserved × × × × × × × × QMax QMax QMax QMax QMax QMax QMax QMax + + + + + + + + 182 195 199 382 165 222 240 101 * Furnace fans incorporated into hydronic air handlers, SDHV modular blowers, SDHV electric furnaces, and CAC/HP indoor units are not subject to the standards listed in this table. ** QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the final DOE test procedure at 10 CFR part 430, subpart B, appendix AA. mstockstill on DSK4VPTVN1PROD with RULES2 Note: The following will not appear in the Code of Federal Regulations. VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR2.SGM 03JYR2 38210 Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations U.S. DEPARTMENT OF JUSTICE Antitrust Division WILLIAM J. BAER Assistant Attorney General RFK Main Justice Building 950 Pe.llllS)'lvania Avenue, N.W. Washington. D.C. 20530-0001 (202)514-2401/ (202)616-2645 (F~) December 20, 2013 EricJ. Fygi Deputy General Counsel Department ofEnergy Washington, DC 20585 Dear Deputy General Counsel Fygi: I am responding to your October 23, 2013 letter seeking the views ofthe Attontey about the potential impact on competition ofproposed energy conservation standards for products that use electricity for purposes of circulating air through duct work in residences (also referred to· as "residential furnace fans''). Your request was submitted undet Section 325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as amended (ECPA), 42 U.S.C. 6295(o)(2)(B)(i)(V), which requires the Attorney General to make a detennination of the impact of any lessening of competition that is likely to result from the imposition ofproposed energy conservation standards. The Attorney General's responsibility for responding to requests from other departments about the effect of a program on competition has been delegated to the Assistant Attorney General for the Antitrust Division in 28 CFR § 0.40(g). Gener~ In conducting its analysis the Antitrust Division examines whether a proposed standard may lessen competition, for example, by substantially limiting consumer choice, by placing certain manufacturers at an unjustified competitive disadvantage, or by We have reviewed the proposed standards contained in the Notice of Proposed Ru1emaking (78 Fed. Reg. 207, October 25, 2013) (NOPR). We have also reviewed supplementary information submitted to the Attorney General by the Department of Energy, including the technical support document. Based on this review, our conclusion VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4725 E:\FR\FM\03JYR2.SGM 03JYR2 ER03JY14.001</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 inducing avoidable inefficiencies in production or distribution of particular products. A lessening of competition could result in higher prices to manufacturers and consumers, and perhaps thwart the intent ofthe revised standards by inducing substitution to less efficient products. · Federal Register / Vol. 79, No. 128 / Thursday, July 3, 2014 / Rules and Regulations 38211 2 is that the proposed energy conservation standards for residential furnace fans are unlikely to have a significant adverse impact on competition. [FR Doc. 2014–15387 Filed 7–2–14; 8:45 am] BILLING CODE 6450–01–P VerDate Mar<15>2010 17:09 Jul 02, 2014 Jkt 232001 PO 00000 Frm 00083 Fmt 4701 Sfmt 9990 E:\FR\FM\03JYR2.SGM 03JYR2 ER03JY14.002</GPH> mstockstill on DSK4VPTVN1PROD with RULES2 Enclosure

Agencies

DEPARTMENT OF ENERGY

[Federal Register Volume 79, Number 128 (Thursday, July 3, 2014)]
[Rules and Regulations]
[Pages 38129-38211]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15387]

[[Page 38129]]

Vol. 79

Thursday,

No. 128

July 3, 2014

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; Final Rule

Federal Register / Vol. 79 , No. 128 / Thursday, July 3, 2014 / Rules
and Regulations

[[Page 38130]]

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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: Final rule.

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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 final rule, DOE is adopting new
energy conservation standards for residential furnace fans. DOE has
determined that the prescribed energy conservation standards for these
products would result in significant conservation of energy, and are
technologically feasible and economically justified.

DATES: The effective date of this rule is September 2, 2014. Compliance
with the prescribed standards established for residential furnace fans
in this final rule is required on and after July 3, 2019.

ADDRESSES: The docket for this rulemaking, which includes Federal
Register notices, public meeting attendee lists and transcripts,
comments, and other supporting documents/materials, is available for
review at www.regulations.gov. All documents in the docket are listed
in the www.regulations.gov index. However, 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. The www.regulations.gov Web page contains simple
instructions on how to access all documents, including public comments,
in the docket.
For further information on how to review the docket, contact Ms.
Brenda Edwards at (202) 586-2945 or by email:
Brenda.Edwards@ee.doe.gov.

FOR FURTHER INFORMATION CONTACT:
Mr. Ron Majette, U.S. Department of Energy, Office of Energy Efficiency
and Renewable Energy, Building Technologies Office, EE-5B, 1000
Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202)
586-7935. Email: Ronald.Majette@ee.doe.gov.
Mr. Eric Stas, U.S. Department of Energy, Office of the General
Counsel, GC-71, 1000 Independence Avenue SW., Washington, DC 20585-
0121. Telephone: (202) 586-9507. Email: Eric.Stas@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Summary of the Final Rule
A. Benefits and Costs to Consumers
B. Impact on Manufacturers
C. National Benefits and Costs
D. Conclusion
II. Introduction
A. Authority
B. Background
1. Current Standards
2. History of Standards Rulemaking for Residential Furnace Fans
III. General Discussion
A. Test Procedures
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
a. Economic Impact on Manufacturers and Commercial Customers
b. Savings in Operating Costs Compared To Increase in Price
(Life-Cycle Costs)
c. Energy Savings
d. Lessening of Utility or Performance of Equipment
e. Impact of Any Lessening of Competition
f. Need of the Nation To Conserve Energy
g. Other Factors
2. Rebuttable Presumption
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
f. Other Components
D. Markups Analysis
E. Energy Use Analysis
F. Life-Cycle Cost and Payback Period Analysis
1. Installed Cost
2. Operating Costs
3. Furnace Fan Lifetime
4. Discount Rates
5. Compliance Date
6. Base-Case Efficiency Distribution
7. 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. Conversion Costs
b. Cumulative Regulatory Burden
c. Scope of MIA Coverage
d. Markups Analysis
e. Employment Impacts
f. Consumer Utility
g. Small Businesses
K. Emissions Analysis
L. Monetizing Carbon Dioxide and Other Emissions Impacts
1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Development of Social Cost of Carbon Values
c. Current Approach and Key Assumptions
M. Utility Impact Analysis
N. Employment Impact Analysis
O. Comments on Proposed Standards
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. Conclusions
1. Benefits and Burdens of Trial Standard Levels Considered for
Residential Furnace Fans

[[Page 38131]]

2. Summary of Benefits and Costs (Annualized) of Today's
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
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
VII. Approval of the Office of the Secretary

I. Summary of the Final Rule

Title III, Part B 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. Pursuant to EPCA, any new or amended
energy conservation standard that DOE prescribes for certain products,
such as furnace fans, 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)). Furthermore, the new
or amended standard must result in a significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B)). In accordance with these and other
statutory provisions discussed in this notice, DOE proposes amended
energy conservation standards for furnace fans. The proposed standards
shall have a fan energy rating (FER) value that meets or is less than
the values shown in Table I.1. These standards would apply to all
products listed in Table I.1 and manufactured in, or imported into, the
United States on or after manufactured on and after July 3, 2019.

Table I.1.--Energy Conservation Standards for Covered Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
Percent
increase over
Product class FER\*\ (watts/cfm) baseline
(percent)
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace FER = 0.044 x QMax + 182......................... 46
Fan (NWG-NC).
Non-Weatherized, Condensing Gas Furnace Fan FER = 0.044 x QMax + 195......................... 46
(NWG-C).
Weatherized Non-Condensing Gas Furnace Fan FER = 0.044 x QMax + 199......................... 46
(WG-NC).
Non-Weatherized, Non-Condensing Oil Furnace FER = 0.071 x QMax + 382......................... 12
Fan (NWO-NC).
Non-Weatherized Electric Furnace/Modular FER = 0.044 x QMax + 165......................... 46
Blower Fan (NWEF/NWMB).
Mobile Home Non-Weatherized, Non-Condensing FER = 0.071 x QMax + 222......................... 12
Gas Furnace Fan (MH-NWG-NC).
Mobile Home Non-Weatherized, Condensing Gas FER = 0.071 x QMax + 240......................... 12
Furnace Fan (MH-NWG-C).
Mobile Home Electric Furnace/Modular Blower FER = 0.044 x QMax + 101......................... 46
Fan (MH-EF/MB).
Mobile Home Non-Weatherized Oil Furnace Fan Reserved......................................... ..............
(MH-NWO).
Mobile Home Weatherized Gas Furnace Fan (MH- Reserved......................................... ..............
WG).
----------------------------------------------------------------------------------------------------------------
* QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the final DOE test
procedure at 10 CFR part 430, subpart B, appendix AA.

A. Benefits and Costs to Consumers

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

Table I.2--Impacts of Energy Conservation Standards on Consumers of
Residential Furnace Fans
------------------------------------------------------------------------
Average LCC Median payback
Product class savings period
(2013$) (years)
------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas $506 5.4
Furnace Fan............................
Non-weatherized, Condensing Gas Furnace $341 5.8
Fan....................................
Weatherized Non-Condensing Gas Furnace $447 4.4
Fan....................................
Non-Weatherized, Non-Condensing Oil $46 1.7
Furnace Fan............................
Non-weatherized Electric Furnace/Modular $204 3.2
Blower Fan.............................
Mobile Home Non-Weatherized, Non- $36 2.7
Condensing Gas Furnace Fan.............
Mobile Home Non-Weatherized, Condensing $35 2.3
Gas Furnace Fan........................
Mobile Home Electric Furnace/Modular $85 4.1
Blower Fan.............................
------------------------------------------------------------------------

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 (2014 to 2048). Using a real discount rate of 7.8
percent, DOE estimates that the INPV for manufacturers of residential
furnace fans is $349.6 million.\1\ Under today's standards, DOE expects
that manufacturers may lose up to 16.9 percent of their INPV, which is
approximately $59.0 million. Total conversion costs incurred by
industry prior to the compliance date are expected to reach $40.6
million.
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\1\ DOE calculated a present value in 2014; all monetary values
in this document are expressed in 2013 dollars unless explicitly
stated otherwise.
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C. National Benefits and Costs \2\
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\2\ All monetary values in this section are expressed in 2013$
and are discounted to 2014.
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DOE's analyses indicate that today's standards would save a
significant amount of energy. The lifetime energy savings for
residential furnace fans purchased in the 30-year period that begins in
the year of compliance with the standards (2019-2048) amount to

[[Page 38132]]

3.99 quadrillion Btu (quads \3\). The estimated annual energy savings
in 2030 (0.07 quads) are equivalent to 0.3 percent of total U.S.
residential energy use in 2012.
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\3\ A quad is equal to 10\15\ British thermal units (Btu).
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The cumulative net present value (NPV) of total consumer costs and
savings of today's standards for residential furnace fans ranges from
$10,024 million (at a 7-percent discount rate) to $28,810 million (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.
In addition, today's standards are expected to have significant
environmental benefits. The energy savings would result in cumulative
emission reductions of approximately 180.6 million metric tons (Mt) \4\
of carbon dioxide (CO2), 695.0 thousand tons of methane
(CH4), 235.7 thousand tons of sulfur dioxide
(SO2), 84.0 thousand tons of nitrogen oxides
(NOX), 6.2 thousand tons of nitrous oxide (N2O),
and 0.4 tons of mercury (Hg).\5\ The cumulative reduction in
CO2 emissions through 2030 amounts to 34 million Mt.
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\4\ A metric ton is equivalent to 1.1 short tons. Results for
NOX and Hg are presented in short tons.
\5\ DOE calculated emissions reductions relative to the Annual
Energy Outlook 2013 (AEO 2013) Reference case, which generally
represents current legislation and environmental regulations for
which implementing regulations were available as of December 31,
2012.
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The value of the CO2 reductions is calculated using a
range of values per metric ton of CO2 (otherwise known as
the Social Cost of Carbon, or SCC) developed by a recent Federal
interagency process.\6\ The derivation of the SCC values is discussed
in section IV.L. Using discount rates appropriate for each set of SCC
values, DOE estimates that the net present monetary value of the
CO2 emissions reductions is between 1,134 million to 16,799
million. DOE also estimates that the net present monetary value of the
NOX emissions reductions is $53.1 million at a 7-percent
discount rate, and $110.8 million at a 3-percent discount rate.\7\
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\6\ Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order 12866, Interagency Working
Group on Social Cost of Carbon, United States Government (May 2013;
revised November 2013) (Available at: https://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
\7\ DOE is investigating valuation of avoided Hg and
SO2 emissions.
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Table I.3 summarizes the national economic costs and benefits
expected to result from today's standards for residential furnace fans.

Table I.3--Summary of National Economic Benefits and Costs of
Residential Furnace Fans Energy Conservation Standards*
------------------------------------------------------------------------
Present value Discount rate
Category million 2013 $ (percent)
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Consumer Operating Cost Savings........ 13,409 7
34,999 3
CO2 Reduction Monetized Value ($12.0/t 1,134 5
case)**...............................
CO2 Reduction Monetized Value ($40.5/t 5,432 3
case)**...............................
CO2 Reduction Monetized Value ($62.4/t 8,694 2.5
case)**...............................
CO2 Reduction Monetized Value ($119/t 16,799 3
case)**...............................
NOX Reduction Monetized Value (at 53 7
$2,684/ton)**.........................
111 3
Total Benefits[dagger]................. 18,894 7
40,542 3
------------------------------------------------------------------------
Costs
------------------------------------------------------------------------
Consumer Incremental Installed Costs... 3,385 7
6,189 3
------------------------------------------------------------------------
Net Benefits
------------------------------------------------------------------------
Including CO2 and NOX[dagger] Reduction 15,509 7
Monetized Value.......................
34,353 3
------------------------------------------------------------------------
* This table presents the costs and benefits associated with residential
furnace fans shipped in 2019-2048. These results include benefits to
consumers which accrue after 2048 from the products purchased in 2019-
2048. The results account for the incremental variable and fixed costs
incurred by manufacturers due to the standard, some of which may be
incurred in preparation for the rule.
** The CO2 values represent global monetized values of the SCC, in
2013$, in 2015 under several scenarios of the updated SCC values. The
first three cases use the averages of SCC distributions calculated
using 5%, 3%, and 2.5% discount rates, respectively. The fourth case
represents the 95th percentile of the SCC distribution calculated
using a 3% discount rate. The SCC time series used by DOE 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 average SCC with 3-percent discount rate.

The benefits and costs of today's 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 operating the product that meets
the new or amended standard (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.\8\
---------------------------------------------------------------------------

\8\ DOE used a two-step calculation process to convert the time-
series of costs and benefits into annualized values. First, DOE
calculated a present value in 2014, the year used for discounting
the NPV of total consumer costs and savings, for the time-series of
costs and benefits using discount rates of three and seven percent
for all costs and benefits except for the value of CO2
reductions. For the latter, DOE used a range of discount rates, as
shown in Table I.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.

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

[[Page 38133]]

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, 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 all future climate-related impacts resulting from the
emission of one metric ton of carbon dioxide in each year. These
impacts continue well beyond 2100.
Estimates of annualized benefits and costs of today's standards are
shown in Table I.4. The results under the primary estimate are as
follows. Using a 7-percent discount rate for benefits and costs other
than CO2 reduction (for which DOE used a 3-percent discount
rate along with the SCC series that has a value of $40.5/t in 2015),
the cost of the residential furnace fans standards in today's final
rule is $358 million per year in increased equipment costs, while the
benefits are $1416 million per year in reduced equipment operating
costs, $312 million in CO2 reductions, and $5.61 million in
reduced NOX emissions. In this case, the net benefit amounts
to $1,376 million per year. Using a 3-percent discount rate for all
benefits and costs and the SCC series that has a value of $40.5/t in
2015, the cost of the residential furnace fans standards in today's
rule is $355 million per year in increased equipment costs, while the
benefits are $2010 million per year in reduced operating costs, $312
million in CO2 reductions, and $6.36 million in reduced
NOX emissions. In this case, the net benefit amounts to
$1,973 million per year.

Table I.4--Annualized Benefits and Costs of Standards for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
Primary estimate Low net benefits High net benefits
Discount rate * estimate * estimate *
----------------------------------------------------------------------------------------------------------------
million 2013$/year
----------------------------------------------------------------------------------------------------------------
Benefits
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings. 7%................ 1416.............. 1167.............. 1718
3%................ 2010.............. 1626.............. 2467
CO2 Reduction (at $12.0/t case) 5%................ 90................ 77................ 108
**.
CO2 Reduction (at $40.5/t case) 3%................ 312............... 268............... 377
**.
CO2 Reduction (at $62.4/t case) 2.5%.............. 459............... 393............... 555
**.
CO2 Reduction (at $119/t case) 3%................ 965............... 828............... 1166
**.
NOX Reduction (at $2,684/ton) ** 7%................ 5.61.............. 4.80.............. 6.82
3%................ 6.36.............. 5.35.............. 7.86
Total Benefits [dagger]......... 7% plus CO2 range. 1,512 to 2,387.... 1,249 to 2,000.... 1,833 to 2,891
7%................ 1,734............. 1,439............. 2,102
3% plus CO2 range. 2,106 to 2,981.... 1,708 to 2,459.... 2,583 to 3,641
3%................ 2,328............. 1,899............. 2,852
----------------------------------------------------------------------------------------------------------------
Costs
----------------------------------------------------------------------------------------------------------------
Consumer Incremental Product 7%................ 358............... 314............... 410
Costs. 3%................ 355............... 304............... 419
----------------------------------------------------------------------------------------------------------------
Net Benefits
----------------------------------------------------------------------------------------------------------------
Total [dagger].............. 7% plus CO2 range. 1,154 to 2,029.... 935 to 1,685...... 1,423 to 2,481
7%................ 1,376............. 1,125............. 1,692
3% plus CO2 range. 1,750 to 2,625.... 1,404 to 2,155.... 2,164 to 3,222
3%................ 1,973............. 1,595............. 2,433
----------------------------------------------------------------------------------------------------------------
* 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 from
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 2013 Reference case,
Low Estimate, and High Estimate, respectively. In addition, incremental product costs reflect a flat rate for
projected product price trends in the Primary Estimate, a slightly increasing rate for projected product price
trends in the Low Benefits Estimate, and a slightly declining rate for projected product price trends in the
High Benefits Estimate. The methods used to derive projected price trends are explained in section IV.F.
** The CO2 values represent global monetized values of the SCC, in 2013$, in 2015 under several scenarios of the
updated SCC values. The first three cases use the averages of SCC distributions calculated using 5%, 3%, and
2.5% discount rates, respectively. The fourth case represents the 95th percentile of the SCC distribution
calculated using a 3% discount rate. The SCC time series used by DOE 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 the average
SCC with a 3% discount rate. 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.

[[Page 38134]]

D. Conclusion

Based on the analyses culminating in this final rule, DOE found the
benefits to the nation of the standards (energy savings, consumer LCC
savings, positive NPV of consumer benefit, and emission reductions)
outweigh the burdens (loss of INPV and LCC increases for some users of
these products). DOE has concluded that the standards in today's final
rule represent the maximum improvement in energy efficiency that is
technologically feasible and economically justified, and would result
in significant conservation of energy.

II. Introduction

The following section briefly discusses the statutory authority
underlying today's final rule, 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 \9\ 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''),\10\ which includes the types of residential furnace fans
that are the subject of this rulemaking. (42 U.S.C. 6295(f)(4)(D))
---------------------------------------------------------------------------

\9\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
\10\ All references to EPCA in this document refer to the
statute as amended through the American Energy Manufacturing
Technical Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18,
2012).
---------------------------------------------------------------------------

Pursuant to EPCA, DOE's energy conservation program for covered
products consists of 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 ``electricity used for
purposes of circulating air through duct work'' (which DOE has referred
to in shorthand as residential ``furnace fans''). (42 U.S.C.
6295(f)(4)(D)) DOE is also required by EPCA 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)(A)(3) 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)) The DOE test procedures for residential furnace fans currently
appear at title 10 of the Code of Federal Regulations (CFR) part 430,
subpart B, appendix AA.
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including furnace fans. As
indicated above, any 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 standard is not technologically feasible or
economically justified. (42 U.S.C. 6295(o)(3)(A)-(B)) In deciding
whether a standard is economically justified, DOE must determine
whether the benefits of the standard exceed its burdens. (42 U.S.C.
6295(o)(2)(B)(i)) DOE must make this determination after receiving
comments on the proposed standard, and by considering, to the greatest
extent practicable, the following seven factors:

(1) The economic impact of the standard on 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 of 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 for a group of products, DOE must consider such factors as the
utility to the consumer of such a feature and other factors DOE deems
appropriate. Id. Any rule prescribing such a standard must include an
explanation of the basis on which such higher or lower level was
established. (42 U.S.C. 6295(q)(2))

[[Page 38135]]

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. 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 furnace fan energy rating metric does not
account for the electrical energy consumption in standby mode and off
mode, because energy consumption in those modes is being fully
accounted for in the DOE energy conservation standards for residential
furnaces and residential central air conditioners (CAC) and heat pumps
(HP). 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))

B. 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 (NOPR) 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).\11\ 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 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. DOE published in the Federal
Register a final rule on January 3, 2014, which contained the final
test procedure for residential furnace fans. 79 FR 500.
---------------------------------------------------------------------------

\11\ 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. DOE published a NOPR in the Federal
Register and made available an accompanying NOPR TSD on October 25,
2013. 78 FR 64068. In that document, DOE requested comment on the
following matters discussed in the TSD: (1) Additional FER values; (2)
the methodology for accounting for the relationship between FER and
airflow capacity; (3) the reasonableness of the values that DOE used to
characterize the rebound effect with high-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)
data regarding manufacturer product costs for furnace fan equipment and
components; (7) the effect of standards on future furnace fan equipment
shipments; (8) whether there are features or attributes of the more
energy-efficient furnace fans that manufacturers would produce to meet
the standards in the proposed rule that might affect how they would be
used by consumers; (9) data that would refine the analytical timeline;
(10) input on average equipment lifetimes; (11) the new SCC values used
to determine the social benefits of CO2 emissions reductions
over the rulemaking analysis period; and (12) input on the cumulative
regulatory burden. Id. DOE also invited written comments on these
subjects, as well as any other relevant issues. A PDF copy of the NOPR
TSD is available at https://www.regulations.gov/#!documentDetail;D=EERE-
2010-BT-STD-0011-0068.
The NOPR TSD provided an overview of the activities DOE undertook
in developing proposed energy

[[Page 38136]]

conservation standards for residential furnace fans, and discussed the
comments DOE received in response to the Preliminary Analysis. 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 developed relationships that show
the manufacturer's cost of achieving increased efficiency;
A markups analysis developed distribution channel markups
that relate the manufacturer production cost (MPC) to the cost to the
consumer;
An energy use analysis estimated the annual energy use of
furnace fans at various potential standard levels;
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;
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;
A manufacturer impact analysis estimated the financial
impact of new energy conservation standards on manufacturers and
calculated impacts on competition, employment, and manufacturing
capacity;
A consumer subgroup analysis evaluated variations in
customer characteristics that might cause a standard to affect
particular consumer sub-populations (such as low-income households)
differently than the overall population;
An emissions analysis assessed the effects of the
considered standards on emissions of carbon dioxide (CO2),
sulfur dioxide (SO2) nitrogen oxides (NOX),
mercury (Hg), nitrous oxide (N20), and methane
(CH4);
An emissions monetization estimated the economic value of
reductions in CO2 and NOX emissions from the
considered standards;
A utility impact analysis estimated selected effects of
the considered standards on electric utilities;
An employment impact analysis assessed the impacts of the
considered standards on national employment; and
A regulatory impact analysis (RIA) evaluated alternatives
to amended energy conservation standards in order to assess whether
such alternatives could achieve substantially the same regulatory goal
at a lower cost.
The NOPR public meeting took place on December 3, 2013. At this
meeting, DOE presented the methodologies and results of the analyses
set forth in the NOPR TSD. The numerous comments received since
publication of the October 2013 NOPR, including those received at the
NOPR public meeting, have contributed to DOE's resolution of the issues
raised by interested parties.
The submitted comments include a comment from the American Council
for an Energy-Efficiency Economy (ACEEE); a joint comment from the
American Fuel and Petrochemical Manufacturers (AFPM), the U.S. Chamber
of Commerce (the Chamber), the Council of Industrial Boiler Owners
(CIBO), the American Forest and Paper Association (AF&PA), and the
American Petroleum Institute (API); a comment from the American Gas
Association (AGA); a comment from the Air-Conditioning, Heating, and
Refrigeration Institute (AHRI); a comment from the American Public Gas
Association (APGA); a joint comment from the Appliance Standards
Awareness Project (ASAP), Alliance to Save Energy (ASE), National
Consumer Law Center (NCLC) and the Natural Resources Defense Council
(NRDC); 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 (SCGC), and
San Diego Gas and Electric (SDGE); a comment from the Cato Institute; a
comment from China WTO (WTO); a comment from Earthjustice; a comment
from Edison Electric Institute (EEI); a comment from the George
Washington University Regulatory Studies Center; a comment from Goodman
Global, Inc. (Goodman); a comment from Heating, Air-Conditioning and
Refrigeration Distributers International (HARDI); a comment from
Johnson Controls; a comment from Laclede Gas Company (Laclede); a
comment from a comment from Lennox International, Inc. (Lennox); a
comment from the Mercatus Center at George Mason University; a comment
from Morrison Products, Inc. (Morrison); a comment from Mortex Product,
Inc. (Mortex); a comment from the National Association of Manufacturers
(NAM); a joint comment from the Northwest Energy Efficiency Alliance
(NEEA) and the Northwest Power and Conservation Council (NPCC); a
comment from the Northeast Energy Efficiency Partnerships (NEEP); a
comment from Rheem Manufacturing Company (Rheem); a comment from
Southern Company; a comment from Ingersoll Rand; and a comment from
Unico, Incorporated. Comments made during the public meeting by those
not already listed include Nidec Motor Corporation (Nidec) and the
motor manufacturer Regal Beloit. This final rule 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 Procedures

DOE published the furnace fan test procedure final rule in the
Federal Register on January 3, 2014. 79 FR 499. DOE's test procedure
for furnace fans (hereinafter referred to as ``the test procedure'') is
codified in appendix AA of subpart B of part 430 of the code of federal
regulations (CFR).The test procedure is applicable to circulation fans
used in weatherized and non-weatherized gas furnaces, oil furnaces,
electric furnaces, and modular blowers. The test procedure is not
applicable to any non-ducted products, such as whole-house ventilation
systems without ductwork, central air-conditioning (CAC) condensing
unit fans, room fans, and furnace draft inducer fans.
DOE aligned the test procedure with the DOE test procedure for
furnaces by incorporating by reference specific provisions from an
industry standard that is also incorporated by reference in the DOE
test procedure for furnaces. DOE's test procedure for furnaces is
codified in appendix N of subpart B of part 430 of the CFR. The DOE
furnace test procedure incorporates by reference American National
Standards Institute (ANSI)/American Society of Heating, Refrigerating
and Air Conditioning

[[Page 38137]]

Engineers (ASHRAE) 103-1993, Method of Testing for Annual Fuel
Utilization Efficiency of Residential Central Furnaces and Boilers
(ASHRAE 103-1993). The DOE furnace fan test procedure incorporates by
reference the definitions, test setup and equipment, and procedures for
measuring steady-state combustion efficiency provisions of the 2007
version of ASHRAE 103 (ASHRAE 103-2007). In addition to these
provisions, the test procedure includes provisions for apparatuses and
procedures for measuring temperature rise, external static pressure,
and furnace fan electrical input power. The test procedure also
incorporates by reference provisions for measuring temperature and
external static pressure from ANSI/ASHRAE 37-2009, Methods of Testing
for Rating Electrically Driven Unitary Air-Conditioning and Heat Pump
Equipment (ASHRAE 37-2009). There are no differences between the 2005
version (which is already incorporated by reference in the CFR) and the
2009 version of the ASHRAE 37 provisions incorporated by reference for
the furnace fan test procedure. The test procedure also establishes
calculations to derive the rating metric, fan energy rating (FER), for
each furnace fan basic model based on the results of testing per the
test method for furnace fans codified in appendix AA of subpart B of
part 430 of the CFR.
FER is the estimated annual electrical energy consumption of a
furnace fan normalized by: (a) The estimated total number of annual fan
operating hours (1,870); and (b) the airflow in the maximum airflow-
control setting. For the purposes of the furnace fan test procedure,
the estimated annual electrical energy consumption is the sum of the
furnace fan electrical input power (in Watts), measured separately for
multiple airflow-control settings at different external static
pressures (ESPs), multiplied by national average operating hours
associated with each setting. These ESPs are determined by a reference
system, based on operation at maximum airflow that represents national
average ductwork system characteristics. Table III.1 includes the
reference system ESP values by installation type that are specified by
the test procedure. In previous rulemaking documents for the furnace
fan test procedure and energy conservation standard rulemaking, DOE
used the term ``manufactured home furnace'' to be synonymous with
``mobile home furnace,'' as defined in the Code of Federal Regulation
(CFR). 10 CFR 430.2. DOE will use the term ``mobile home'' hereinafter
to be consistent with the CFR definition for ``mobile home furnace.''
All provisions and statements regarding mobile homes and mobile home
furnaces are applicable to manufactured homes and manufactured home
furnaces.

Table III.1--Required Reference System Criteria (i.e., ESP at Maximum
Airflow) by Furnace Fan Installation Type
------------------------------------------------------------------------
ESP at maximum
Installation type airflow (in.
wc)
------------------------------------------------------------------------
Units with an internal evaporator coil.................. 0.50
Units designed to be paired with an evaporator coil..... 0.65
Units designed to be installed in a mobile home \12\.... 0.30
------------------------------------------------------------------------

The test procedure requires measurements for the airflow-control
settings that correspond to fan operation while performing the cooling
function (which DOE finds is predominantly associated with the maximum
airflow-control setting), heating function, and constant-circulation
function. Table III.2 describes the required airflow-control settings
by product type.
---------------------------------------------------------------------------

\12\ Mobile home external static pressure is much lower because
there is no return air ductwork in mobile homes. Also, the United
States Department of Housing and Urban Development (HUD)
requirements for mobile homes stipulate that the ductwork for
cooling should be designed for 0.3 in. water column (wc). 24 CFR
3280.715.

Table III.2--Airflow-Control Settings at Which Measurements Are Required for Each Product Type
----------------------------------------------------------------------------------------------------------------
Airflow-control Airflow-control
Product type setting 1 setting 2 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.
----------------------------------------------------------------------------------------------------------------
* For the purposes of the test procedure, ``absolute maximum'' airflow-control setting refers to the airflow-
control setting that achieves the maximum attainable airflow at the operating conditions specified by the test
procedure.

As shown in Table III.2, for products with single-stage heating, the
three airflow-control settings to be tested are: The default constant-
circulation setting; the default heating setting; and the absolute
maximum setting. For products with multi-stage heating or modulating
heating, the airflow-control settings to be tested are: The default
constant-circulation setting; the default low heating setting; and the
absolute maximum setting. The absolute lowest airflow-control setting
is used to represent constant circulation if a default constant-
circulation setting is not specified. DOE defines ``default airflow-
control settings'' as the airflow-control settings for installed use
specified by the manufacturer in the product literature shipped with
the product in which the furnace fan is integrated. See Section 2.2 of
Appendix AA to Subpart B of 10 CFR part 430. 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. In instances where a manufacturer specifies
multiple airflow-control settings for a given function to account for
varying installation scenarios, the highest airflow-control setting
specified for the given function shall be used for the DOE test
procedure. High heat and reduced heat shall be considered different
functions for multi-stage heating units. Manufacturer installation
guides also provide detailed instructions regarding compatible
thermostats and how to wire them to achieve the specified default
settings.
The Watt measurements for calculating FER are weighted using
designated annual operating hours for each function (i.e., cooling,
heating, and constant circulation) that represent national average
operation. Table III.3 shows the estimated national average operating
hours for each function.

[[Page 38138]]

Table III.3--Estimated National Average Operating Hour Values for Calculating FER
----------------------------------------------------------------------------------------------------------------
Multi-stage or
Operating mode Variable Single-stage modulating
(hours) (hours)
----------------------------------------------------------------------------------------------------------------
Heating......................................................... HH 830 830/HCR
Cooling......................................................... CH 640 640
Constant Circulation............................................ CCH 400 400
----------------------------------------------------------------------------------------------------------------

For multi-stage heating or modulating heating products, the
specified operating hours for the heating mode are divided by the
heating 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 measured reduced heat input rate to the measured maximum
heat input rate.
The FER equation is:
[GRAPHIC] [TIFF OMITTED] TR03JY14.000

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.

DOE received comments from interested parties regarding the furnace
fan test procedure in response to the furnace fan energy conservation
standard (ECS) NOPR. Interested parties' comments on the test procedure
are summarized below. DOE addressed many of these issues in the test
procedure final rule, published in the Federal Register on January 3,
2014. (79 FR 514). The publication of the test procedure final rule
occurred after the standards NOPR public meeting, held on December 3,
2013, but before the close of the standards NOPR comment period on
January 23, 2014. For comments that were addressed in the test
procedure final rule, a reference to the applicable discussion
contained in the test procedure final rule document is provided. DOE's
detailed response is provided in this document for comments that were
not addressed in the test procedure final rule document.
AHRI, Goodman, Morrison, Rheem, Southern Company, Johnson Controls,
and Ingersoll Rand commented that DOE's schedule for finalizing the
test procedure did not provide interested parties with sufficient time
to evaluate product performance in accordance with the final test
procedure in order to develop and submit substantive comments on the
standards proposed in the NOPR. (AHRI, No. 98 at p. 2, 3; Goodman, No.
102 at pp. 7, 8; Morrison, No. 108 at p. 3; Rheem, No. 83 at p. 1;
Southern Company, No. 85 at p. 2; Johnson Controls, No. 95 at p. 3;
Ingersoll Rand, No. 43 at p. 33) Ingersoll Rand added that the comments
they have submitted to date are based on the proposed test procedure,
not the final test procedure. (Ingersoll Rand, No. 107 at pp. 2, 10)
AGA and Allied Air agree and recommend that DOE delay promulgation of
standards to give interested parties and DOE more time to conduct
analyses using the final test procedure. (AGA, No. 110 at pp. 3, 4;
Allied Air, Public Meeting Transcript, No. 43 at p. 48) Goodman
recommended a delay of three months for this type of product and
testing. (Goodman, No. 102 at p. 3) Prior to publication of the test
procedure final rule, EEI expressed support for DOE issuing a
supplemental notice of proposed rulemaking (SNOPR) for the standard if
changes were made to the test procedure final rule that had significant
impacts on DOE's analyses results. (EEI, No. 87 at p. 3) APGA and
Southern Company also recommended that DOE publish a standards SNOPR.
(APGA, No. 90 at p. 2; Southern Company, No. 43 at p. 37)
DOE recognizes that interested parties need sufficient time to
collect and evaluate relevant fan performance data in order to submit
meaningful comments on the proposed energy conservation standard for
furnace fans. Thus, on December 24, 2013, DOE posted a pre-publication
test procedure final rule notice to regulations.gov and issued a 30-day
extension of the standards NOPR comment period to provide interested
parties with time to evaluate DOE's proposed standards using the final
test procedure.
AHRI, Johnson Controls, and Morrison stated that, even with the
comment period extension, the 20 days between the publication of the
test procedure final rule on January 3, 2014 and the close of the
standards NOPR comment period on January 23, 2014 did not provide
interested parties with sufficient time to assess the energy
conservation standards NOPR based on the provisions within the final
test procedure. AHRI added that DOE was obligated to issue the NOPR on
the proposed energy conservation standards after the issuance of the
final rule on the furnace fan test procedures per Section 7(c) of
Appendix A to Subpart C of 10 CFR part 430. (AHRI, No. 98 at pp. 2, 3;
Johnson Controls, No. 95 at p. 3; Morrison, No. 108 at p. 3) Mortex
stated that they were not able to test any of their products according
to the final test procedure by the time the energy conservation
standard NOPR comment period closed. (Mortex, No. 104 at p. 2)
Ingersoll Rand commented that DOE's standards NOPR analyses are invalid
because they were not based on the test procedure final rule.
(Ingersoll Rand, No. 107 at p. 2, 10). NEEA and NPCC provided there is
a need for product testing using the final test procedure, and a re-
assessment of the derivation of the proposed FER equations and standard
levels. NEEA and NPCC added that they do not support a decision on

[[Page 38139]]

standards before there is sufficient data with which to verify that the
proposed FER values will not disqualify from compliance the majority of
the very products upon which they are founded, and for which DOE's
economic analyses are valid. (NEEA and NPCC, No. 96 at p. 2)
DOE disagrees with AHRI and Morrison that the extended comment
period was insufficient. DOE issued a test procedure SNOPR for furnace
fans on April 2, 2013. 78 FR 19606. DOE did not make changes to the
test procedure between the SNOPR and final rule that would
significantly alter FER values for most products. Interested parties
that conducted testing in accordance with the test procedure SNOPR
proposal should not have to retest most furnace models to derive an FER
value that is consistent with the final test procedure. For most
furnaces, the FER value should not change or the FER value can be
recalculated per the final test procedure requirements using the raw
data measured according to the SNOPR test method. Therefore,
notwithstanding the 20 days between the test procedure final rule and
the close of the standards NOPR comment period, interested parties
still had over nine months between the publication of the test
procedure SNOPR and the close of the standards NOPR comment period to
collect and evaluate fan performance data that is relevant to DOE's
proposed standards. DOE received data that could be used to derive FER
values that meet the final test procedure requirements from multiple
manufacturers during this period.
DOE agrees with NEEA and NPCC that its proposed standards should be
assessed based on FER values that are reflective of performance as
measured by the final test procedure. For the reasons stated above, DOE
was able to use much of the FER data it has collected in previous
phases of this rulemaking to generate FER values that meet the
requirements of the final test procedure. DOE also conducted testing
prior to and during the development of the test procedure final rule
that generated a broad set of results to enable DOE to derive FER
values that are consistent with the requirements of the final test
procedure. In addition, DOE continued to collect and use data from
publicly-available product literature. DOE relied on the mathematical
methods outlined in the test procedure NOPR for using this data to
model fan performance and estimate FER values that meet the final test
procedure requirements. 77 FR 28690 (May 15, 2012). DOE recognizes that
this method is not identical to the final test procedure method.
However, DOE believes the FER values generated in this manner are still
relevant because the final test method is similar to the test method
proposed by AHRI (with support from Goodman, Ingersoll Rand, Lennox,
and Morrison) in response to the test procedure NOPR, which they argued
would result in accurate and repeatable FER values that are comparable
to the FER values resulting from the methods proposed in the NOPR.
(AHRI, No. 16 at p. 3; Goodman, No. 17 at p. 4; Ingersoll Rand, No. 14
at p. 1; Morrison, No. 21 at p. 3.) For these reasons, Ingersoll Rand's
comment stating that DOE's standards NOPR analyses are invalid because
they are not based on the test procedure final rule is inaccurate. The
standards proposed in the NOPR and those established by this final rule
are based on relevant FER data.
Goodman stated that DOE's modifications to the test procedure since
the April 2013 test procedure SNOPR will have a significant impact on
FER. Goodman referred specifically to the modification in the test
procedure that specifies that airflow be calculated based on firing the
product in the absolute maximum airflow-control setting if that setting
is a default heating setting. According to Goodman, most furnaces allow
heating operation at the highest airflow setting. Thus, instead of
heating airflow setting being a mid-range temperature rise as typically
set by factory default, it will now be a low-range temperature rise at
a much higher and less efficient setting for FER calculation (and a
setting that will not be typical of a field installation). (Goodman,
No. 102 at p. 7) Ingersoll Rand echoed Goodman's statement, adding that
the modification would also result in higher watts in heating mode and
a higher FER value than would have resulted using the procedure in the
SNOPR for a majority of furnaces. (Ingersoll Rand, No. 107 at pp. 2,
10).
DOE disagrees with Goodman's and Ingersoll Rand's comments. DOE
expects that both interested parties have misinterpreted the test
procedure requirement. DOE recognizes that product controls can be
altered from factory settings to allow heating in the absolute maximum
airflow-control setting. The test procedure does not allow for this
practice. The test procedure only requires testing in factory-set
configurations. Specific to the modification in question, the test
procedure requires heating in the absolute maximum airflow-control
setting only if that setting is a default heat setting. See Section
8.6.1.2 of Appendix AA to Subpart B of 10 CFR part 430. By definition,
as outlined in the test procedure, a default heating airflow-control
setting is factory-set and specified for installed-use as a heat
setting by the manufacturer. See Section 2.2 of Appendix AA to Subpart
B of 10 CFR part 430. Consequently, the resulting temperature rise is
also factory-set by the manufacturer, and the measured performance will
be representative of field use. In addition, the test procedure SNOPR
and final rule requirements for EHeat (the watts in heating
mode input for FER) are consistent and the measured values for this
input should not change. The impacts of the modification in question
are explained in more detail in the test procedure final rule. 79 FR
514 (January 3, 2014).
AHRI commented that in the final test procedure that was published
on January 3, 2014, DOE introduced a change within the test procedure
that increases the measured FER. AHRI stated that DOE decided not to
implement AHRI's recommendation that a furnace be fired at the maximum
airflow rate to calculate the maximum airflow. Instead, according to
AHRI, the final rule specifies that the maximum airflow is determined
by applying the airflow equation for a heating setting and adjusting to
the maximum setting based on pressure measurements. AHRI claims that
this approach results in an increase of the measured FER and was not
accounted within the analyses associated with the energy conservation
standards NOPR TSD that was issued on October 25, 2013. AHRI recommends
that DOE reevaluate the analyses within the entire TSD due to this
single change. (AHRI, No. 98 at p. 3, 4)
DOE introduced the change referred to by AHRI in the April 2, 2013
test procedure SNOPR. A detailed discussion of DOE's reasoning for that
change are provided in that notice. 78 FR 19616. DOE made additional
changes to this provision in the test procedure final rule by requiring
that the product under test be fired at the maximum airflow rate to
calculate the maximum airflow for furnaces for which the maximum
airflow-control setting is a default heat setting (consistent with
AHRI's recommendation). See Section 8.6.1.2 of Appendix AA to Subpart B
of 10 CFR part 430. DOE disagrees with AHRI that the change in question
will result in higher FER values. DOE fan performance tests, including
tests following the final test procedure, show that the maximum airflow
calculated when firing the product under test in the maximum airflow
control setting is typically lower than when applying the airflow
equation for a heating setting

[[Page 38140]]

and adjusting to the maximum setting based on pressure measurements.
Consequently, FER values would be lower if they were derived using
airflow values calculated when firing in the maximum airflow-control
setting. AHRI did not provide data to the contrary. As stated above,
DOE's proposed standards and the standards established by this document
are valid because they are based on FER values that are consistent with
the final test procedure (to include FER values employing the airflow
adjustment method in question).
AHRI, Morrison, and Ingersoll Rand commented that they are opposed
to DOE eliminating the HCR from the denominator of the FER equation.
According to AHRI, DOE did not provide a sound technical justification
for such a modification and unnecessarily penalized the FER values
associated with multi-stage and modulating units. (AHRI, No. 98 at p.
2, 3; Morrison, No. 108 at p. 3, 4; Ingersoll Rand, No. 107 at p. 2,
10)
As discussed in the test procedure final rule, DOE found that
including HCR in the denominator of the FER equation resulted in
percent reductions in estimated annual energy consumption, as
calculated for FER, of 15 percent. 79 FR 515 (January 3, 2014).
Further, DOE found percent reductions in FER of approximately 30
percent when comparing single-stage products using constant-torque
brushless permanent magnet (BPM) motors to multi-stage products using
constant-torque BPM motors. DOE eliminated HCR from the FER equation
because, as a result, percent reductions in FER dropped to 15 percent
on average, which is consistent with percent reduction in estimated
annual energy consumption. 79 FR 515 (January 3, 2014). DOE did not
receive any new FER values for products that use a constant-torque BPM
motor and multi-stage heating. DOE was also unable to find data in the
public domain with which to calculate new FER values to represent such
products. In the absence of new data, DOE used the raw airflow, ESP,
and fan electrical energy consumption data for single-stage furnaces
with constant-torque BPM motors to generate FER values reflecting the
addition of theoretical multi-stage heating capabilities. Single-stage
furnaces using constant-torque BPM motors typically have additional
airflow-control settings that provide less airflow than the factory-set
heating airflow-control setting. Theoretically, these airflow-control
settings could be used for a low heat setting in a multi-stage heating
configuration. DOE identified as many models as possible that meet this
criterion and for which DOE has sufficient data to calculate
theoretical FER values for a multi-stage configuration. For each model,
DOE first calculated the temperature rise in the default heating
setting based on the airflow, thermal efficiency and input heat rating
in that setting. Next, DOE used a variation of the same relationship
between these parameters to calculate the theoretical low input
capacity that would achieve the same temperature rise for each
available airflow-control setting below the heat setting. DOE then
evaluated the HCR for each of the lower airflow-control settings based
on the theoretical input capacity of the lower setting and the rated
input capacity of the default heat setting. DOE selected the low
airflow-control setting that produced an HCR between 0.4 and 0.9 that
was closest to 0.7 to represent the theoretical low heating setting.
DOE chose these criteria based on investigation of typical HCR values
observed in currently available products. Finally, DOE calculated
estimated annual energy consumption and an FER value using the single-
stage model's data for the absolute maximum and constant circulation
airflow-control settings and the data for the theoretical low heating
setting for the heating airflow-control setting. DOE's new data shows
that multi-staging reduces estimated annual energy consumption by an
average of 14 percent and FER by an average of 12 percent. These
findings are consistent with DOE's previous findings and support its
decision to eliminate HCR from the denominator of the FER calculation.
Ingersoll Rand stated that the final test procedure reduces the
estimated savings associated with BPM motors. Ingersoll Rand commented
that BPM motors consume more power as static pressure increases than
permanent-split capacitor (PSC) motors. (Ingersoll Rand, No. 107 at p.
2, 10)
DOE addressed this issue in the energy conservation standards NOPR.
78 FR 64084 (October 25, 2013). While BPM motors consume more power as
static pressure increases, they also provide more airflow. FER is
normalized by airflow to account for this difference in behavior
between BPM and PSC motors. In addition, the standards established in
this document are a function of airflow. BPM motor-driven fan
performance is evaluated relative to PSC motor-driven fans that provide
the same amount of airflow at the same reference system static pressure
as a result. Interested parties did not provide any evidence that these
methods are inappropriate for evaluating relative fan performance.
China WTO commented that FER includes factors, such as HCR, to
account for multi-stage heating but does not include analogous factors
for multi-stage cooling. (China WTO, No. 92 at p. 1)
DOE considered accounting for fan performance during multi-stage
cooling operation for the test procedure NOPR. 77 FR 28680. DOE did not
include factors for multi-stage cooling in the final test procedure
because the presence and capacity of low-stage cooling is dependent on
the cooling system with which a product containing a furnace fan is
paired. DOE found in its review of publicly-available product
literature that detailed characteristics of the cooling system are not
typically provided. Consequently, entities performing the DOE furnace
fan test procedure cannot identify the airflow-control setting that
would be designated for low-stage cooling operation. In addition,
multi-stage heating is not necessarily associated with multi-stage
cooling capability (e.g., multi-stage cooling equipment is much less
common than multi-stage heating equipment).
China WTO stated that the final test procedure does not provide a
method for calculating the maximum airflow when the maximum airflow-
control setting is only designated for cooling. (China WTO, No. 92 at
p. 1)
The method for calculating the maximum airflow when the maximum
airflow-control setting is only designated for cooling is provided in
the final rule and in Section 9 of appendix AA of subpart B of part 430
of the CFR. 79 FR 524 (January 3, 2014).
The California Investor Owned Utilities (CA IOU) commented that
they observed a potential error in the calculation of airflow in the
final test procedure. Specifically, CA IOU recommended that DOE include
the humidity ratio in pounds water vapor per pounds dry air. CA IOU
submits that this addition will increase the accuracy of the
calculation of specific volume of test room air in cubic feet per pound
of dry air to calculate airflow. (CA IOU, No. 106 at p. 4)
The equation for calculating airflow in the final test procedure
already includes the humidity ratio in pounds water vapor per pounds
dry air as codified in Section 9 of appendix AA of subpart B of part
430 of the CFR.
CA IOU recommended that in addition to reporting FER, which is the
basis for the performance standard, DOE require manufacturers to report
individual mode electrical energy consumption values (e.g.,
EHeat, EMax, and ECirc). According to
CA IOU,

[[Page 38141]]

reporting these values would greatly facilitate the development of more
targeted energy efficiency incentive programs, and manufacturers
already have to measure and perform these calculations for the
composite FER. CA IOU recognizes that EMax could represent
fan electrical energy consumption in either heating or cooling mode
depending on the product. Nonetheless, CA IOU also recommends that DOE
require manufacturers to report fan electrical energy consumption in
cooling mode even if not included in FER because having it as an
additional data point could be useful for the development of utility
programs across the country. CA IOU stated that energy efficiency
incentive programs typically require a rigorous level of review and
justification for implementation. Gaps in performance data of
commercially available equipment is one of the main limiting factors in
program development, contributing to the lengthy and resource-intensive
data collection and verification processes. In the case of this
rulemaking, manufacturers will already be required to test their
products in heating, cooling, and constant circulation modes. CA IOU
believes that the minimal extra effort required by manufacturers to
report these values would be outweighed by the opportunity for
utilities and other public agencies to develop incentive programs using
these performance metrics, which in turn would positively impact
manufacturers of high performing products. For these reasons, CA IOU
strongly urge DOE to require manufacturers to report tested and
calculated metrics that feed into a composite metric for the standard.
ASAP, ASE, NCLC, and NRDC, hereinafter referred to as ASAP, et al.,
agree. (ASAP, et al., No. 105 at p. 3)
At this time, DOE is declining to adopt reporting requirements for
individual mode electrical consumption values as the CA IOU suggests.
While DOE is open to considering additional reporting metrics in the
future, DOE believes that establishing a Federal test procedure and
metric (i.e., FER) will provide utility programs with a basis for
establishing meaningful incentive programs as the CA IOUs desire.
Further, DOE believes that reporting the aggregated electrical
consumption (i.e., the FER metric) will provide market differentiation
amongst currently- available models, thereby allowing the utility
programs to set voluntary levels for incentive programs at meaningful
levels to obtain energy savings. If data and analyses are provided,
which show the disaggregated levels are necessary for the proper
execution of utility incentive programs, DOE will consider modifying
the certification requirements for furnace fans.
Unico pointed out that DOE presents the required minimum reference
system ESP values inconsistently across rulemaking documents. Unico
noticed that in some documents DOE presents these values as a range for
each installation type, and in other rulemaking documents DOE presents
only the lower value within each range with an asterisk. (Unico, No. 93
at p. 6)
As explained in the test procedure final rule, DOE's test
experience confirms manufacturer concerns that specific ESP values are
difficult to achieve and maintain when measuring airflow. The final
test procedure specifies that products maintain an ESP level between
the minimum reference system value and 0.05 in. wc. above that minimum
value to allow for slight variations. 79 FR 508 (January 3, 2014).
Consequently, DOE presents the minimum required ESP values as a range
in Section 8.6.1.2 in appendix AA of subpart B of part 430 in the CFR
or as the minimum value with an asterisk accompanied by the explanation
above in other DOE documents.
AHRI commented that DOE should provide the option of employing an
alternative efficiency determination method (AEDM) to determine FER.
AHRI insists that an AEDM is critical for manufacturers to implement
new requirements on a timely basis while minimizing burden. AHRI
believes that the number of furnace fan basic models will be greater
than the number of furnace basic models. According to AHRI, the
pressure drop due to the gas heat exchanger will require that each
furnace basic model also be considered as a furnace fan basic model.
AHRI added that additional furnace fan basic models would be created in
order to account for the type of installation. AHRI also pointed out
that many furnace fan manufacturers also produce several other DOE
regulated products. AHRI submits that rather than requiring
manufacturers to spend valuable resources on conducting several tests,
DOE should recognize that those resources could be better spent on
innovating more efficient products. (AHRI, No. 98 at p. 13)
DOE provided a detailed discussion of this issue in the test
procedure final rule. 79 FR 513 (January 3, 2014). DOE currently does
not allow the use of AEDMs for residential products, with the exception
of central air conditioners and heat pumps due to the uniquely large
number of combinations of split-system air conditioners and heat pumps
that are rated. DOE recognizes that the number of furnace fan basic
models may outnumber furnace basic models for the reasons AHRI lists.
Even so, DOE expects the number of basic models of furnace fans to be
significantly less than the number of basic models of residential
central air conditioners and heat pumps (CAC and HP) for which
alternative rating methods are currently allowed. DOE has not found the
residential furnace fan market to be highly customized (i.e.,
containing many unique built-to-order designs) and expects that
manufacturers will be able to group similar individual furnace fan
types into basic models to reduce testing burden. DOE notes that it
currently has over 1 million CAC combinations certified in the
Compliance Certification Management System (CCMS) compared to
approximately 12,500 certified furnace basic models. Consequently, DOE
does not agree with AHRI's assertion that an alternative rating method
needs to be considered at this time. Should AHRI or the industry
provide additional data or substantiation for its requests
demonstrating why testing furnace fans are unique, as compared to the
majority of other residential products for which AEDMs are not allowed,
then DOE may consider such requests in a separate rulemaking.

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 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. However, in
this rulemaking, DOE is only covering 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,

[[Page 38142]]

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 final test
procedure. DOE addresses 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 differentiates 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 final
rule technical support document (TSD). DOE includes 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)
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan
(MH-NWG-NC)
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH-
NWG-C)
Mobile Home Electric Furnace/Modular Blower Fan (MH-EF/MB)
Mobile Home Weatherized Gas Furnace Fan (MH-WG)
Mobile 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. ``Mobile home'' products meet certain design requirements that
allow them to be installed in mobile 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 document
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 tcrial standard levels (TSLs) in
this rulemaking. For further details on the screening analysis for this
rulemaking, see chapter 4 of the final rule 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 section IV.C of this final rule and in chapter 5 of the
final rule TSD.

D. Energy Savings

1. Determination of Savings
For each TSL, DOE projected energy savings from the products that
are the subjects of this rulemaking purchased during a 30-year period
that begins in the year of compliance with amended standards (2019-
2048).\13\ The savings are measured over the entire lifetime of
products purchased in the 30-year period.\14\ DOE used the NIA model to
estimate the NES for products purchased over the above period. The
model forecasts total energy use over the analysis period for each
representative product class at efficiency levels set by each of the
considered TSLs. DOE then

[[Page 38143]]

compares the aggregated energy use at each TSL to the base-case energy
use to obtain the NES. The NIA model is described in section IV. H of
this document and in chapter 10 of the final rule TSD.
---------------------------------------------------------------------------

\13\ DOE also presents a sensitivity analysis that considers
impacts for products shipped in a 9-year period.
\14\ 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
during 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 NIA spreadsheet model to estimate energy savings from
amended 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. For electricity, DOE reports national energy savings in terms of
the primary (source) energy savings, which are the savings in the
energy that is used to generate and transmit the site electricity. To
convert site energy to primary energy, DOE derives annual conversion
factors from the model used to prepare the Energy Information
Administration's (EIA) Annual Energy Outlook 2013 (AEO 2013).
DOE also has begun to estimate full-fuel-cycle energy savings. 76
FR 51282 (August 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 energy efficiency standards. DOE's evaluation
of FFC savings is driven in part by the National Academy of Science's
(NAS) report on FFC measurement approaches for DOE's Appliance
Standards Program.\15\ The NAS report discusses that FFC was primarily
intended for energy efficiency standards rulemakings where multiple
fuels may be used by a particular product. In the case of this
rulemaking pertaining to residential furnace fans, only a single fuel--
electricity--is consumed by the product. DOE's approach is based on the
calculation of an FFC multiplier for each of the energy types used by
covered products. Although the addition of FFC energy savings in the
rulemakings is consistent with the recommendations, the methodology for
estimating FFC does not project how fuel markets would respond to this
particular standards rulemaking. The FFC methodology simply estimates
how much additional energy, and in turn how many tons of emissions, may
be displaced if the estimated fuel were not consumed by the products
covered in this rulemaking. It should be noted that inclusion of FFC
savings has not affected DOE's choice of the energy conservation
standards adopted in today's final rule. For more information on FFC
energy savings, see section IV. H.2.
---------------------------------------------------------------------------

\15\ ``Review of Site (Point-of-Use) and Full-Fuel-Cycle
Measurement Approaches to DOE/EERE Building Appliance Energy-
Efficiency Standards,'' (Academy report) was completed in May 2009
and included five recommendations. A copy of the study can be
downloaded at: https://www.nap.edu/catalog.php?record_id=12670.
---------------------------------------------------------------------------

2. Significance of Savings
EPCA prohibits DOE from adopting a standard for a covered product
that would not result in significant energy savings. (42 U.S.C.
6295(o)(3)(B)) Although the term ``significant'' is not defined in
EPCA, the U.S. Court of Appeals for the District of Columbia, in
Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373
(D.C. Cir. 1985), opined that Congress intended ``significant'' energy
savings in this context to be savings that were not ``genuinely
trivial.'' The energy savings for today's standards (presented in
section V of this notice) are nontrivial, and, therefore, DOE considers
them ``significant'' within the meaning of section 325 of EPCA.

E. Economic Justification

1. Specific Criteria
As discussed in section II.A, 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 generally discuss how DOE is addressing
each of those seven factors in this rulemaking. For further details and
the results of DOE's analyses pertaining to economic justification, see
sections IV and V of today's document.
Economic Impact on Manufacturers and Commercial Customers
In determining the impacts of a potential new or amended energy
conservation standard on manufacturers, DOE conducts a manufacturer
impact analysis (MIA), as discussed in section IV.J. DOE first
determines a potential standard's quantitative impacts using an annual
cash flow approach. This step includes both a short-term assessment
(based on the cost and capital requirements associated with new or
amended standards during the period between the announcement of a
regulation and the compliance date of the regulation) and a long-term
assessment (based on the costs and marginal impacts over the 30-year
analysis period). The impacts analyzed include: (1) Industry net
present value (INPV) (which values the industry based on 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 potential impacts on different types of
manufacturers, paying particular attention to impacts on small
manufacturers. Third, DOE considers the impact of new or amended
standards on domestic manufacturer employment and manufacturing
capacity, as well as the potential for new or amended 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
other DOE regulations and non-DOE regulatory requirements on
manufacturers.
For individual customers, measures of economic impact include the
changes in LCC and the PBP associated with new or amended standards.
These measures are discussed further 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. DOE also evaluates the LCC impacts of potential standards
on identifiable subgroups of consumers that may be affected
disproportionately by a national standard.
Savings in Operating Costs Compared to Increase in Price (Life-Cycle
Costs)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product compared
to any increase in the price of the covered product that are likely to
result from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts
this comparison in its LCC and PBP analysis.
The LCC is the sum of the purchase price of a product (including
the cost of its installation) and the operating costs (including
energy, maintenance, and repair costs) discounted over the lifetime of
the equipment. 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. For
its analysis, DOE assumes that consumers will purchase the covered
product in the first year of compliance with new standards.
The LCC savings and the PBP for the considered efficiency levels
are calculated relative to a base-case scenario, which reflects likely
market trends in the absence of new or amended standards. 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

[[Page 38144]]

standard level. DOE's LCC analysis is discussed in further detail in
section IV.F.
Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA 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))
DOE uses NIA spreadsheet results in its consideration of total
projected savings. For the results of DOE's analyses related to the
potential energy savings, see section V.B of this notice and chapter 10
of the final rule TSD.
Lessening of Utility or Performance of Equipment
In establishing product classes, and in evaluating design options
and the impact of potential standard levels, DOE follows EPCA's
requirement to develop standards that would not lessen the utility or
performance of the products under consideration. (42 U.S.C.
6295(o)(2)(B)(i)(IV)) DOE has determined that none of the TSLs
presented in today's final rule would reduce the utility or performance
of the products under consideration in this rulemaking. During the
screening analysis, DOE eliminated from consideration any technology
that would adversely impact customer utility. See section IV.B of this
notice and chapter 4 of the final rule TSD for further details.
Impact of Any Lessening of Competition
EPCA requires DOE to consider any lessening of competition that is
likely to result from setting new or amended 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))
To assist the Department of Justice (DOJ) in making such a
determination, DOE provided DOJ with copies of both the NOPR and NOPR
TSD for review. In its assessment letter responding to DOE, DOJ
concluded that the proposed energy conservation standards for
residential furnace fans are unlikely to have a significant adverse
impact on competition. DOE is publishing the Attorney General's
assessment at the end of this final rule.
Need of the Nation To Conserve Energy
Another factor that DOE must consider in determining whether a new
or amended standard is economically justified is the need for national
energy and water conservation. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The
energy savings from new or amended standards are likely to provide
improvements to the security and reliability of the Nation's energy
system. Reductions in the demand for electricity may also result in
reduced costs for maintaining the reliability of the Nation's
electricity system. DOE conducts a utility impact analysis to estimate
how new or amended standards may affect the Nation's needed power
generation capacity, as discussed in section IV.M.
Energy savings from energy conservation standards are also likely
to result in environmental benefits in the form of reduced emissions of
air pollutants and greenhouse gases associated with energy production
(i.e., from power plants). For a discussion of the results of the
analyses relating to the potential environmental benefits of today's
standards, see sections IV.K, IV.L and V.B.6 of this notice. DOE
reports the expected environmental effects from today's standards, as
well as from each TSL it considered, in chapter 13 of the final rule
TSD. DOE also reports estimates of the economic value of emissions
reductions resulting from the considered TSLs in chapter 14 of the
final rule TSD.
Other Factors
EPCA allows the Secretary, in determining whether a new or amended
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))
There were no other factors considered for today's final rule.
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA provides for a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the new or amended standard is less than three times
the value of the first-year energy (and, as applicable, water) savings
resulting from the standard, as calculated under the applicable DOE
test procedure. DOE's LCC and PBP analyses generate values that
calculate the PBP for consumers of products subject to potential new
and amended energy conservation standards. These analyses include, but
are not limited to, the 3-year PBP contemplated under the rebuttable
presumption test. However, 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 these analyses 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). The rebuttable presumption
payback calculation is discussed in section IV.F of this rulemaking and
chapter 8 of the final rule TSD.

IV. Methodology and Discussion

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; (3) manufacturers; (4) quantities and types of
products sold and offered for sale; (5) retail market trends; (6)
regulatory and non-regulatory programs; and (7) 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 final rule 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)) DOE adopted the term
``furnace fan'' as shorthand to describe the range of products
encompassed by this statutory mandate. In the preliminary analysis, DOE
interpreted its statutory mandate by defining ``furnace fan'' to
include ``any electrically-powered device used in residential central
heating, ventilation, and air-conditioning (HVAC) systems for the
purpose of circulating air through duct work.'' 77 FR 40530, 40532
(July 10, 2012). DOE

[[Page 38145]]

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.
In response to the preliminary analysis, many interested parties
disagreed with DOE's definition of ``furnace fan'' and corresponding
approach to set component-level regulations, which they warned would
ignore system effects that could impact both fan and HVAC system energy
consumption. California investor-owned utilities CA IOUs suggested that
``furnace fan'' should 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, PA Public
Meeting Transcript, 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, PA Public Meeting Transcript, No. 43 at p. 63) Rheem commented
that turbulent flow is considerably more efficient for heat transfer
than laminar flow,\16\ 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 consequently,
the furnace will consume more gas to compensate and meet the desired
house heat load. (Ingersoll Rand, No. 43 at p. 66)
---------------------------------------------------------------------------

\16\ ``Laminar flow'' is as term to describe when all fluid
particles move in paths parallel to the overall flow direction
(i.e., in layers). Laminar flow may occur when the flow channel is
small and the speed is low. ``Turbulent flow'' is characterized by a
three-dimensional movement of the fluid particles superimposed on
the overall direction of motion. Turbulent flow may occur when the
flow speed is higher and when there are obstacles in the channel
that disrupt the flow profile. The turbulent flow intensifies the
heat transfer, thus resulting in more efficient heat exchange.
---------------------------------------------------------------------------

In the NOPR, DOE responded by explaining that 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)) Consequently, in the
context of furnace fans, DOE does not have latitude to apply only a
single standard for the larger HVAC product (which is already
regulated). Pursuant to this statutory mandate, DOE issued a NOPR which
proposed energy conservation standards for circulation fans used in
residential central HVAC systems (78 FR 64068 (Oct. 25, 2013)). DOE
added that it did not interpret its authority as including regulating
the duct work itself. DOE recognized that component-level regulations
could have system-level impacts. Accordingly, DOE conducted its NOPR
analyses and selected the standard levels proposed in the NOPR 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 final test procedure codified in DOE's regulations at 10
CFR part 430, subpart B, appendix AA specifies that the furnace fan be
tested as factory-installed in the HVAC product, thereby enabling the
rating metric, FER, to account for system effects on airflow delivery
and, ultimately, energy performance. In addition, the product class
structure proposed in the NOPR allowed for differentiation of products
with designs that achieve higher thermal efficiency but may have lower
fan performance, such as condensing furnaces. 78 FR 64068, 64082 (Oct.
25, 2013).
In the January 3, 2014 test procedure final rule, DOE broadened its
definition of ``furnace fan'' to mean ``an electrically-powered device
used in a consumer product for the purpose of circulating air through
ductwork.'' 79 FR 500, 521.
In response to the NOPR, DOE did not receive comments from
interested parties regarding the definition of ``furnace fan''
established by the test procedure final rule. Consequently, in this
standards final rule, DOE is maintaining the definition for ``furnace
fan,'' codified at 10 CFR 430.2. However, DOE did receive comments on
its definitions for certain product types that include furnace fans.
DOE summarizes and responds to these comments later in this section of
the notice.
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.
In response to the preliminary analysis, efficiency advocates
expressed concern at DOE's exclusion of packaged and split-system CAC
products because advocates 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. 78 FR 64068, 64080 (Oct. 25, 2013).
In contrast, many manufacturers submitted comments in response to
the preliminary analysis that they 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. Manufacturers also
claimed that the electricity used to circulate air through duct work is
already adequately accounted for in existing energy efficiency metrics
for CAC and HP products that use circulation fans. 78 FR 64068, 64080-
81 (Oct. 25, 2013).
In the October 25, 2013 furnace fan energy conservation standard
NOPR, DOE noted 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

[[Page 38146]]

FR 64068, 64081. 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.'' Id. 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. In the
standards NOPR, however, DOE only proposed energy conservation
standards for those circulation fans that are used in residential
furnaces and modular blowers (see discussion below). As a result, DOE
did not address public comments that pertain to fans in other types of
HVAC products (other than to clarify instances where there was
uncertainty as to whether a given product fits within the scope of the
current rulemaking). The following list describes the furnace fans
which DOE proposed to address in the standards NOPR.
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 indoor
units, through-the-wall indoor units, small-duct, high-velocity (SDHV)
indoor units, energy recovery ventilators (ERVs), heat recovery
ventilators (HRVs), draft inducer fans, exhaust fans, or hydronic air
handlers.

Id.

In the October 25, 2013 NOPR, DOE also maintained its proposal to
account for the electrical consumption of furnace fans while performing
all active mode functions (i.e., heating, cooling, and constant
circulation) because 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. 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. Id.
China WTO commented that DOE's definition for ``furnace fan'' and
the proposed scope show that residential furnace fans primarily perform
the heating function. For this reason, China WTO recommended that DOE
exclude fan performance for cooling operation to avoid unnecessary test
procedure burden. (China WTO, No. 92 at pp. 1-2).
For the reasons stated above, the energy conservation standards
established by this notice account for the electrical consumption of
furnace fans while performing all active mode functions (i.e., heating,
cooling, and constant circulation). The commenter did not dispute the
fact that fans will operate in cooling or constant-circulation mode,
often for non-trivial periods of time. Because the electrical energy
consumption of the fan may vary substantially depending on its mode of
operation, DOE has concluded that testing fan operation in all these
modes is necessary to reflect the product's energy consumption during a
representative use cycle and that such testing would not be unduly
burdensome to conduct.
Unico submitted comments regarding concerns with DOE's test
procedure and proposed standard levels as they apply to SDHV systems.
Unico explains that DOE proposed to exclude SDHV products from the
rulemaking but included modular blowers and electric furnaces,
resulting in a potential conflict. Unico added that most of their SDHV
air handlers are modular in construction. Unico also offers an add-on
electric furnace to provide secondary or backup heat, but very few
systems are installed as an electric furnace. As a result, Unico
expressed uncertainty whether this rule applies to SDHV modular blowers
and SDHV electric furnaces. Unico provided data showing that SDHV
blowers operate at different conditions compared to the products
proposed to be covered and cannot meet the proposed FER levels.
Ultimately, Unico expressed concerns that this rule could potentially
eliminate many SDHV products from the market if they are subject to
DOE's proposed standards. (Unico, No. 93 at pp.1-4)
In response to the comment, DOE clarifies that the furnace fan test
procedure and the energy conservation standards established by this
final rule do not apply to SDHV products, including SDHV modular
blowers and electric furnaces. DOE recognizes that these products
operate at different conditions which significantly impact their fan
performance, as compared to the products addressed in this rulemaking.
While DOE's regulations at 10 CFR 430.2 include a definition for
``small duct high velocity systems,'' it does not include a definition
for small duct high velocity modular blowers or SDHV electric furnaces.
Absent clarification, DOE realizes that confusion may result regarding
which products are and are not covered by today's standards.
Accordingly, DOE is adopting the following definition of ``small-duct
high-velocity (SDHV) modular blower,'' which has been drafted to be
consistent with the existing definition of ``SDHV system'' at 10 CFR
430.2:
Small-duct high-velocity (SDHV) modular blower means a product
that:
Meets the definition of ``modular blower,'' as set forth
in 10 CFR part 430, subpart B, appendix AA;
Is designed for, and produces, at least 1.2 inches of
external static pressure when operated at the certified air volume rate
of 220-350 CFM per rated ton of cooling in the highest default cooling
airflow-controls setting; and
When applied in the field, uses high velocity room outlets
generally greater than 1,000 fpm that have less than 6.0 square inches
of free area.
Similarly, DOE is adopting a definition for ``small-duct high-
velocity (SDHV) electric furnace'' to read as follows:
Small-duct high-velocity (SDHV) electric furnace means a product
that:
Meets the definition of ``electric furnace,'' as set forth
in 10 CFR 430.2;
Is designed for, and produces, at least 1.2 inches of
external static pressure when operated at the certified air volume rate
of 220-350 CFM per rated ton of cooling in the highest default cooling
airflow-control setting; and
When applied in the field, uses high velocity room outlets
generally greater than 1,000 fpm that have less than 6.0 square inches
of free area.
DOE has concluded that these amendments should eliminate any
confusion associated with DOE not addressing SDHV modular blowers and
SDHV electric furnaces in the present rulemaking. Unico also submitted
other SDHV-related concerns, but DOE need not discuss those issues
further because SDHV products are not addressed in this rulemaking.
AHRI, Morrison, Goodman, Johnson Controls, and Mortex stated that
modular blowers should be excluded from the scope of this rulemaking.
(AHRI, No. 98 at pp. 1, 2; Morrison, No. 108 at p. 1; Goodman, No. 102
at p. 5; Johnson Controls, No. 95 at p. 2; and Mortex, NOPR Public
Meeting Transcript, No. 91 at pp. 78-79). AHRI,

[[Page 38147]]

Morrison, and Johnson Controls continue to advance an interpretation of
42 USC 6295(f)(4)(D) as being only applicable to furnaces, and these
commenters argued that absent a legislative change, DOE has exceeded
its statutory authority in terms of the NOPR's proposed coverage of
modular blowers. (AHRI, No. 98 at pp. 1-2; Morrison, No. 108 at p. 1;
and Johnson Controls, No, 95 at p. 2). AHRI and Johnson Controls added
that some modular blowers in today's marketplace are not designed to
operate with electric resistance heat kits, rendering the final test
procedure insufficient for these products. (AHRI, No. 98 at pp. 1, 2;
and Johnson Controls, No. 95 at p. 3).
ASAP, et al., on the other hand, expressed support for the
inclusion of modular blowers in the scope of coverage. ASAP, et al.
stated that they understand that the strip heat used with electric
furnaces is often installed in the field, which means that an
``electric furnace'' is often sold by the manufacturer as a ``modular
blower.'' ASAP, et al. cite DOE's finding that non-weatherized and
mobile home electric furnace/modular blower furnace fans represent 10
percent of all furnace fan sales. According to ASAP, et al., excluding
modular blowers from the scope of coverage would not only reduce energy
savings from this rulemaking, but would also create a loophole--i.e.,
manufacturers would have an incentive to sell electric furnaces as
modular blowers (without strip heat installed) in order to avoid
compliance with the furnace fan energy conservation standards. (ASAP,
et al., No. 105 at pp. 1, 2)
As stated above, DOE maintains its interpretation that the relevant
statutory language at 42 U.S.C. 6295(f)(4)(D) is broader in its
applicability than just furnaces, and consequently, it provides DOE
authority to cover modular blowers in this rulemaking. These same
arguments were already addressed in some detail in the NOPR (see 78 FR
64068, 64081 (Oct. 25, 2013)). DOE also disagrees with the contention
of AHRI and Johnson Controls that the final test procedure is not
sufficient to address all modular blowers. All modular blower models of
which DOE is aware can be operated in conjunction with an electric
resistance heat kit, and commenters did not identify any models of
modular blowers that cannot. Even assuming arguendo that modular
blowers do exist that are not designed to operate with an electric
resistance heat kit, DOE expects that number of such models would be de
minimis and that manufacturers producing modular blowers that cannot be
operated in conjunction with an electric resistance heat kit would
apply for a waiver from the test procedure. DOE provides more details
regarding this issue in the January 3, 2014 test procedure final rule.
79 FR 504.
In its comments, Johnson Controls stated that DOE's use of the
phrase ``primary heat source'' is too ambiguous, especially when
certain products might be modified in the field. According to Johnson
Controls, DOE's characterizations of air handlers and modular blowers
when an air handler or modular blower is the primary heating source is
still confusing and brings uncertainty to the NOPR market assessment.
Johnson Controls commented that none of the residential air handlers,
modular blowers, or residential single-package finished good models
built by Johnson Controls includes factory-installed electric heat
kits. Therefore, according to the commenter, electric heat kits
installed in these products cannot be considered to be the primary
source for heat in their applications, and so none of these products
should be included in this rulemaking. Johnson Controls added that
while field-installed electric heat kits are available and used
frequently, the use of field kits is outside of the air handler or
modular blower manufacturer's control, unlike gas furnaces where the
application is known to usually be the primary heating source in the
vast number of situations. (Johnson Controls, No. 95 at p. 2) NEEA,
Mortex, and Daikin agreed that the contractor determines whether a CAC/
HP blower-coil unit with electric resistance heat is the principal
source of heating for a residence, rendering any such determination
speculative for other entities. (NEEA, NOPR Public Meeting Transcript,
No. 91 at pp. 64-65; Mortex, NOPR Public Meeting Transcript, No. 91 at
pp. 78-79; and Daikin, NOPR Public Meeting Transcript, No. 91 at pp.
75-76)
Modular blowers are not a source of heat per DOE's definition of
``modular blower'' as provided in 10 CFR part 430, subpart B, appendix
AA. Consequently, the ``principal heating source'' qualifier (per the
definition of ``furnace'' at 10 CFR 430.2) does not apply to modular
blowers, so this part of the ``furnace'' definition has the effect of
excluding modular blowers from that definition. However, the
``furnace'' definition is not the only factor in deciding whether
modular blowers are covered in this rulemaking, contrary to what
Johnson Controls suggests. If electric resistance heat is added to a
modular blower product, that product no longer meets DOE's definition
of a ``modular blower.'' Instead, DOE considers the modified product an
electric furnace, absent other design changes. Regardless of whether
the electric resistance heat is factory-installed, both product
variations are covered in the final test procedure and this energy
conservation standard.
DOE recognizes that interested parties may have trouble determining
whether a CAC/HP blower-coil unit with electric resistance heating is
considered an electric furnace and thereby covered by the energy
conservation standards established by this final rule. Strictly
following the DOE definition for ``electric furnace'' (which references
the DOE definition of ``furnace'') as set forth at 10 CFR 430.2,
coverage in this final rule of a CAC/HP blower-coil with electrical
resistance heating depends on whether the electric resistance heating
is the ``principal heating source for the residence.'' As Johnson
Controls points out, this is not as easily determined as for gas and
oil furnaces. DOE expects that in the significant majority of CAC/HP
blower-coil models that have electric resistance heat, the electric
resistance heat is supplemental in nature and not the principal heating
source for the residence. For this reason, DOE has decided that the
energy conservation standards established by this rule will not cover
CAC/HP blower-coil units, regardless of whether they include electric
resistance heat.
Lennox argued that including weatherized commercial products in
this rulemaking is unrealistic and improper. Specifically, Lennox
expressed concerns that DOE mischaracterizes single-package weatherized
products as ``residential'' when these products are offered with a
single-phase power source. The commenter stated that these products are
often used in commercial applications, explaining that single-phase
weatherized products are often designed to have higher duct static
pressure capability than a traditional residential furnace. Lennox
commented that they have single-phase belt-drive products that are
capable of operating up to 2 inches water column external static
pressure to meet commercial duct static requirements. According to
Lennox, BPM motors (including both constant-torque and constant-airflow
BPM motors) typically used in residential products cannot achieve the
high static pressures required in these commercial installations.
Therefore, Lennox recommended that DOE should exclude all products
marked not for residential use from standards coverage. (Lennox, No.
100 at p. 4).
DOE recognizes that industry may differentiate between residential
products and commercial equipment differently than DOE. The standards

[[Page 38148]]

established by this final rule do not cover all single-phase, single-
package HVAC products, only single-phase weatherized furnaces (i.e.,
single-phase, single-package HVAC products that include a ``furnace''
as defined at 10 CFR 430.2). Lennox did not identify, and after
additional research, DOE is not aware of any weatherized gas furnace
models that operate at the static pressures mentioned by the commenter.
DOE expects that the operating conditions mentioned by Lennox are
typical of single-package heat pump equipment, which is not covered by
this rule. DOE expects the number of models covered by this rule that
DOE defines as residential but are designed and operated in commercial
applications to be de minimis. Any manufacturer which can substantiate
its case that it would suffer serious hardship, gross inequity, and an
unfair distribution of burdens if required to comply with the furnace
fan standards may seek exception relief from DOE's Office of Hearings
and Appeals (OHA).\17\
---------------------------------------------------------------------------

\17\ For information about obtaining exception relief, see 10
CFR part 1003 (available at https://www.ecfr.gov/cgi-bin/text-idx?SID=d95bf6ed9cd849253fab734656f80c2e&node=10:4.0.3.5.3&rgn=div5).

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

ACEEE commented that if manufacturers offered air handlers as a
separate product, without the coil, the modified product would not be
inherently different than a modular blower. ACEEE stated that DOE
should cover CAC/HP blower-coil units following the same logic that DOE
used to justify covering modular blowers (i.e., because of their
similarities to electric furnaces). ACEEE also commented that the DOE
definition for ``modular blower'' is confusing because, in their
experience, all (or almost all) conventional indoor blower units--
whether furnaces, HP, or CAC--use a separate assembly (or field-
fabricated `plenum') to house the coil used as the evaporator (CAC) or
evaporator and condenser (HP). (ACEEE, No. 94 at pp. 1-2, 4).
DOE disagrees with ACEEE's assessment that a CAC/HP blower-coil
unit with the coil removed and an electric furnace are equally
comparable to a modular blower. For example, modular blowers are
typically designed to accommodate the addition of electric resistance
heating kits (after which DOE would consider them as electric furnaces)
without modifying the product envelope. Modular blower envelope
dimensions are similar, and in many cases identical, to electric
furnace dimensions as a result. In addition, the final test procedure
requires an electric resistance heat kit to be installed in modular
blowers to produce a temperature rise allowing for calculation of
airflow for the rating metric, FER. The test configurations for
electric furnaces and modular blowers are almost identical as a result.
In turn, the FER values for an electric furnace and modular blower with
no other design difference other than the presence of an electric
resistance heat kit are expected to be approximately equivalent. On the
other hand, the coils typically included in CAC/HP blower-coil units
are larger than heat resistance kits. Consequently, blower-coil unit
envelope dimensions are different than modular blower dimensions, which
impacts fan performance. CAC/HP blower-coil unit design, as it relates
to fan performance, cannot be compared to modular blower design for
this reason. The final test procedure does not include methods for
deriving an FER value for CAC/HP blower-coil units. Furthermore, the
coil and envelope dimension differences mentioned would preclude the
circulation fan performance of a CAC/HP blower-coil unit from being
deemed equivalent to an otherwise similarly-designed modular blower. In
addition, modular blowers and electric furnaces are product
configurations installed in the field. DOE doubts that a CAC/HP blower-
coil unit with the coil removed would be offered by manufacturers or
purchased and installed in the field. Regarding the criticism of its
definition of ``modular blower,'' DOE recognizes that the definition
for ``modular blower'' as set forth at 10 CFR part 430, subpart B,
appendix AA may be confusing because it does not explicitly state that
a modular blower does not include an indoor refrigerant coil, only that
it does not provide heating or cooling. An ``indoor unit,'' on the
other hand, is defined at 10 CFR 430.2 as containing a ``coil.'' This
notice modifies the definition of ``modular blower'' to explicitly
exclude products that contain an indoor refrigerant coil in order to
eliminate ambiguity between the two definitions.
ACEEE, Earthjustice, and CA IOU stated that DOE's decision to
exclude products such as CAC/HP and hydronic air handlers is
inappropriate and in conflict with DOE's interpretation of the
statutory language. These interested parties also commented that DOE
does not provide a justification for its decision to exclude products
for which DOE claims to have authority to set energy conservation
standards. (ACEEE, No. 94 at pp. 1-2, 4; and CA IOU, No. 106 at pp. 1,
2) According to Earthjustice, DOE's decision to exclude products for
which it claims authority to cover represents a failure to carry out
EPCA's command to adopt ``standards for electricity used for purposes
of circulating air through ductwork'' and does not comply with the
statute's requirement that standards ``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).
Earthjustice adds that EPCA authorizes DOE not to prescribe an amended
or new standard for a type or class of covered product in three
situations: (1) The standard will eliminate certain product features
from the market; (2) the standard will not result in significant
conservation of energy or is not technologically feasible or
economically justified; or (3) for certain products, test procedures
have not been established. (42 U.S.C. 6295(o)(3) and (4)). Earthjustice
states that DOE has failed to show that the products it is not
addressing in this rule meet those criteria. (Earthjustice, No. 101 at
p. 1).
ASAP, et al. encouraged DOE to adopt standards and/or test
procedure changes to drive improved efficiency of furnace fans that are
part of single-package and blower-coil central air conditioners and
heat pumps in the future. According to ASAP, et al., CA IOU and ACEEE,
the operating conditions and metrics used in the DOE test procedures
for CAC/HP (i.e., SEER and HSPF) are insufficient for representing
furnace fan performance in the field for those products. (ASAP, et al.,
No. 105 at pp. 2, 3; CA IOU, No. 106 at pp. 1, 2; and ACEEE, No. 94 at
pp. 1-2, 4). Further, ASAP, et al. are concerned that heat pump indoor
units will increasingly be installed and operated as electric furnaces
(without an outdoor unit) to avoid both the DOE standard for CAC/HP and
the standards established by this rule. ASAP, et al. added that
consumers will have greater incentive to install heat pump indoor units
to operate as electric furnaces if a heat pump indoor unit with a PSC
motor is less expensive than an electric furnace/modular blower with a
constant-torque BPM motor. (ASAP, et al., No. 105 at pp. 2, 3)
Earthjustice also identified CAC/HP blower-coil units installed without
an outdoor unit and operated as an electric furnace as a potential
loophole. (Earthjustice, No. 101 at p. 1) While ASAP, et al., stated
that they recognize that it may be too late to include furnace fans
that are part of single-package and blower-coil central air
conditioners and heat pumps in the scope of coverage in the current
rulemaking, they encourage

[[Page 38149]]

DOE to address furnace fan efficiency in these products in the future
through one of two options: (1) Amend the test procedures for central
air conditioners and heat pumps to incorporate more realistic external
static pressure values; or (2) include furnace fans that are part of
single-package and blower-coil central air conditioners and heat pumps
in a future rulemaking for furnace fans. ASAP, et al., submitted that
if DOE pursued the second option, changing the external static pressure
values in the central air conditioner and heat pump test procedures
would be less critical, because fan efficiency would be addressed
through standards for furnace fans. (ASAP, et al., No. 105 at pp. 2, 3)
CA IOU also expressed support for a separate, expedited rulemaking to
set energy conservation standards for products not addressed in this
rule. CA IOU claims that such a rule would ensure that the entire
market for furnace fans is regulated, thereby avoiding the negative
market impacts due to the prevalence of unregulated products. (CA IOU,
No. 106 at pp. 1, 2). NEEA and NPCC also expressed disappointment that
DOE is choosing to cover only two-thirds of furnace fan products by
excluding indoor blower/cool units used with split system heat pump and
air conditioning systems and hydronic air handlers, which leaves
substantial energy savings on the table. (NEEA and NPCC, No. 96 at p.
3). ACEEE estimated that approximately two quads of potential
cumulative energy savings are left uncaptured by DOE's decision to
exclude CAC/HP blower-coil units, which ACEEE claims could jeopardize
achievement of the Administration's goal of 3 billion tons of
CO2 avoided. (ACEEE, No. 94 at p. 1-2, 4). CA IOU cited
these potential energy savings as another reason that a separate,
expedited rulemaking is warranted. (CA IOU, No. 106 at pp. 1, 2).
Laclede, APGA, and AGA also recommended that DOE expand the scope of
this rule to include products such as split-system central air
conditioners, heat pump air handlers, through-the-wall air handlers,
and small-duct high-velocity air handlers that compete with the types
of natural gas furnaces covered by this rules. Each cited concerns that
DOE's decision to exclude fans used in these products could lead to
fuel switching. (Laclede, No. 89 at p. 2; APGA, No. 90 at p. 2; and
AGA, No. 110 at p. 2). Laclede believes the Department failed to
adequately explain why fans in heat pumps are excluded and to clearly
demonstrate how this exclusion serves the best interests of the
American public.
EEI, on the other hand, supports DOE's exclusion of CAC/HP blower-
coils and hydronic air handlers from this rulemaking. EEI commented
that the energy used by the fans operating in the cooling mode is part
of the calculation of SEER, EER, and HSPF. EEI explains that
manufacturers have already made design decisions that reduce the energy
usage of such fans for these systems to meet the higher air conditioner
and heat pump energy conservation standards (based on SEER and HSPF)
that took effect in 1992 and 2006, and will take effect in 2015. EEI
stated that including these fans in this rule would be a form of
``double regulation'' of the same product. (EEI, No. 87 at p. 3)
Southern Company agreed that CAC/HP fan energy is already covered by
the SEER and HSPF rating. (Southern Company, NOPR Public Meeting, No.
43 at p. 70).
As explained previously, DOE has noted the relatively broad scope
of the language of 42 U.S.C. 6295(f)(4)(D), which provides DOE
authority to regulate ``electricity used for purposes of circulating
air through duct work.'' At the present time, however, DOE is only
adopting energy conservation standards for those circulation fans that
are used in residential furnaces and modular blowers. The DOE test
procedure for furnace fans is not currently equipped to address fans
contained in central air conditioners, heat pumps, or other products,
as would be required for the adoption of standards under 42 U.S.C.
6295(o)(3). Consequently, DOE is not considering standard setting for
other products beyond the current scope of the rulemaking at this time.
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 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).
Mobile Home Weatherized Gas
Furnace Fan (MH-WG).
Mobile Home Weatherized Oil
Furnace Fan (MH-WO).
Mobile 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).
Mobile 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).
Mobile Home Heat/Cool Hydronic
Air Handler Fan (MH-HAH-HC).
Mobile Home Heat-Only Hydronic
Air Handler Fan (MH-HAH-H).
Mobile Home Hydronic Air
Handler Fan with Coil (MH-HAH-
C).
Mobile Home Non-Weatherized, Non-
Condensing Gas Furnace Fan (MH-NWG-NC).

[[Page 38150]]

Mobile Home Non-Weatherized, Condensing
Gas Furnace Fan (MH-NWG-C).
Mobile Home Electric Furnace/Modular
Blower Fan (MH-EF/MB).
------------------------------------------------------------------------

Manufacturers agreed that the selected key product classes are an
accurate representation of the market. Some manufacturers 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.
In the NOPR, DOE agreed with manufacturers' assertion that the
additional non-key product classes represent products with few and in
many cases, no shipments. 78 FR 64082. Individual discussions with
manufacturers for the MIA confirmed this assertion. Additionally,
review of the AHRI appliance directory revealed that only two of the
additional non-key product classes have active models listed: (1)
Mobile home weatherized gas furnace fans (MH-WG) and (2) mobile 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 proposed in the NOPR to eliminate the additional non-key
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 proposed to reserve space to establish standards for
MH-WG and MH-NWO furnace fans in the future as sufficient data become
available. DOE also proposed to exclude hydronic air handlers from
consideration in this rulemaking, thereby further reducing the number
of product classes addressed in the NOPR to 10. 78 FR 64082. Table IV.2
includes a list of the revised set of product classes for residential
furnace fans used in the NOPR.
DOE did not receive comment or additional information on the
proposed product classes, thus, DOE is not making changes to the
product classes in this Final Rule. Table IV.2 includes a list of the
product classes for residential furnace fans used in the Final Rule.

Table IV.2--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)
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan (MH-NWG-NC)
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH-NWG-C)
Mobile Home Electric Furnace/Modular Blower Fan (MH-EF/MB)
Mobile Home Weatherized Gas Furnace Fan (MH-WG)
Mobile Home Non-Weatherized Oil Furnace Fan (MH-NWO)
------------------------------------------------------------------------

3. Technology Options
In the preliminary analysis, DOE considered seven technology
options that would be expected to improve the energy 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. In
the NOPR, DOE revised its proposed scope of coverage to no longer
address hydronic air handlers, the only furnace fan product class for
which standby mode and off mode energy consumption is not already fully
accounted for in the DOE energy conservation standards rulemakings for
residential furnaces and residential CAC and HPs. 76 FR 37408 (June 27,
2011); 76 FR 67037 (Oct. 31, 2011). Consequently, the standby mode and
off mode technology options (options 5 through 7 in the list above) are
no longer applicable. In addition, DOE found that multi-staging and
modulating heating controls can also improve FER, so DOE evaluated
multi-staging and modulating heating controls as a separate technology
option for the NOPR. 78 FR 64083.
DOE did not receive comment or additional information regarding the
evaluated technology options, so DOE did not make any changes to the
list of technology options identified in the NOPR. The resultant list
of technology options identified to be evaluated in the screening
analysis before consideration in the engineering analysis for the Final
Rule 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 Final Rule TSD.
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 \18\ 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

[[Page 38151]]

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.
---------------------------------------------------------------------------

\18\ 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.
---------------------------------------------------------------------------

Interested parties expressed support for DOE's consideration of the
aerodynamics of furnace fan cabinets in its initial analysis of
technology options. In particular, ASAP cited a 2003 GE study \19\ that
quantified energy savings produced by modifying fan housing as
justification for its inclusion as an option. ACEEE, et al. also cited
a Lawrence Berkeley National Laboratory (LBNL) study \20\ that linked
changes in efficiency to modifying the clearance between fan housing
and an air handler cabinet wall. Ingersoll Rand stated that 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. 78 FR 64083.
---------------------------------------------------------------------------

\19\ 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).
\20\ 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. 78 FR 64083.
Many interested parties requested that DOE keep airflow path design
as a technology option. Manufacturers stated that improving airflow
path design, like modifying fan housing, is highly cost-effective when
compared to other enhancements. 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. 78 FR
64083. DOE believes including airflow path design is appropriate
because of its potential to impact fan efficiency. Airflow path design
will impact the rating metric, FER, because the DOE test procedure
requires the furnace fan to be tested as it is factory-installed in the
HVAC product.
DOE did not receive comment or additional information on fan
housing about including airflow path design improvements as a
technology option, thus, DOE is including these as technologies to be
evaluated further in the screening analysis. Chapter 3 of the Final
Rule TSD provides more technical detail regarding fan housing and
airflow path design modifications and how these measures could reduce
furnace fan energy consumption.
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 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. Manufacturers commented that there are
alternate, more cost-effective solutions to reduce energy consumption
for air-moving systems, such as airflow path design or ECM (referred to
herein by DOE as a ``constant-airflow BPM motor'') technology. 78 FR
64084.
For the NOPR analysis, DOE recognized 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. 78 FR 64084.
DOE did not receive comment or additional information on including
inverter controls for PSC motors as a technology option, thus, DOE is
including this technology option in the Final Rule. DOE evaluates in
the engineering analysis the cost-effectiveness of all energy-saving
technology options that are not screened out. Chapter 3 of the Final
Rule TSD provides a more detailed discussion of inverter-driven PSC
furnace fan motors.
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'').\21\ DOE finds that furnace fans using high-efficiency motor
technology options operate more efficiently than furnace fans using
baseline PSC motors by:
---------------------------------------------------------------------------

\21\ ``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 \22\ (i.e., ratio of
airflow in lowest setting to airflow in highest setting).
---------------------------------------------------------------------------

\22\ 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, PA Public Meeting Transcript,
No. 43 at p. 67)
For the NOPR analysis, DOE stated that it 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).\23\ DOE
agreed with Ingersoll Rand that as static pressure increases, input
power to a PSC-driven furnace fan will decrease, which is

[[Page 38152]]

seemingly contradictory to the principle described above. DOE found
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). 78 FR 64084.
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 rating metric, FER, is
normalized by airflow to result in ratings that are in units of watts/
cfm. DOE believed 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.
---------------------------------------------------------------------------

\23\ See chapter 3 of the TSD for more details regarding fan
operation.
---------------------------------------------------------------------------

As detailed in the NOPR, interested parties recognized the benefits
provided by constant-torque and constant-airflow BPM motors. Interested
parties also 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. 78 FR 64084.
Table IV.3 contains the turndown ratio estimates supplied publicly by
interested parties. Manufacturers generally provided similar feedback
during interviews.

Table IV.3--Interested Party Estimated Fan Motor Turndown Ratios
----------------------------------------------------------------------------------------------------------------
Wave chopper Constant- Constant-
Interested party PSC controller PSC torque ECM airflow 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 disagreed with Lennox that including
constant circulation as part of FER would ``artificially'' inflate the
performance of BPM motors compared to PSC motors, because DOE concluded
that there is non-trivial use of this mode by consumers. 78 FR 64085.
As part of the test procedure rulemaking, DOE estimated 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 Final Rule published on January
3, 2014. 79 FR 499.
DOE did not receive comment or additional information on including
high-efficiency motors as a technology option, thus, DOE is including
this technology option in the Final Rule. DOE evaluates in the
engineering analysis the cost-effectiveness of all energy-saving
technology options that are not screened out. Chapter 3 of the Final
Rule TSD provides a more detailed discussion of high-efficiency furnace
fan motors.
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.\24\ 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.
---------------------------------------------------------------------------

\24\ 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.
---------------------------------------------------------------------------

Interested parties encouraged DOE to consider X13-level motors
applied with multi-stage furnace controls as a technology option. 78 FR
64085. During interviews, manufacturers commented that multi-stage
heating controls can be and are used regardless of motor type.
Based on comments from manufacturers, DOE recognized that multi-
stage controls can be paired with other motor types, not just constant-
airflow BPM motors. DOE agreed with interested parties that
implementing multi-stage heating controls independent of motor type
could result in residential furnace fan efficiency improvements.
Consequently, DOE decided to de-couple multi-staging controls from the
constant-airflow BPM motor technology option. Accordingly, DOE
evaluated multi-staging controls as a separate technology option for
the NOPR. 78 FR 64085.
DOE did not receive comment or additional information on multi-
staging controls as a technology option, thus, DOE is including this
technology option in the Final Rule.
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 (GE) that showed large improvements in efficiency were
achievable under certain operating conditions.\25\
---------------------------------------------------------------------------

\25\ 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).
---------------------------------------------------------------------------

Interested parties disagreed with the DOE's findings, stating that
literature indicates there are varying degrees of performance
improvement when

[[Page 38153]]

backward-inclined impellers are used in place of forward-curved
impellers. 78 FR 64085. 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 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).
DOE recognized 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 included backward-inclined impellers as a technology option in the
NOPR. 78 FR 64086.
DOE did not receive additional comment or information on including
backward-inclined impellers as a technology option. Thus, DOE included
backward-inclined impellers as a technology to be evaluated further in
the screening analysis for the Final Rule.

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.
In response to the preliminary analysis, interested parties stated
many concerns associated with modifying airflow path designs to reduce
residential furnace fan electrical energy consumption, namely, 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. 78 FR 64086.
For the NOPR, 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 in which fan housing or airflow path design modifications could
lead to potential fan energy savings without increasing the size of the
HVAC product or compromising thermal performance or safety. 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. 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 decided to screen out fan housing and
airflow path design modifications in the NOPR. 78 FR 64086.
DOE did not receive additional comment or information regarding fan
housing and airflow path design modifications in response to the NOPR.
Thus, DOE determined to screen out fan housing and airflow path design
modifications in the Final Rule.
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. 78 FR 64087. 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 Final Rule. Therefore, DOE
believes all of the efficiency levels evaluated in this notice are
technologically feasible. For additional details, please see chapter 4
of the Final Rule TSD.
Interested parties, however, voiced concerns regarding these
screening criteria as they apply to BPM fan motors and backward-
inclined impellers in previous phases of this rulemaking. DOE
summarizes and addresses these concerns in the sections immediately
below. DOE did not receive public comments relevant to the screening

[[Page 38154]]

analysis criteria for the other remaining technology options.
High-Efficiency Motors
In response to the preliminary analysis, manufacturers stated that
there are a limited number of ECM motor suppliers to furnace fan
manufacturers, and that it is a proprietary technology. Manufacturers
also stated that no alternative ECM exists at the scale of Regal Beloit
ECMs and that limiting PSC applicability would reduce product
flexibility.
Motor manufacturers disagreed with residential furnace fan
manufacturers, claiming that there is more than just a single motor
manufacturer offering ECM technology. Motor manufacturers also
supported DOE's assumption that after implementation of furnace fan
efficiency standards, brushless permanent magnet motor technologies
will become increasingly available over time. 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, PA Public
Meeting Transcript, 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. Most furnace fan manufacturers claimed that development of
in-house controls for BPM motors is not an option. 78 FR 64087.
While DOE recognizes that Regal Beloit possesses a number of
patents in the BPM motor space, other motor manufacturers (e.g., Broad
Ocean, ebm-papbst, and 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 continues to
expect that BPM motor technology is currently available from more than
one source and will become increasingly available to residential
furnace fan manufacturers. 78 FR 64087.
Also in response to the preliminary analysis, 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 discussions with manufacturers, 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. 78 FR 64087.
DOE did not receive additional comment or information in response
to the NOPR about high-efficiency motors related to the screening
criteria. Thus DOE included high-efficiency motors as a technology
option in the engineering analysis.
Backward-Inclined Impellers
In response to the preliminary analysis, furnace fan manufacturers
stated that 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). However, ebm-
papst stated that they retrofitted existing equipment with backward-
inclined impellers, which only required making minor changes to the
airflow path within the equipment. 78 FR 64088.
Manufacturers were also concerned with the potential impacts that
backward-inclined impellers could have on heat exchanger temperatures.
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 claimed that a backward-
inclined impeller, in combination with increased fan motor speeds to
achieve higher efficiency, leads to amplified noise levels. 78 FR
64088.
For the NOPR, DOE found that there are multiple approaches to
implementing backward-inclined impellers to reduce furnace fan energy
consumption. DOE recognized 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 believed that this prototype represented 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 in the NOPR. 78 FR 64088.
DOE did not receive additional comment or information about
backward-inclined impellers related to the screening criteria. Thus,
DOE decided not to screen out backward-inclined impellers in the Final
Rule.

C. Engineering Analysis

In the engineering analysis (corresponding to chapter 5 of the
Final Rule 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

[[Page 38155]]

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.
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 Final Rule 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
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/1,000 cfm)
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............ 380
Non-Weatherized, Condensing Gas Furnace Fan................ 393
Weatherized, Non-Condensing Gas Furnace Fan................ 333
Non-Weatherized, Non-Condensing Oil Furnace Fan............ 333
Electric Furnace/Modular Blower Fan........................ 312
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan 295
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan.... 319
Mobile Home Electric Furnace/Modular Blower Fan............ 243
----------------------------------------------------------------------------------------------------------------

In response to the preliminary analysis, manufacturers asserted
that the baseline FER values presented were not representative of the
furnace fans in the least-efficient residential HVAC models offered for
sale today. Some manufacturers also requested that DOE alter FER to
better reflect unit capacity. Specifically, some manufacturers stated
that residential furnace fans having a larger capacity also have higher
FERs and recommended that DOE adjust baseline FER values to include the
largest-capacity fan within a product class. 78 FR 64089.
In the NOPR, 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 of the linear fit 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). For the NOPR, DOE proposed to use such
linear functions to represent FER for the different efficiency levels
of the different product classes. 78 FR 64089.
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/1,000 cfm)
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............ FER = 0.057 x QMax + 362.
Non-Weatherized, Condensing Gas Furnace Fan................ FER = 0.057 x QMax + 395.
Weatherized Non-Condensing Gas Furnace Fan................. FER = 0.057 x QMax + 271.
Non-Weatherized, Non-Condensing Oil Furnace Fan............ FER = 0.057 x QMax + 336.
Electric Furnace/Modular Blower Fan........................ FER = 0.057 x QMax + 331.
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan FER = 0.057 x QMax + 271.
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan.... FER = 0.057 x QMax + 293.
Mobile Home Electric Furnace/Modular Blower Fan............ FER = 0.057 x QMax + 211.
Mobile Home Weatherized Gas Furnace Fan.................... Reserved.
Mobile Home Non-Weatherized Oil Furnace Fan................ Reserved.
----------------------------------------------------------------------------------------------------------------
*QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the proposed DOE test
procedure at the time of the ECS NOPR publication. 78 FR 19606, 19627 (April 2, 2013).

Manufacturers stated that the baseline FER values presented in the
NOPR need to be re-evaluated to determine the appropriate baseline.
Because the test procedure was not finalized at the time of the ECS
NOPR publication, Lennox believes that assumptions were made by DOE to
determine the baseline from other sources, leading to overstated energy
savings and misleading conclusions. (Lennox, No. 100 at p. 3) Goodman
believes that the NOPR

[[Page 38156]]

baseline values are too high. Goodman initially commented that baseline
values were too low for the preliminary analysis. Based on the product
testing per the April 2013 test procedure SNOPR, Goodman feels the
increased values for baseline FER are too high, and should be closer
(but still higher than) the original TSD estimated values. (Goodman,
No. 102 at p. 8) Morrison, NEEA, and NPPC also commented that because
there was no finalized test procedure at the time the ECS NOPR was
published, DOE should not be using test data from public literature to
generate FER values. (Morrison, No. 91 at p. 124; NEEA, NPCC, No. 96 at
p. 2) Ingersoll-Rand echoed Lennox's and Morrison's comments, stating
that it is difficult to get furnace fan power data from public
literature, and that DOE's baseline FER values are over-estimated.
(Ingersoll-Rand, No. 91 at pp. 110-111) Rheem and Lennox questioned
whether the efficiency levels are based off of FER or the average
annual auxiliary electrical energy consumption (Eae).
(Rheem, No. 83 at p. 4; Lennox, No. 100 at p. 3) Lennox and Ingersoll-
Rand also commented specifically about the baseline FER for weatherized
gas furnaces, citing a dramatic difference in DOE's baseline
performance level as compared to their product offerings. Additionally,
when the performance improvement factors are applied to DOE's baseline,
the result is a very aggressive mandated increase in performance.
(Lennox, No. 100 at p. 3; Ingersoll-Rand, No. 107 at p. 4) AHRI also
commented on the FER for weatherized gas furnaces, stating that the FER
values for weatherized gas furnace fans and non-weatherized condensing
gas furnace fans should be the same because the test procedure is the
same for both products, except for a difference in ESP. AHRI explained
the difference in ESP accounts for the cooling coil within the
weatherized gas furnace, therefore, in effect, the furnace fan
assemblies for weatherized and non-weatherized gas furnaces are subject
to the same ESP. (AHRI, No. 91 at pp. 127-129) Goodman agreed with AHRI
that weatherized gas furnace fans should have the save efficiency
levels as non-weatherized gas, non-condensing furnace fans. (Goodman,
No. 102 at p. 3)
DOE did not use Eae as an input for the engineering
analysis. All efficiency levels considered by DOE throughout this
rulemaking, including the baseline, are based on FER data, not
Eae. DOE used Eae as a proxy for FER to evaluate
market-wide energy performance of furnace fans in the market and
technology assessment only. Further description of this
characterization is found in chapter 3 of the Final Rule TSD. DOE
disagrees with Lennox, Morrison, NEEA, and NPPC that FER values that
DOE generated prior to the final test procedure or based on public
literature should not be considered in this Final Rule. DOE outlines in
detail in section III.A the reasons that FER data from previous stages
of the rulemaking and public literature are relevant. Section III.A
also explains how DOE's changes to the test procedure between the test
procedure SNOPR and final rule should not result in significant
differences in FER values for many covered products. Thus, DOE
disagrees with Ingersoll Rand, Lennox, Goodman, and Morrison's claims
that, in the absence of a final test procedure or because of changes in
the final test procedure, DOE used unreliable information to calculate
FER and model efficiency levels for the NOPR. Regardless, DOE agrees
with interested parties that DOE should re-update its NOPR baseline
equations based on new data. DOE received some baseline FER data from
interested parties in response to the NOPR. As discussed in section
III.A, DOE also conducted testing prior to and during the development
of the test procedure final rule that generated a broad enough set of
results to enable DOE to derive FER values that are consistent with the
requirements of the final test procedure. DOE used this new baseline
FER data to revise its baseline equations.
DOE investigated interested party claims that DOE's proposed
baseline equation for weatherized gas furnace fans did not match
manufacturer performance estimates. DOE did not receive additional
baseline FER data for weatherized gas furnace fans. However, DOE did
derive additional FER values from data from specification sheets and
testing of weatherized gas furnaces at higher efficiency levels (i.e.,
weatherized gas furnaces that use constant-torque and constant-airflow
BPM motors). DOE was able to collect more reliable FER data for more
efficient weatherized gas furnace fans than for baseline weatherized
gas furnace fans. Consequently, DOE estimated the weatherized gas
furnace fan baseline FER by multiplying the market and capacity
weighted FER value for weatherized gas furnace fans with constant-
airflow BPM motor and multi-staging by the expected percent increase in
FER (i.e., the inverse of the expected percent reduction in FER for
constant-airflow BPM and multi-staging). DOE then developed a
conversion factor from the non-weatherized, non-condensing gas furnace
fan baseline FER to generate a y-intercept for the weatherized non-
condensing gas furnace fan baseline FER equation. This approach
significantly increased DOE's estimated baseline FER for weatherized
non-condensing gas furnace fans to a level consistent with the revised
baseline for non-weatherized, condensing gas furnace fans. Even though
they are not identical, DOE concludes that the approach described is
appropriate based on interested party feedback. The airflow path design
of weatherized non-condensing gas and non-weatherized, condensing gas
furnaces are very different, which impacts furnace fan performance,
accounting for the slightly different FER equations.
DOE also received comments from interested parties regarding the
slopes in the NOPR FER equations. Rheem and Lennox commented that the
slope characterizing the relationship between FER and airflow capacity
is too flat, adding that higher-capacity models are space constrained,
and their FER values do not meet the proposed FER levels in the NOPR.
(Rheem, No. 83 at p. 8; Lennox, No. 100 at p. 6) Ingersoll-Rand
commented that for condensing furnaces and furnaces using improved PSC
motors and multi-staging controls, FER tends to decrease as capacity
increases, creating a negative slope. (Ingersoll-Rand, No. 91 at pp.
110-111; Ingersoll-Rand, No. 107 at pp. 3-4) Ingersoll-Rand also
commented that even though FER values for furnace fans with PSC motors
follow a linear trend, FER values for furnace fans that use BPM motor
technologies do not because they react differently to changes in static
pressure (Ingersoll-Rand, No. 107 at p. 5) ACEEE, Goodman, and Mortex
questioned whether a linear slope is the best way to characterize the
relationship between FER and airflow capacity. AHRI and Goodman added
that there is a cubic relationship between fan input power and airflow,
thus, a non-linear slope may be more appropriate. (ACEEE, No. 94 at p.
3; Goodman, No. 102 at p. 13; Mortex, No. 104 at p. 3; AHRI, No. 98 at
p. 3)
In response to interested party comments, DOE recalculated FER
versus airflow capacity slopes using new data from baseline series for
both non-weatherized, non-condensing gas furnace fans and non-
weatherized, condensing gas furnace fans. DOE found that the average
baseline slope increased dramatically from 0.057 to 0.081. DOE is aware
that some instances of furnace series models will not match DOE's slope
analysis results. The data, that DOE has, shows a positive slope when
characterizing the relationship between

[[Page 38157]]

FER and airflow capacity. Furthermore, DOE did not determine that a
linear fit was the best fit statistically. DOE believes a linear fit is
the best representation of furnace fan performance given the level of
data available. DOE finds that linear fits result in a distribution of
efficiency levels that match the distribution of furnace fan
performance by technology option used. Additionally, a cubic trend-line
does not account for changes in furnace envelope size, heat exchanger
size, furnace fan outlet size, and other factors the affect furnace fan
performance. Using a cubic trend-line would only be appropriate if
these other factors were held constant. 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 rating metric, FER, is normalized by airflow to
result in ratings that are in units of watts/cfm.
Table IV.5 shows the revised FER baseline efficiency levels
estimates that DOE used for the Final Rule.

Table IV.6--Final Rule Baseline FER Estimates
----------------------------------------------------------------------------------------------------------------
Product class FER * (W/1,000 cfm)
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............ FER = 0.081 x QMax + 335.
Non-Weatherized, Condensing Gas Furnace Fan................ FER = 0.081 x QMax + 358.
Weatherized Non-Condensing Gas Furnace Fan................. FER = 0.081 x QMax + 365.
Non-Weatherized, Non-Condensing Oil Furnace Fan............ FER = 0.081 x QMax + 433.
Electric Furnace/Modular Blower Fan........................ FER = 0.081 x QMax + 304.
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan FER = 0.081 x QMax + 252.
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan.... FER = 0.081 x QMax + 273.
Mobile Home Electric Furnace/Modular Blower Fan............ FER = 0.081 x QMax + 186.
Mobile Home Weatherized Gas Furnace Fan.................... Reserved.
Mobile Home Non-Weatherized Oil Furnace Fan................ Reserved.
----------------------------------------------------------------------------------------------------------------
* QMax is the airflow, in cfm, at the maximum airflow-control setting measured using the final DOE test
procedure. 79 FR 499, 524 (January 3, 2014).

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.7
includes DOE's preliminary analysis estimates for the percent reduction
in FER from baseline for each efficiency level.

Table IV.7--Preliminary Analysis Estimates for Percent Reduction in FER From Baseline for Each Efficiency Level
----------------------------------------------------------------------------------------------------------------
Percent
reduction in
Efficiency level (EL) Design option FER from
baseline
----------------------------------------------------------------------------------------------------------------
1............................................. Improved PSC.................................... 2
2............................................. Inverter-Driven PSC............................. 10
3............................................. Constant-Torque BPM Motor....................... 45
4............................................. Constant-Airflow BPM Motor + Multi-Staging...... 59
5............................................. Premium Constant-Airflow BPM Motor + Multi- * 63
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. Specifically, interested parties noted that
DOE underestimated the efficiency gain of improved PSC motors over
standard PSC motors, and overestimated the efficiency improvement of
BPM motor technology options. 78 FR 64090.
For the NOPR, 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 summarized 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.8 shows DOE's revised estimates for the
percent reduction in FER for each efficiency level that DOE used in the
NOPR. 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 38158]]

Table IV.8--NOPR Estimates for Percent Reduction in FER From Baseline for Each Efficiency Level
----------------------------------------------------------------------------------------------------------------
Percent
reduction in
Efficiency level (EL) Design option FER from
baseline
----------------------------------------------------------------------------------------------------------------
1............................................. Improved PSC.................................... 10
2............................................. Inverter-Driven PSC............................. 25
3............................................. Constant-Torque BPM Motor....................... 42
4............................................. Constant-Torque BPM Motor and Multi-Staging..... 50
5............................................. Constant-Airflow BPM Motor and Multi-Staging.... 53
6............................................. Premium Constant-Airflow BPM Motor and Multi- * 57
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.

Note that EL 4 in the table above was a newly proposed efficiency
level in the NOPR. As discussed in section IV.A.3, DOE analyzed multi-
staging as a separate technology option. For the NOPR, DOE also
evaluated a separate efficiency level representing applying multi-
staging to a furnace fan with a constant-torque BPM motor. 78 FR 64091.
In response to the NOPR, AHRI asked if DOE considered pairing PSC
motors with multi-stage furnace controls in its analysis. (AHRI, No. 91
at p. 310) While DOE did gather data for and investigated PSC-driven
furnace fans in multi-stage products, DOE did not include this
combination as an efficiency level for the Final Rule. In the
engineering analysis, DOE assesses technology options in order of cost-
effectiveness. DOE finds that constant-torque BPM motors are more cost-
effective than PSC motors with multi-staging. While the cost of multi-
staging for each motor type is approximately the same, multi-staging
results in significantly less energy savings when used with a PSC
motor. DOE expects this is the result of a limited turndown ratio as
discussed in section III.A.4.
Interested parties commented on the NOPR percent reductions in FER
from the baseline and resulting efficiency level equations. Nidec
stated that the percent reductions do not reflect furnace fan
performance improvements when using higher-efficiency PSC motors.
(Nidec, No. 91 at p. 147) Many manufacturers stated that the proposed
efficiency levels are not consistent with product performance using the
varying design options. Rheem, Allied Air, Daikin, Lennox, and
Ingersoll-Rand stated that only their multi-staging furnace lines that
use constant-airflow BPM motors would meet the proposed standard level.
(Rheem, No, 83 at pp. 1-2; Allied Air, No. 91 at p. 105; Daikin, No. 91
at p. 105; Lennox, No. 100 at p. 5; Ingersoll-Rand, No. 91 at pp. 102-
103) Goodman and AHRI submitted similar comments stating that there are
existing products that use the design options specified within TSL 5
that will not even meet the proposed energy conservation standards.
(AHRI, No. 98 at p. 3; and Goodman, No 102 at pp. 4 and 7) In a joint
comment submitted by Appliance Standards Awareness Project (ASAP),
Alliance to Save Energy (ASE), National Consumer Law Center (NCLC), and
National Resources Defense Council (NRDC) and in a separate comment
submitted by California Investor-Owned Utilities (CA IOUs), interested
parties recommended that DOE conduct additional testing of furnace fans
with constant-torque BPM motors with multi-staging controls to verify
the accuracy of the proposed FER standard level equations, and to
ensure that the majority of products containing constant-torque BPM
motors with multi-staging controls meet the standard. (ASAP, et al.,
No. 105 at p. 2; CA IOU, No. 106 at p. 3)
DOE carefully considered the feedback received from interested
parties on the percent reductions in FER from baseline that the
Department proposed in the NOPR. DOE shares manufacturers' concerns
that their products are not meeting the levels proposed in the NOPR
despite those models using the technologies (or more efficient
technologies) on which those levels are based. DOE used data provided
by interested parties, conducted additional testing using the final DOE
test procedure, and gathered data from additional product specification
sheets to generate new FER values. DOE used this new FER data to revise
its estimates of percent reduction in FER from baseline for each
efficiency level. In response to Nidec, DOE did analyze an efficiency
level associated with improved PSC motors. However, DOE did not receive
and could not gather any new FER data with which to revise its
estimated percent reduction in FER from baseline for this technology.
Using the revised estimates of percent reduction in FER from baseline,
DOE revised its FER equations. Then, for the product classes with the
highest shipments, DOE assessed how many models for which DOE has an
FER value met the revised EL 4. DOE finds that over 90% of the non-
weatherized, non-condensing gas, non-weatherized, condensing gas and
weatherized non-condensing gas furnace fans for which DOE has FER
values that use constant-torque BPM motors and multi-staging meet the
revised EL 4. DOE finds that many models in those product classes for
which DOE has FER data that use constant-torque BPM motors without
multi-staging would also meet the revised EL 4. DOE feels that the
percentage of models that meet the revised EL 4 show that the Final
Rule efficiency levels are reflective of the performance of the
technologies on which they are based.
Ingersoll Rand stated that percent reduction in FER from the
baseline should not be constant across all capacities for products
using constant-torque BPM motor technologies. Specifically, Ingersoll-
Rand noted that efficiency improvements with this technology decrease
with increasing furnace capacity, and that at high airflow capacities,
there is little or no difference in FER values between furnace fans
using improved PSC motors and those using constant-torque BPM motors.
(Ingersoll-Rand, No. 107 at p. 5) Additionally, Ingersoll-Rand stated
that wider cabinets for furnaces with more cooling capacity but the
same heating input will have lower FERs. (Ingersoll-Rand, NOPR Public
Meeting Transcript, No. 91 at p. 94) Ingersoll-Rand and Mortex disagree
with DOE using the same slope for FER equations for both mobile home
furnaces as well as non-mobile home furnaces. These parties cite that
there are space constraints associated with mobile home applications,
and that it is more difficult to meet the proposed standard at higher
capacities because the cabinet

[[Page 38159]]

size must remain the same. (Ingersoll-Rand, No. 91 at pp. 116-117;
Mortex, No. 91 at pp. 129-131)
DOE recognizes that percent reduction in FER from baseline for a
given technology option varies with capacity. DOE's estimates of
percent reduction in FER from baseline are based on market-weighted
averages of FER values from across the entire range of furnace fan
airflow capacities to account for this variation. As discussed above,
DOE finds that constant percent reductions in FER from baseline result
in a distribution of efficiency levels that match the distribution of
furnace fan performance by technology option used across the entire
range of furnace fan airflow capacities. Thus, DOE believes that a
constant percent reduction in FER from baseline across all airflow
capacities is appropriate. DOE is also aware that in some instances FER
may decrease for furnaces with higher cooling capacities but the same
heating input. DOE's analysis includes FER data for furnace fans that
have differing heating capacity to cooling capacity ratios. DOE
recognizes that these ratios indicate design differences that impact
fan performance. However, a significant majority of the models for
which DOE has FER data are meeting the ELs associated with the
technologies that they use. Of the few models that do not, DOE observes
no pattern related to the ratio of heating capacity to cooling
capacity. DOE recognizes that mobile home products are more space-
constrained than the other products covered by this standard. DOE did
not receive mobile home FER data in response to the NOPR. Despite DOE
using the same slope for mobile home product classes to characterize
the relationship between FER and airflow capacity for all product
classes, the resulting ELs for mobile home furnace fans are less
stringent than those for non-mobile home furnaces at higher capacities.
EL 4 for MH-NWG-NC and NWG-NC both have slopes of 44 FER per 1000 cfm,
for example. Thus, for an increase in airflow capacity of 1000 cfm, EL
4 allows for an increase of 44 in FER for both classes. At 1,200 cfm,
EL 4 is represented by and FER of 235 for NWG-NC and 190 for MH-NWG-NC.
An increase of 44 in FER would represent an increase in FER of
approximately 18 percent for the NWG-NC furnace fan, but an increase in
FER of approximately 23% for the MH-NWG-NC furnace fan. Consequently,
the allowable increase in FER as capacity increases is more lenient for
mobile home furnaces. DOE believes this leniency is appropriate
considering the more rigid space constraints mobile home furnaces must
meet. DOE recognizes that the same variation in stringency occurs as a
result of DOE's method for establishing baseline FER equations using
conversion factors as described in more detail in chapter 5 of the
Final Rule TSD. However, the difference in FER values between mobile
home and non-mobile home furnace fans is much greater than the
difference between FER values amongst non-mobile home furnace fans. The
variation in stringency for non-mobile home products is minimal as a
result.
Table IV.9 shows DOE's revised estimates for the percent reduction
in FER for each efficiency level that DOE used in the Final Rule
analyses.

Table IV.9--Final Rule Estimates for Percent Reduction in FER from Baseline for Each Efficiency Level
----------------------------------------------------------------------------------------------------------------
Percent
reduction in
Efficiency level (EL) Design option FER from
baseline
----------------------------------------------------------------------------------------------------------------
1............................................. Improved PSC.................................... 12
2............................................. Inverter-Driven PSC............................. 25
3............................................. Constant-Torque BPM Motor....................... 41
4............................................. Constant-Torque BPM Motor and Multi-Staging..... 46
5............................................. Constant-Airflow BPM Motor and Multi-Staging.... 51
6............................................. Premium Constant-Airflow BPM Motor and Multi- * 56
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 5% percent reduction in FER from baseline. The total percent reduction in FER from
baseline for EL 6 includes the 51% reduction from EL 5 and the 5% net reduction from the backward-inclined
impeller for a total percent reduction of 56% from baseline.

Ingersoll Rand provided a significant amount of FER data in its
written comment to support its statements. (Ingersoll Rand, No. 107 at
pp. 3, 12-16) DOE appreciates this information and included these FER
values in its revision of the engineering analysis to account for the
furnace fan performance behaviors described by Ingersoll Rand.
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.\26\
---------------------------------------------------------------------------

\26\ High-volume and low-volume product classes are discussed
further in chapter 5 of the Final Rule TSD.
---------------------------------------------------------------------------

Production Volume Impacts on MPC
In response to the preliminary analysis, manufacturers commented
that they use different manufacturing processes for high and low-volume
products. In the NOPR analysis, DOE found that 94 percent of the MPC
for furnace fans is attributed to materials (included purchased parts
like fan motors), which are not impacted by process differences. DOE's
estimates also already accounted 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

[[Page 38160]]

those products. DOE believed 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.
78 FR 64091.
DOE did not receive comment or additional information on production
volume impacts on MPC, thus, DOE is taking the same approach to
distinguish between high-volume and low-volume product classes in the
Final Rule.
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.
Interested parties commented that DOE was underestimating the cost of
adding an inverter to a PSC motor, and questioned if DOE's cost
estimate was for wave chopper technology and not inverters. In the
NOPR, DOE stated that the preliminary analysis estimate for the MPC of
an inverter-driven PSC was indeed based on a wave chopper drive. DOE
found that more sophisticated and costly inverters are required to
achieve the efficiencies reflected in DOE's analysis. Consequently, DOE
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 found that $30 for high-volume 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
updated those values for the NOPR. 78 FR 64091-64092.
DOE did not receive comment or additional information on cost
estimates for inverter-driven PSC motors, thus, DOE is not making
changes to the MPC estimates for inverters used to drive PSC furnace
fan motors in the Final Rule.
Furnace Fan Motor MPC
In response to the preliminary analysis, manufacturers stated that
DOE underestimated the incremental MPC to implement high-efficiency
motors in HVAC products, other than oil furnaces. 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. Based
upon the input received from interested parties, DOE adjusted its motor
cost estimates in the NOPR analysis. In general, DOE increased its
estimates by approximately 10 to 15 percent, which is consistent with
the feedback DOE received. 78 FR 64092.
Goodman stated that DOE significantly underestimated the costs of
the increasing levels of fan motor cost. (Goodman, No. 102 at p. 9)
Lennox stated that DOE underestimated the total cost of furnace fans
with BPM motor technology by 10 to 30 percent, therefore, the
incremental costs are underestimated by 20 to 120 percent. (Lennox, No.
100 at p. 6) Conversely, ACEEE commented that DOE has a well-
established record of over-estimating the cost of complying with
standards, thus, DOE's cost estimates should be discounted to further
improve the economics of advanced technology options. (ACEEE, No. 94 at
p. 3) Rheem questioned if the DOE motor cost estimates included power
factor correction filters for BPM motors, as those can cost $10 to $20.
(Rheem, No. 91 at p. 165)
DOE recognizes that BPM motor use contributes to concerns regarding
total harmonic distortion. However, the use of power factor correction
filters for BPM motor technologies is currently not required under
federal regulations. The DOE cost estimates reflect what is currently
available on the market, thus, the added cost of filters for BPM motor
technologies is not included in DOE's MPC estimates for BPM motors. DOE
believes the motor MPC estimates presented in the NOPR are
representative of current motor costs. Thus, DOE is keeping the same
furnace fan motor cost estimates presented in the NOPR for the Final
Rule analysis. Details regarding DOE's MPC estimates are provided in
chapter 5 of the Final Rule TSD.
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). Manufacturers
confirmed that higher-efficiency motors and modulating motors require
more sophisticated and costly controls. 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. 78 FR 64092.
In the NOPR, DOE agreed 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 estimated 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 agreed 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.
DOE did not receive comment or additional information on motor
control costs, thus, DOE is not making changes to this in the Final
Rule.
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. Manufacturers also
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.
During the NOPR, 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 in the NOPR. 78
FR 64092.
In response to the NOPR, Mortex questioned whether the price
differential between backward-inclined impellers manufactured at high
volume and those manufactured at low volume should be greater than
DOE's estimate of 32 cents. (Mortex, No. 91 at p. 163)
DOE reviewed its manufacturer production cost estimates for the
backward-inclined impeller technology option based on interested party
comments. DOE did not receive any

[[Page 38161]]

quantification of the total MPC of backward-inclined impellers or the
incremental MPC associated with the changes needed to implement them.
Consequently, DOE did not modify its NOPR estimated MPC for backward-
inclined impellers in the Final Rule. Regardless, DOE finds that EL 6,
which represents use of a backward-inclined impeller, is not
economically justified. Modifying the MPC estimate for this technology
would not impact the standard set by this Final Rule as a result.
Other Components
In response to the MPCs presented in the NOPR, Goodman commented
that there are likely additional components for the furnace that may
need to be added if significant changes to the blower system are
implemented. For example, improving air moving efficiency may require
an increase in cabinet size, or the addition of internal baffling to
direct airflow over the heat exchanger. None of these additional
components or modifications were accounted for in the furnace fan MPC.
(Goodman, No. 102 at p. 13)
As discussed in section III.B.1 and chapter 4 of the Final Rule
TSD, DOE did not include housing design modifications in the
engineering analysis. Thus, DOE did not develop cost estimates for
housing design modifications. DOE recognizes that the airflow path
design of the HVAC product in which the furnace fan is integrated
impacts efficiency. DOE anticipates that modifying the size of the
cabinet and the geometry of the heat exchanger(s) would be the primary
considerations for improving airflow path design. Alterations to the
design and configuration of internal components, such as the heat
exchanger, could impact the thermal performance of the HVAC product,
potentially reducing or eliminating product availability for certain
applications. While DOE did not consider airflow path design as a
technology option, as described in section III.B.1, DOE did account for
the components used to direct or guide airflow in the MPC estimates.

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.
DOE used the same distribution channels for furnace fans as it used
for furnaces in the recent energy conservation standards rulemaking for
those products. DOE believes that this is an appropriate approach,
because the vast 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 mobile homes. DOE has concluded that there is insufficient
evidence of a replacement market for furnace fans to establish a
separate distribution channel on that basis.
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.
Ingersoll Rand stated that the incremental markup percentages do
not represent real life practices and are too low. It commented that
once the new rule goes into effect, the more expensive furnaces will
become the baseline and will need to be marked up appropriately for
manufacturers, distributors, and dealers to remain viable. (Ingersoll
Rand, No. 107 at p. 8) However, the commenter provided no data to
support its expectation of how the actors respond in terms of pricing
when confronted with more-stringent energy conservation standards.
DOE acknowledges that detailed information on actual distributor
and contractor practices would be helpful in evaluating their markups
on furnaces. In the absence of such information, DOE has concluded that
its approach, which is consistent with expected business behavior in
competitive markets, is reasonable to apply. If the cost of goods sold
increases due to efficiency standards, DOE continues to assume that
markups would decline slightly, leaving profit unchanged, and, thus, it
uses lower markups on the incremental costs of higher-efficiency
products.
Goodman stated that lower markups on incremental costs of higher-
efficiency products is an invalid practice because manufacturers will
attempt to have higher margin dollars to offset overall lower volumes.
(Goodman, No. 102 at p. 9) For the LCC and NIA analyses, DOE does not
use a lower markup on the incremental manufacturer selling price of
higher-efficiency products. Instead, it assumes that manufacturers are
able to maintain existing average markups in response to new standards.
The MIA considers different markup scenarios for manufacturers (see
section IV.J.2.b).

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
final rule TSD.
DOE used the Energy Information Administration's (EIA) Residential
Energy Consumption Survey (RECS) \27\ to establish a sample of
households using furnace fans for each furnace fan

[[Page 38162]]

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.
---------------------------------------------------------------------------

\27\ Energy Information Administration, 2009 Residential Energy
Consumption Survey (Available at: https://www.eia.gov/consumption/residential/data/2009/index.cfm?view=consumption).
---------------------------------------------------------------------------

DOE used RECS 2009 \28\ heating and cooling energy use data to
determine heating and cooling operating hours. DOE used data from RECS
2009, American Housing Survey (AHS) 2011,\29\ and the Census Bureau
\30\ to project household weights in 2019, which is the anticipated
compliance date of any new energy efficiency standard for residential
furnace fans. These adjustments account for housing market changes
since 2009, as well as for projected product and demographic changes.
---------------------------------------------------------------------------

\28\ See https://www.eia.gov/consumption/residential/data/2009/.
\29\ See https://www.census.gov/housing/ahs/data/national.html.
\30\ 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. For the final
rule, DOE adjusted the furnace fan energy use estimated from RECS 2009
data to account for projected changes in heating and cooling loads due
to climate change (as projected by EIA in AEO 2013).
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 mobile
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. w.c. for single-family households and 0.30 in. w.c. for mobile
homes.
Rheem stated that substitution of a BPM motor can increase the
conditioned air that is leaked to the atmosphere. (Rheem, No. 83 at p.
13) However, the commenter provided no data to support its view on
increased air leakage associated with BPM motors.
DOE agrees that if a BPM motor maintains flow in a high-resistance
duct system that has leakage, it may lead to higher duct leakage
compared to a PSC motor. However, in cases where the heating load can
be met with low air flow, the BPM motor may have lower air leakage.
Given that the magnitude of these effects is uncertain and may offset,
DOE did not include it in its analysis. DOE notes that the constant-
torque BPM motor, which meets the standards in today's final rule, may
not maintain the flow in leaky and overly-restrictive ducts, and, thus,
would be expected to have similar losses as a PSC motor.
NEEA stated that their field measurements of ESP for the past 40
years are consistent with DOE's analysis. (NEEA, No. 91 at p. 222)
Daikin stated that, from experience over the past 30 plus years, mobile
homes have higher external static pressure than the typical site-built
home in the preponderance of cases. (Daikin, No. 91 at p. 222)
The data that DOE has seen (described in appendix 7B of the final
rule TSD) do not indicate that mobile homes have higher external static
pressure. Furthermore, the HUD static pressure criteria for mobile
homes \31\ are supportive of DOE's assumptions regarding ESP.
Consequently, DOE has maintained its approach regarding ESP for this
final rule.
---------------------------------------------------------------------------

\31\ HUD for Mobile Home with comfort cooling certificate -0.3
inches WC at cooling airflow setting [Title 24 of the HUD code PART
3280--Mobile Home Construction and Safety Standards, Part
3280.715(a)(3)(ll)].
---------------------------------------------------------------------------

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.
For the NOPR, to estimate use of constant circulation in the sample
homes, DOE evaluated the available studies, which include a 2010 survey
in Minnesota \32\ and a 2003 Wisconsin field monitoring of residential
furnaces.\33\ 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. For the NOPR, DOE
used the same assumptions for use of constant circulation as were used
in the proposed DOE test procedure for furnace fans. 77 FR 28674 (May
15, 2012). The average value that emerges is approximately 400 hours
per year. The shares of homes using the various constant-circulation
modes are presented in Table IV.10.
---------------------------------------------------------------------------

\32\ Provided in CEE, No. 22 at pp. 1-2.
\33\ Pigg, S., ``Electricity Use by New Furnaces: A Wisconsin
Field Study'' (October 2003) (Available at https://www.ecw.org/sites/default/files/230-1.pdf)
---------------------------------------------------------------------------

NEEA and NPCC commented that DOE's estimate of 400 hours per year
of continuous-circulation mode may be overly conservative, and they
disagree with stakeholders who suggest that 400 hours per year is too
high. (NEEA, NPCC, No. 32 at p. 5)
For the final rule, DOE examined a newly-released proprietary
survey that broadly evaluates the use of continuous circulation across
the U.S.\34\ This survey shows a higher number of continuous-
circulation hours than DOE used for the NOPR. DOE has concerns about
the representativeness of the data, however, because the survey only
included homeowners who had been involved in the purchase of central
HVAC equipment in the past two years. The practices of these consumers
may not accurately portray the use of continuous circulation across the
entire stock of homes with central HVAC equipment. Given the
uncertainty regarding the survey data, DOE decided that it would not be
appropriate to change the continuous-circulation hours for the final
rule.
---------------------------------------------------------------------------

\34\ Decision Analysts, 2013 American Home Comfort Study (2013)
(Available at: https://www.decisionanalyst.com/Syndicated/HomeComfort.dai).
---------------------------------------------------------------------------

Southern Company stated that if DOE is assuming a greater
percentage of variable speed fans in the future, the need for constant
circulation will be reduced. (Southern Company, No. 91 at p. 233) DOE
accounted for the reduced hours of operation during constant-
circulation mode when variable speed motors are applied (see appendix
7-C). Variable speed fans tend to increase the operating hours in
heating and cooling modes, which would result in a smaller fraction of
time in continuous-fan mode.

[[Page 38163]]

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 document.

Table IV.10--Constant-Circulation Test Procedure Assumptions Used for Furnace Fans Standards Analysis
----------------------------------------------------------------------------------------------------------------
Estimated
Assumed share of homes Estimated
average in north and share of homes
Constant-circulation fan use number of south-hot dry in south-hot
hours regions humid region
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
No constant fan................................................. 0 84 97
Year-round...................................................... 7290 7 1
During heating season........................................... 1097 2 0.4
During cooling season........................................... 541 2 0.4
Other (some constant fan)....................................... 365 5 1
-----------------------------------------------
Total....................................................... .............. 100 100
----------------------------------------------------------------------------------------------------------------

Morrison stated that not all the energy used in circulation is
wasted heat because the energy consumed for circulation during the
heating season is useful energy. Morrison recommended that for a more
accurate analysis of energy use in circulation mode, DOE should split
heating and cooling hours. (Morrison, No. 108 at p. 2) DOE adjusted its
analysis so that heat generated by constant-circulation fan operation
reduces furnace heating energy use in the heating season, and in the
cooling season, it adds to the operating hours of the air conditioner.
In the NOPR, 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 did not include furnace fan
electricity savings that were counted in DOE's rulemaking for CAC and
heat pump products.\35\
---------------------------------------------------------------------------

\35\ U.S. Department of Energy--Energy Efficiency & Renewable
Energy, Final Rule Technical Support Document: Energy Efficiency
Standards for Consumer Products: Central Air Conditioners, Heat
Pumps, and Furnaces (2011) (Available at: https://www.regulations.gov/#!documentDetail;D=EERE-2011-BT-STD-0011-0012).
---------------------------------------------------------------------------

Several stakeholders stated that DOE may be double-counting energy
savings in cooling mode in this rulemaking by accounting for the
central air conditioner blower output used for calculating SEER. (JCI,
No. 95 at pp. 4-5; Morrison, No. 108 at p. 2; AHRI, No. 98 at p.6;
Goodman, No. 102 at p. 5) EEI stated that a large share of the
estimated furnace fan energy savings are a result of the air
conditioner and heat pump energy efficiency standards, so some or all
of these estimated energy savings should be removed from the furnace
fan analyses. (EEI, No. 87 at p. 5)
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 a BPM motor-driven fan in the furnace
to achieve that efficiency level. The base-case efficiency distribution
of fans used in the current analysis includes the presence of those BPM
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.
Morrison stated that any reduction in energy use by the fan from
this rulemaking would be a de facto improvement in SEER and an unlawful
change to the current SEER regulations. It noted that if there is no
change to SEER, then there will be no energy savings when operated in
the cooling mode. (Morrison, No. 108 at p. 2)
A reduction in energy use by the furnace fan resulting from this
rulemaking would improve the CAC operating efficiency (for homes with
both furnace and CAC), but DOE is not increasing the energy
conservation standard for CAC or requiring a change to the reported
current SEER ratings for CAC. DOE has clear and explicit statutory
authority to regulate furnace fans under 42 U.S.C. 6295(f)(4)(D), and
any related improvements to CAC efficiency would simply be an added
benefit.
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 \36\ to estimate the extent to which increased
use of constant circulation under a standard requiring BPM furnace fans
is likely to cancel out some of the savings from such a fan. The
specific assumptions are described in chapter 7 of the final rule TSD.
---------------------------------------------------------------------------

\36\ State of Wisconsin, Public Service Commission of Wisconsin,
Focus on Energy Evaluation Semiannual Report, Final (April 8, 2009)
(Available at: https://focusonenergy.com/sites/default/files/semiannualreport18monthcontractperiodfinalrevisedoctober192009_evaluationreport.pdf).
---------------------------------------------------------------------------

Commenting on the average energy use estimates reported in the
final rule TSD, EEI stated that the baseline energy use values seem to
be overstated, because baseline values reported in the market and
technology assessment are lower than what was used in following
analyses. Consequently, the estimated energy savings and energy cost
savings are overstated as well, because they are shown in the NOPR as
percentage savings based on the design options. (EEI, No. 87 at pp. 4-
5) Goodman believes that the calculated baseline values, and thus the
projected energy savings, are too high based on product testing for the
April 2013 test procedure SNOPR. (Goodman, No. 102 at p. 8)
The baseline values reported in the market and technology
assessment are based on the test procedure. The energy use analysis is
not based on test procedure conditions, but instead reflects actual
usage in the field, which is more appropriate for estimating the
impacts of higher furnace fan efficiency on consumers. Therefore, the
estimated energy savings and energy cost savings are not overstated.
JCI and AHRI stated that DOE needs to ensure that it avoids double-
counting energy consumption associated with standby mode, noting that
there is no standby mode and off mode energy use associated with
furnace fans that would

[[Page 38164]]

not already be measured by the established test procedures, because
they are integrated in the electrical systems of the HVAC products in
which they are used. (JCI, No. 95 at p. 5; AHRI, No. 98 at p. 6)
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 accounted for in the
energy conservation standards for residential furnaces and residential
CAC and HP. Accordingly, DOE did not include standby mode and off mode
energy use associated with furnace fans in the present analysis.
Consequently, there should not be any problems associated with double-
counting of standby mode and off mode energy consumption.

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 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 final rule TSD.
1. Installed Cost
The installed cost at each efficiency level is based on the product
price, distribution chain markups, sales tax, and installation cost.
The current product price comes from the engineering analysis. DOE
believes that price trends for integral horsepower electric motors are
a reasonable proxy for trends in prices of furnace fans, and for the
NOPR DOE evaluated the historic real (i.e., adjusted for inflation)
producer price index (PPI) of such motors. DOE found that this index
has been decreasing except for the last few years, when it started to
increase (see appendix 10-C of the final rule TSD). Given the
uncertainty about whether the recent trend will continue or instead
revert to the historical mean, DOE elected to use constant prices at
the most recent level as the default price assumption to project future
prices of furnace fans. 78 FR 64068, 64096 (Oct. 25, 2013).
Morrison stated that motor prices have remained flat in the last
decade because production of motors moved offshore and foreign
competitors entered the marketplace. It stated that in the coming
decades, motor prices will increase at the rate of long run prices for
commodities (e.g. copper, steel, aluminum). (Morrison, No. 108 at p. 2)
Goodman believes that it is incorrect to use constant prices at the
most recent level of motor cost, which has shown a recent increasing
trend, as the default price assumption to project future prices of
furnace fans. (Goodman, No. 102 at p. 9)
DOE continues to believe that it is unclear whether the increasing
trend in motor prices since 2004 will continue in the future. Part of
the recent growth in prices of commodities used in motors was due to
strong demand from China. Current projections envision slower growth in
China, which would likely dampen commodity prices. Given the
uncertainty, DOE continued to use constant prices at the most recent
level as the default price assumption for the final rule. For the NIA,
DOE also conducted sensitivity analysis using alternative price growth
assumptions.
Because furnace fans are installed in furnaces in the factory,
there is generally no additional installation cost at the home.
However, furnace fans that employ a constant-airflow BPM design may
require additional installation costs. DOE assumed that all constant-
airflow BPM furnace fan installations will require extra labor at
startup to check and adjust airflow.
Goodman stated that it is acceptable for relative product cost
comparison to include costs only for the components of the HVAC product
that impact FER in the manufacturing cost, but it disagrees with using
the cost of only the furnace fan portion of the furnace in the LCC,
GRIM, and other aspects of the financial analysis. The real upfront
costs for the consumer will be significantly higher (likely two to four
times more) than DOE has included in the analysis using only the
furnace fan portion. (Goodman, No. 102 at p. 9) DOE believes that the
commenter is claiming that the consumer will face higher costs when
buying a furnace because the proposed furnace fan standards would
require changes in furnace design. As discussed in section IV.B.1, DOE
screened out fan housing and airflow path design modifications from
further analysis. Accordingly, it is unlikely that significant changes
in furnace design would be required to accommodate furnace fans that
meet today's standards. Therefore, DOE concludes that using the
incremental costs of the furnace fan portion is reasonable.
2. Operating Costs
To estimate the annual energy costs for operating furnace fans at
different efficiency levels, DOE used the annual energy use results
from the energy use analysis and projections of residential energy
prices. DOE derived average monthly energy prices for a number of
geographic areas in the United States using the latest data from EIA
\37\ and monthly energy price factors that it

[[Page 38165]]

developed. Electricity and natural gas prices were adjusted using
seasonal marginal price factors to come up with monthly marginal
electricity and natural gas prices. DOE assigned an appropriate price
to each household in the sample, depending on its location.
---------------------------------------------------------------------------

\37\ U.S. Department of Energy--Energy Information
Administration, Form EIA-826 Database Monthly Electric Utility Sales
and Revenue Data, 2013. https://www.eia.doe.gov/cneaf/electricity/page/eia826.html; U.S. Department of Energy--Energy Information
Administration, Natural Gas Navigator. 2013. https://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm.
---------------------------------------------------------------------------

Laclede stated that using average utility rates leads to
significantly overstating consumer savings. DOE should use marginal
energy rates in its consumer energy savings calculations. (Laclede, No.
86 at p. 4) As described above, DOE did derive marginal electricity and
natural gas prices based on recent data. (For a discussion of the
development of marginal energy price factors, see appendix 8-C of the
final rule TSD). To arrive at marginal prices in future years, DOE
multiplied the current marginal prices by values in the Reference case
projection of annual average residential electricity and natural gas
price changes in EIA's AEO 2013. The price trends projected in the AEO
2013 Reference case are shown in chapter 8 of the final rule TSD. For
electricity prices, which are primarily of interest in this rulemaking,
the AEO 2013 projection shows the average residential price growing
from 0.119 $/kWh in 2020 to 0.122 $/kWh in 2030 and 0.131 $/kWh in 2040
(constant dollars).
To estimate annual maintenance costs, DOE derived labor hours and
costs for annual maintenance from RS Means data.\38\ The frequency with
which the maintenance occurs was derived from a consumer survey \39\ on
the frequency with which owners of different types of furnaces perform
maintenance.
---------------------------------------------------------------------------

\38\ RS Means Company Inc., Means Facilities Maintenance &
Repair Cost Data. 2012. Kingston, MA.
\39\ Decision Analysts, 2008 American Home Comfort Study: Online
Database Tool, 2009. Arlington, Texas. https://www.decisionanalyst.com/Syndicated/HomeComfort.dai.
---------------------------------------------------------------------------

For the NOPR, DOE used the same maintenance costs for furnace fans
at different efficiency levels. 78 FR 64096. Goodman stated that it is
invalid to assume that the maintenance costs for all efficiency levels
are the same regardless of technology, as higher technology products
will take a higher skill level of technician, and will require more
costly equipment for service than baseline products. (Goodman, No. 102
at p. 9) Allied Air stated that in shifting from a primarily single-
stage PSC market to multistage constant torque, the maintenance cost
could be two to three times current costs. (Allied Air, No. 43 at pp.
252-253)
DOE understands that furnace fans require very little maintenance,
and it did not find any evidence that there is any additional
maintenance cost associated with higher efficiency equipment. It seems
likely that the commenters are including repair costs under the term
``maintenance.'' DOE's treatment of repair costs is discussed below.
The most important element of repair costs for furnace fans is
replacement of the fan motor. For the NOPR, 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).
DOE then paired these data with the calculated number of annual
operating hours for each sample furnace, including constant circulation
as appropriate. DOE did not have a firm basis for quantifying whether
constant-torque BPM motors and constant-airflow BPM motors have
different failure rates than PSC motors. Thus, it 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). 78 FR 64097.
Rheem stated that DOE did not justify the assumption that furnace
fan motor lifetimes are equal to furnace lifetimes. (Rheem, No. 83 at
p. 4) DOE modeled overall furnace fan lifetime based on furnace
lifetimes (see discussion below), but it used the approach described
above for furnace fan motor lifetime.
Morrison stated that multi-staged BPM assemblies will have longer
operating times within a given period (to account for lower fire rates
and heat output) and therefore, all else being equal, will have a
shorter life expectancy. (Morrison, No. 108 at p. 5) DOE's approach is
consistent with the comment; a multi-staged BPM motor has a shorter
lifetime measured in years.
A number of stakeholders stated that failure rates are higher for
BPM motors than for PSC motors, leading to shorter lifetime. Rheem
stated that the PSC motor life, which it estimated to be 15 years, is
much longer than the BPM motor life. (Rheem, No. 83 at pp. 2 and 13)
Mortex stated that, based on their experience, BPM lifetime is half
that of PSC motors. (Mortex, No. 104 at p. 2) Lennox estimated that
constant-airflow BPM motors have failure rates that are 50% higher than
PSC motors at 5 and 10 years, and furnaces with constant-torque BPM
motors have failure rates that are 385% higher than PSC motors at 5 and
10 years. (Lennox, No. 100 at p. 8) Ingersoll Rand stated that its data
indicate that BPM motors fail at 2.3 times the rate of PSC motors in
the 5 to 10 year time frame. (Ingersoll Rand, No. 107 at pp. 6-7) AHRI
stated that the failure rate for a high efficiency motor is typically
higher than that of a PSC motor because the electronics added to a high
efficiency motor introduce additional failure modes associated with the
life of electronic controls in damp, very cold and very hot conditions.
AHRI has collected data from manufacturers that show that the failure
rates associated with constant-torque BPM and constant-airflow BPM
technologies are higher than PSC motors over an extended time period.
(AHRI, No. 98 at p. 7) Morrison and Ingersoll Rand cited recent data
from an AHRI survey of manufacturers that indicate failure rates at 1,
5 and 10 years are 24%, 87% and 165% greater for BPM motors than PSC
ones. (Morrison, No. 108 at p. 5, Ingersoll Rand, No. 107 at p. 6) JCI
stated that, based on an analysis of JCI's residential warranty data,
failure rates associated with constant-torque BPM and constant-airflow
BPM technologies are significantly higher than those experienced by
standard PSC motors due to the added electronic controls that are
required as part of the BPM motor designs, which are more susceptible
to failure due to power fluctuations and other factors. (JCI, No. 95 at
p. 7) Ingersoll Rand stated that repair of the electronics is not
possible for the constant-torque BPM motors available today, so an
electronics failure will result in a complete motor replacement.
(Ingersoll Rand, No. 107 at pp. 7-8)
In contrast, NEEA and NPCC believe that the NOPR analysis
assumptions may unfairly penalize BPM motors, as the Department has
insufficient data to properly estimate the frequency and nature of BPM
motor repair. (NEEA, NPCC, No. 96 at p. 5)
DOE notes that BPM motors had higher level of failure in the late
1990s and early 2000s when the electronics technologies went through
major renovations. The comments from furnace manufacturers may reflect
this past experience. For example, the cited data from an AHRI survey
of manufacturers would reflect BPM technology in the early 2000s. For
the final rule, DOE searched for more information on the lifetime of
BPM and PSC motors. This information (discussed in appendix 8-E)
suggests that BPM and PSC motors have similar lifetimes, as BPM designs
have improved over the years. While BPM motor designs could have
additional failures due to the additional controls or

[[Page 38166]]

electronics, furnace fan motor manufacturers claim longer mechanical
life for BPM designs due to better bearings and less heat generated by
inefficiency. Between now and the compliance date, future BPM motor
enhancements could further strengthen product reliability and reduce
failures. In this analysis, DOE assumes higher failures for BPM designs
due to longer operating hours (because of multi-stage operating at more
hours and more constant circulation operation of BPM motors), as well
as additional control failures. For example, DOE estimates that 43% for
BPM constant torque multi-stage designs experience failure during the
lifetime of the furnace, compared to 35% of PSC designs.
Recognizing that there exists some uncertainty regarding the
lifetime of BPM motors, DOE conducted a sensitivity analysis using
alternative assumptions, as requested in a comment by Mortex. (Mortex,
No. 43 at pp. 264-265) This analysis is described in appendix 8-E of
the final rule TSD.
For the NOPR, the replacement motor costs were based on costs
developed in the engineering analysis for each motor type, and the
labor time and unit costs were based on RS Means data.\40\ 78 FR 64097.
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. DOE assumed that when replacement is necessary, consumers
replace the failed motor with the same type of motor.
---------------------------------------------------------------------------

\40\ RS Means Company Inc., RS Means Residential Cost Data
(2012); RS Means Company Inc., Facilities Maintenance & Repair Cost
Data (2012).
---------------------------------------------------------------------------

A number of stakeholders stated that the replacement cost of BPM
motors is higher than the cost DOE used in its analysis. (Morrison, No.
108 at p. 2; Goodman, No 102 at p. 8; APGA, No. 110 at p. 3) Mortex
stated that DOE substantially underestimated BPM replacement costs,
which in its experience are 2-3 times that of a PSC. (Mortex, No. 104
at p. 2) Ingersoll Rand stated that replacement costs are significantly
underestimated for constant-torque BPM and constant-airflow BPM motors.
It added that the difference between PSC motor replacement and
constant-torque BPM motor replacement should be at least $225, and the
PSC to constant-airflow BPM difference should be at least $295.
(Ingersoll Rand, No. 107 at pp. 7-8) JCI stated that outside the
warranty periods (typically 10 years for parts), ECM motors can cost 3
to 5 times the replacement costs of PSC motors due to the complexity of
those motors and the electronic controls required to use them. (JCI,
No. 95 at p. 6)
The replacement equipment cost of BPM and PSC motors used in DOE's
LCC analysis is based on costs derived in the engineering analysis,
which DOE believes are accurate. It is possible that the stakeholders
believe that the higher BPM replacement costs are largely due to extra
labor charges by contractors. DOE determined that for a constant torque
BPM motor any such extra charges would be minimal. In the analysis for
today's final rule, on average the replacement cost is $407 for a
constant torque multi-stage BPM (EL 4) and $356 for the PSC design (EL
0).
Several stakeholders stated that the replacement cost of an
aftermarket furnace fan is 2-3 times higher than DOE's estimated
manufacturer production costs for low-volume product classes. They
added that DOE's material cost estimate of $0.00 for furnace fan
replacements is incorrect. (JCI, No. 95 at p. 6; Morrison, No. 108 at
p. 5; AHRI, No. 98 at p. 8; Lennox, No. 100 at p. 8; Unico, No. 93 at
p. 5)
DOE believes that the first comment above refers to a replacement
motor. DOE applies markups to the motor MPC, such that the cost to the
consumer is two to three times higher than the MPC. The material cost
is listed as $0.00 in the cited tables because these tables refer to
labor costs only (as stated in the table captions).
Ingersoll Rand stated that motors that fail in-warranty are not
free, as standard product warranties in the HVAC industry cover parts
only, and do not typically include labor charges, which the homeowner
must pay. (Ingersoll Rand, No. 107 at p. 7) DOE excluded labor charges
only if the consumer has a service contract or if the motor fails the
first year (which is rare).
Southern Company stated that DOE unrealistically considered
component failures as independent events rather than interdependent
ones. It stated that in actual consumer settings, rather than a lab, it
is likely that a capacitor failure will not be detected until it
results in a motor failure. (Southern Company, No. 85 at p. 3)
Undetected capacitor failure that leads to motor failure (as may occur
for PSC motors) is reflected in DOE's distribution of motor lifetimes.
3. Furnace Fan Lifetime
DOE used the same modeling for furnace fan lifetime (meaning the
life of the overall equipment not including the motor) as in the
NOPR.78 FR 64097. Chapter 8 of the final rule TSD describes the
approach. DOE used the same lifetime for furnace fans at different
efficiency levels because there are no data that indicate variation of
lifetime with efficiency. For the NOPR analysis, DOE assumed that the
lifetime for the fans installed in electric furnaces and gas furnaces
is the same.
Rheem stated that the lifetime of a residential furnace fan is
limited by the lifetime of the electronic control, and advanced
controls may shorten the lifetime of the product. (Rheem, No. 83 at pp.
6, 13) JCI stated that the repair costs for furnace fans are generally
the cost of replacing the motors used, as there are very few failures
of fan components other than the motor. (JCI, No. 95 at p. 6)
DOE believes that with current technology there are few failures of
the electronic control, as stated by JCI. DOE also expects that the
reliability of the electronic controls is likely to increase as the
technology matures. Nonetheless, DOE accounts for failure of capacitors
and motor electronic controls in its repair cost analysis.
APGA stated that 23.6 years lifetime for gas-fired furnace fans in
the LCC analysis is unrealistic, and DOE should employ more realistic
furnace fan lives based on documented motor lives. (APGA, No. 110 at p.
3) It would appear that APGA misinterpreted DOE's approach. Motor
failure, which occurs on average at around 15 years, is counted as a
repair cost. However, DOE believes that the rest of the furnace fan
would last as long as the furnace itself.
Southern Company stated that because the analysis shows at least
50% greater shipments of furnace fans than furnaces, the data seems to
indicate a shorter lifetime for furnace fans than furnaces. (Southern
Company, No. 85 at p. 3) DOE did not calculate the shipments of furnace
fans. Since furnace fans are a component of furnaces, the shipments in
the NIA analysis are limited to furnace shipments only.
4. Discount Rates
For the NOPR, DOE used distributions of discount rates based on a
variety of financial data. 78 FR 64097. For replacement furnaces, the
average rate was 5.0 percent.
Miller stated that, based on a literature review of consumer
discount rates for energy-using durables, the 3-percent and 7-percent
discount rates used in the analysis only represent high-income
households; other consumers may use much higher discount rates.
Consumers with higher discount rates--including median-income
Americans, low-income Americans, and the elderly--are much less likely
to benefit from higher efficiency furnace fans. (Miller, No. 79 at pp.
10-13)

[[Page 38167]]

DOE uses 3-percent and 7-percent discount rates to measure net
consumer benefits from energy efficiency standards from a national
perspective (see section IV.H). DOE recognizes that a wide range of
discount rates may be appropriate for consumers, and thus it uses
distributions of discount rates when it evaluates consumer impacts in
the LCC analysis. For the final rule, DOE developed specific
distributions of discount rates for each of six consumer income groups.
Chapter 8 of the final rule TSD describes the approach. The estimated
impacts of today's standards on low-income households are discussed in
section V.B.1.\41\
---------------------------------------------------------------------------

\41\ The comment refers to high discount rates based on studies
of implicit consumer discount rates using the purchase of energy-
using durables (such as air conditioners, dishwashers, and
refrigerators) to measure consumer time preferences. While these
studies of implicit consumer discount rates provide a way of
characterizing consumer behavior, they do not necessarily measure
consumer time preferences. What appears to be low valuation of
future energy cost savings from higher-efficiency appliances instead
may be partially a result of lack of information on the magnitude of
savings or inability to evaluate the available information.
---------------------------------------------------------------------------

5. Compliance Date
In the NOPR, DOE proposed a 5-year compliance date for residential
furnace fan standards. 78 FR 64103. A number of stakeholders encouraged
DOE to adopt a three-year period between the final rule publication and
the compliance date rather than the five years proposed in the NOPR.
(ACEEE, No. 94 p. 6; NEEP, No. 109 at p. 2; Earthjustice, No. 101 at p.
3; CA IOU, No. 106 at p. 3; Joint Advocates, No. 105 at p. 4; NEEA,
NPCC, No. 96 at p. 3) ACEEE, CA IOU, the Joint Advocates, and NEEA and
NPCC stated that the technologies assumed to be required to meet TSL 4
are well-established in the market and commercially available. (ACEEE,
No. 94 at p. 6; CA IOU, No. 106 at p. 3; Joint Advocates, No. 105 at p.
4; NEEA, NPCC, No. 96 at p. 3) NEEP stated that three years should
provide adequate time for manufacturers to adjust product lines. (NEEP,
No. 109 at p. 2) The Joint Advocates stated that constant-torque BPM
motors are essentially drop-in replacements for PSC motors, and capital
conversion costs are not required. (Joint Advocates, No. 105 at p. 4)
NEEA and NPCC believe that three years of lead time should be
sufficient to allow a ramping up of motor manufacturing capacity and a
gradual shift of air handler manufacturing lines to incorporate them.
The technology required to meet the TSL 4 standards requires little
more than expansion of current production capacity for these models,
which mostly means buying different furnace fan motors and the
associated controls. (NEEA, NPCC, No. 96 at p. 3) Earthjustice stated
that DOE must choose a compliance date based on an assessment that
includes a consideration of factors beyond the impact on manufacturers.
(Earthjustice, No. 101 at p. 3)
JCI, Morrison, AHRI, Lennox, and HARDI support the five-year period
between the final rule publication and the compliance date as proposed
in the NOPR. (JCI, No. 95 at p. 2; Morrison, No. 108 at p. 2; AHRI, No.
98 at p. 2; Lennox, No. 100 at p. 4; HARDI, No. 103 at p. 2) JCI, AHRI,
and Lennox stated that to comply with the proposed standard,
manufacturers would not only have to alter the designs and fabrication
processes for the furnace fan assembly but also modify the broader
product design of the furnaces, air handlers, modular blowers, and
residential single package units that include those furnace fans. (JCI,
No. 95 at p. 2; AHRI, No. 98 at p. 2; Lennox, No. 100 at pp. 4-5) AHRI
stated that similar products that require similar actions for
compliance typically have lead times of five years. (AHRI, No. 98 at p
2) Ingersoll Rand agrees with AHRI's comments. (Ingersoll Rand, No. 107
at p. 11)
DOE continues to believe a 5-year lead time is appropriate. Since
EPCA does not mandate a specific lead time for furnace fan standards,
DOE considered the actions required by manufacturers to comply with
today's standards. As discussed in the NOPR, 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. 78 FR 64103. To comply with the
standards, 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
lead time, which would place the compliance date in 2019. For the
purposes of the LCC and PBP analysis, DOE assumed that all relevant
consumers purchase a furnace fan in 2019.
6. 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 NOPR, DOE reviewed the information provided by the
manufacturers and estimated 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.78 FR 64097.
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.\42\ 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. Id
---------------------------------------------------------------------------

\42\ 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.
---------------------------------------------------------------------------

No comments were received on the base case efficiency distribution,
and DOE retained the NOPR assumptions for the final rule. The details
of DOE's approach are described in chapter 8 of the final rule TSD.
7. Payback Period
To calculate PBPs for the considered efficiency levels, DOE uses
the same inputs as for LCC analysis, except that discount rates are not
required.
Goodman stated that not including repair costs from later years in
the PBP does not provide a realistic picture of what most consumers
will face. It noted that while repair costs later in the product life
cycle may allow the initial investment to balance out faster, the
overall life-cycle costs can be very negatively impacted by such
repairs. (Goodman, No 102 at p. 10)
DOE recognizes that the PBP metric does not provide a complete
assessment of all costs that consumers may face, but it has found that
the results are of interest in standards rulemakings. The LCC analysis
does include all costs, and in part for this reason, DOE expresses the
share of consumers who benefit

[[Page 38168]]

from standards in terms of the change in LCC.
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. For the final
rule, DOE used AEO 2013 for projections of new housing. Furnace
saturation rates in new housing are provided by the U.S. Census
Bureau's Characteristics of New Housing.\43\
---------------------------------------------------------------------------

\43\ Available at: https://www.census.gov/construction/chars/.
---------------------------------------------------------------------------

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.
Lennox stated that the shipment projections do not appear to be
supported by the record or recent sales figures, as historical
shipments data from AHRI for gas and oil warm air furnaces show a
downward trend in shipments. (Lennox, No. 100 at pp. 6-7) AHRI stated
that DOE's shipment projections are inaccurate and the projected
numbers significantly skew the national energy savings estimates.
(AHRI, No. 98 at pp. 4-5)
DOE's shipments projections are based on replacement of furnaces
installed over the past few decades and furnaces installed in future
new homes. Most of the recent downward trend in shipments is due to
lower new construction in the wake of the financial crisis. DOE updated
historical shipments with 2013 data, which shows a growth in gas
furnace shipments. DOE also updated the new construction forecast based
on AEO 2013 projections, which reflect improving economic conditions
and a future increase of the new construction market. In addition, the
replacements reflect an updated furnace retirement function based on
the latest furnace lifetime data. Oil furnace shipments are projected
to continue to drop in the future.
JCI and AHRI stated that the projected shipments should account for
an echo effect loss in replacement sales for the furnaces that were not
sold in the years 2008-2012. (JCI, No. 95 at p. 10; AHRI, No. 98 at pp.
4-5) The projection for today's final rule shows a lower level of
replacement shipments in the 2025-2030 period, which is a consequence
(i.e., an echo) of the decline in historical shipments in 2006-2009.
JCI believes that the shipment projections for furnaces are too
optimistic. It noted that during the years prior to 2006, demand for
large homes with multiple furnace systems was more common than it is
today. (JCI, No. 95 at pp. 9-10) Mortex stated that forecasts of future
shipments are unrealistically high because new homes are smaller and
less likely to have two furnaces. (Mortex, No. 104 at p. 3) In DOE's
final rule analysis, DOE assumed that new homes would not have multiple
furnaces.
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 estimate the
impact on shipments of the price increase for the considered efficiency
levels, DOE used a relative price elasticity approach. This approach
also gives some weight to the operating cost savings from higher-
efficiency products.
Ingersoll Rand stated that the shipment projections do not account
for a drop off in sales due to higher furnace prices that will result
from using more expensive components. (Ingersoll Rand, No. 107 at p. 9)
The comment is incorrect; the relative price elasticity approach does
estimate the impact on shipments of the price increase for the
considered efficiency levels for the NOPR and the final rule.
Several stakeholders raised issues with DOE's relative price
elasticity approach. They stated that the household income data and
data used to derive the elasticity are outdated and do not reflect
current trends, and the household appliances used to derive the
relative price elasticity (refrigerators, clothes washers and
dishwashers) are inappropriate for this rulemaking. (JCI, No. 95 at p.
10; Morrison, No. 108 at p. 8; AHRI, No. 98 at pp. 12-13; Goodman, No.
102 at p. 13) Rheem expressed similar concerns. (Rheem, No. 83 at p.
12)
In response, DOE notes that there are very few estimates of
consumer demand elasticity for durable goods. Although the data that
DOE used to estimate relative price elasticity are not current, and the
analysis focused on products that differ from furnaces, DOE believes
that consumer behavior with respect to the impact of higher appliance
price on

[[Page 38169]]

demand is not likely to have changed significantly. One recent paper
suggests that demand elasticity for air conditioners is inelastic--
holding efficiency constant, a 10% rise in price leads to a 1.4%
decline in sales.\44\ This is a lower elasticity than DOE uses in its
analysis. Therefore, DOE believes that it is reasonable to use the
relative price elasticity approach for today's final rule. See chapter
9 in the final rule TSD for a description of the method.
---------------------------------------------------------------------------

\44\ David Rapson. Durable Goods and Long-Run Electricity
Demand: Evidence from Air Conditioner Purchase Behavior. Department
of Economics, University of California, Davis. Available at:
www.econ.ucdavis.edu/faculty/dsrapson/Rapson_LR_electricity.pdf.
---------------------------------------------------------------------------

Mortex stated that a big increase in the installed cost of a new
furnace under the proposed energy conservation standards will lead many
consumers to repair rather than replace with a new furnace. (Mortex,
No. 104 at p. 3) In terms of the overall cost of a new furnace, the
increase attributable to using a more energy-efficient furnace fan is
relatively small--less than 10 percent--for fans meeting today's
standards. In any case, the price elasticity approach described above
captures the potential consumer response to higher furnace prices,
which often would consist of choosing to repair an existing furnace
rather than replace it with a new furnace.
AGA urged the Department to include a robust fuel switching
analysis, including the competing economics of natural gas furnaces
versus both electric furnaces and heat pumps. (AGA, No. 110 at p. 3)
There is a possibility that for some consumers considering replacement
of a non-condensing gas furnace, the higher price of a gas furnace due
to today's standards could lead to some switching to heat pumps.
However, this switching would only occur if the CAC is replaced at the
same time as the furnace. Furthermore, switching to a heat pump would
require additional cost to install backup electric resistance heating
elements. Based on the above considerations, DOE believes that any
switching to heat pumps due to today's standards would be minimal. The
standards would not create any incentive to switch to electric furnaces
because electric furnaces are subject to the furnace fan standard and
would see a similar incremental cost as a gas furnace.

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).
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. 78 FR 64099. No comments were received on
this issue and DOE retained the same approach for the final rule.
For the NOPR, 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) Products
with 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) products with efficiencies above the standard level under
consideration would not be affected. Id.
Rheem stated that DOE's assumption that the sale of premium
products above the standard level will be unaffected is unreasonable.
(Rheem, No. 83 at p. 3) DOE acknowledges that the market shares of fans
with efficiency levels above a given standard level could change after
compliance with the new standards is required. Estimating how
manufacturers will respond to new standards with regard to their
marketing strategy for ``above-standard'' products is very difficult,
however. Rather than speculate, DOE believes that it is preferable to
retain a roll-up scenario for today's final rule.
For the standards cases, the assumed efficiency trend after the
compliance year varies depending on the particular standard. For the
case with today's standards, the overall BPM motor market share goes to
100 percent in 2019 and remains at that level. The shares of the
specific BPM motor designs (i.e., constant-torque BPM, constant-torque
BPM motor + multi-stage, constant-airflow BPM motor + multi-stage, and
constant-airflow BPM motor + multi-stage + backward-inclined impeller)
remain at the levels of 2019. The details are provided in chapter 10 of
the final rule TSD.
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. Cumulative energy savings
are the sum of the NES for each year over the timeframe of the
analysis.
DOE calculates primary energy savings (power plant consumption)
from site electricity savings by applying a factor to account for
losses associated with the generation, transmission, and distribution
of electricity. For the NOPR, DOE derived marginal site-to-power plant
factors based on the version of the National Energy Modeling System
(NEMS) that corresponds to AEO 2012. 78 FR 64099. The factors change
over time in response to projected changes in the types of power plants
projected to provide electricity to the country.

[[Page 38170]]

Commenting on DOE's approach, AGA stated that it is highly unlikely
and unrealistic that all of the projected changes in types of power
plant used to generate electricity in this country will occur between
2019 and 2021 and that essentially no change will occur from 2031
through 2048. AGA stated that realistic trend lines to 2048 including a
linear forecast of declining site-to-power plant energy use should be
provided. (AGA, No. 110 at p. 3)
For the final rule, DOE derived site-to-power plant factors based
on the version of NEMS that corresponds to AEO 2013. As shown in Figure
10.3.1 in the final rule TSD, the factor (expressed as primary energy
per site kWh) declines through 2030 as more efficient power plants gain
share in power generation. After 2035, there is an increase due to
lower projected share of highly-efficient combined-cycle power plants.
DOE acknowledges that projections after 2035 are uncertain, but it
believes that NEMS provides a reasonable projection.
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). After evaluating 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 the most appropriate tool for
its FFC analysis and its intention to use NEMS for that purpose. 77 FR
49701 (August 17, 2012). The approach used for today's final rule is
described in appendix 10-C of the final rule TSD.
JCI and AHRI stated that, for cooling mode, the NIA spreadsheet
model does not indicate how DOE used the average annual electricity use
values from the energy use analysis to determine national energy
savings. (JCI, No. 95 at pp. 4-5; AHRI, No. 98 at p. 6) In the NIA
spreadsheet, the LCC Inputs worksheet shows how the average annual
electricity use values are used over the analysis period.
Several stakeholders questioned the accuracy of the doubling in FFC
energy savings from TSL 3 to TSL 4 from an incremental efficiency level
improvement of 8 percent for five of the product classes from adding
the multi-staging option. (JCI, No. 95 at p 4; EEI, No. 91 at pp. 307,
309; Morrison, No. 108 at p. 4; AHRI, No. 98 at pp. 4-5; Lennox, No.
100 at p. 2; Ingersoll Rand, No. 107 at p. 9) Similarly, AHRI stated
that if the effect of multi-staging was indeed prominent enough to
nearly double the estimated FFC energy savings between TSLs 3 and 4,
DOE should have evaluated this effect for PSC motors as well. (AHRI,
No. 98 at p. 5) Morrison stated that for non-weatherized gas furnace
fans, it is inconsistent that TSL 4 could produce a very large increase
in FFC energy savings over TSL 3 while TSL 2 and 3 have the same
national energy savings; compared to the difference in energy use
between TSL 2 and TSL 3, TSL 4 has a much lower incremental average
electricity savings and higher additional fuel use compared to TSL 3.
(Morrison, No. 108 at p. 4)
For the final rule, DOE incorporated new test data on the fan
efficiency levels that were included in TSL 3 (constant torque BPM
motors) and TSL 4 (constant torque BPM motors (multi-stage)). These
data contributed to a decrease in efficiency for TSL 4 (see section
IV.C.1) With this change, the increase in savings from TSL 3 to TSL 4
is now smaller than in the NOPR. The NIA results are presented in
section V.B.3.
Several stakeholders stated that it is implausible that the furnace
fan standard will save about as much energy as the 2006 13 SEER
rulemaking (76 FR 7185) or the 2013/2015 90% AFUE furnace and 14 SEER
rulemaking (76 FR 37412). (AHRI, No. 98 at p. 6; Ingersoll Rand, No.
107 at p. 9; Lennox, No. 100 at p. 2; Goodman, No. 102 at p. 6)
Ingersoll Rand stated that the energy savings from the proposed rule
claim to be greater than savings from the 13 SEER rule, but the energy
savings of a furnace switching from a PSC motor to a constant torque
BPM is nearly an order of magnitude less than the energy use of the
furnace or heat pump. (Ingersoll Rand, No. 107 at p. 9)
DOE reviewed the methodology used to assess the energy savings
estimated for the proposed standards, as discussed in previous parts of
this notice, and believes that the energy savings estimated for the
considered TSLs are reasonable. Comparison with other rules must be
done with caution, as the savings in those rules depends on both the
stringency of the standards and the base case that was chosen in the
analysis. The fact that the energy savings of a furnace switching from
a PSC motor to a constant torque BPM is much less than the energy use
of the furnace or heat pump is not relevant to the energy savings
associated with standards for furnaces or heat pumps.
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 final rule 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.\45\ The NPV results for the residential furnace fan TSLs are
presented in section V.B.3 of this document.
---------------------------------------------------------------------------

\45\ OMB Circular A-4 (Sept. 17, 2003), section E, ``Identifying
and Measuring Benefits and Costs.''
---------------------------------------------------------------------------

I. 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).

[[Page 38171]]

The purpose of a consumer subgroup analysis is to determine the extent
of any such disproportional impacts.
For today's final rule, 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 document.

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 final rule
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,\46\ corporate annual reports, the
U.S. Census Bureau's Economic Census,\47\ and Hoover's reports.\48\
---------------------------------------------------------------------------

\46\ U.S. Securities and Exchange Commission, Annual 10-K
Reports (Various Years) (Available at: https://sec.gov).
\47\ 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).
\48\ Hoovers Inc. Company Profiles (Various Companies)
(Available at: https://www.hoovers.com).
---------------------------------------------------------------------------

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. Section IV.J.4 of the NOPR
contains a description of the key issues manufacturers raised during
the interviews. 78 FR 64068, 64104-05 (Oct. 25, 2013).
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 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 15 residential furnace fan manufacturers
that qualify as small businesses. The residential furnace fan small
manufacturer subgroup is discussed in chapter 12 of the final rule TSD
and in section V.B.2.d of this document.
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 model 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 2014 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 final rule 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

[[Page 38172]]

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 final rule 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 2014 (the base year) to 2048 (the end year of the
analysis period). See chapter 9 of the final rule TSD for additional
details.
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 final rule 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 would
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 same product in the standards case.
See chapter 9 of the final rule 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
per unit 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.11--Manufacturer Markup by Residential Furnace Fan Product
Class
------------------------------------------------------------------------
Product class Markup
------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan (NWG-NC)... 1.30
Non-Weatherized, Condensing Gas Furnace Fan (NWG-C)........ 1.31
Weatherized, Non-condensing Gas Furnace Fan (WG-NC)........ 1.27
Non-Weatherized, Non-condensing Oil Furnace Fan (NWO-NC)... 1.35
Electric Furnace/Modular Blower Fan (EF/MB)................ 1.19

[[Page 38173]]

Mobile Home Non-Weatherized, Non-condensing Gas Furnace Fan 1.25
(MH-NWG-NC)...............................................
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan (MH- 1.25
NWG-C)....................................................
Mobile Home Electric Furnace/Modular Blower Fan (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 per unit 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 on a per unit basis. 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 per unit. The implicit assumption behind
this markup scenario is that the industry can only maintain its
operating profit in absolute dollars per unit 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 NOPR public meeting, interested parties commented on the
assumptions and results of the NOPR analysis TSD. Oral and written
comments addressed several topics, including conversion costs,
cumulative regulatory burdens, scope of MIA coverage, markups analysis,
employment impacts, consumer utility impacts, and impacts on small
businesses.
a. Conversion Costs
Several manufacturers expressed concern regarding the DOE's
estimates of the capital and product conversion costs, including costs
relating to testing and certification.
Regarding capital conversion costs associated with a furnace fans
standard, Goodman commented that DOE's estimate of zero capital
conversion costs at TSL 4 does not properly reflect feedback from
manufacturer interviews. (Goodman, No. 102 at p. 10) AHRI stated that
the technology option associated with TSL 4 would necessitate changes
in manufacturers' assembly and subassembly production lines, including
the modification and/or elimination of current fan housings, heat
exchanger types, and furnace cabinet sizes, at a cost of $103 million
for the industry. (AHRI, No. 98 at p. 10) Johnson Controls commented
that compliance with the proposed standard would likely require them to
make a capital investment ranging from $2.8 million to $4 million.
(JCI, No. 95 at p. 2)
In the engineering analysis, most of the technology options being
considered require only a change in the type of motor used. At the NOPR
stage, DOE tentatively concluded that TSLs 1 through 5 would not
require manufacturers to incur capital expenditures for new tooling or
equipment. However, in response to the above-mentioned public comments
received during the NOPR period, DOE has revised its methodology for
estimating capital conversion costs at all TSLs for the final rule. DOE
incorporated all capital conversion cost values submitted by
manufacturers during the course of MIA interviews and used a product
listing weighted-average of feedback (based on basic model listings in
the AHRI directory) to determine conversion costs for the industry. As
a result, capital conversion costs were revised upward at all TSLs, as
shown in Table IV.12.

Table IV.12--Final Rule Capital Conversion Costs (CCC)
----------------------------------------------------------------------------------------------------------------
TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
----------------------------------------------------------------------------------------------------------------
Total Industry CCCs ($ millions)........ 8.8 11.1 11.8 15.1 15.7 134.7
----------------------------------------------------------------------------------------------------------------

DOE notes that the conversion costs submitted by AHRI and Johnson
Controls are generally consistent with DOE's estimates of conversion
costs at TSL 6 in the final rule. However, without a more detailed
breakdown of the conversion costs by TSL from those stakeholders, it
was not feasible for DOE to determine the discrepancies in capital
conversion cost values or to incorporate their feedback into the GRIM
model.
With regards to product conversion costs, including costs
associated with compliance, certification, and enforcement (CC&E), both
Trane and Johnson Controls provided their own estimates in support of
the notion that there will be significant testing burden associated
with standards compliance. (Trane, No. 107 at pp. 2, 6, and JCI, No. 95
at p. 8) Goodman also stated that investments in additional testing
equipment may be required in order to keep pace with current and future
testing requirements. (Goodman, No. 102 at p. 11) AHRI and multiple
manufacturers commented that the performance standard associated with
TSL 4 would require total industry product conversion costs of $6.2
million. (AHRI, No. 98 at p. 10)
DOE acknowledges manufacturers' concerns regarding product
conversion cost estimates, including those relating to testing and
certification. Similar to the capital conversion cost analysis, DOE
refined its final rule modeling of product conversion costs to better
reflect information received during manufacturer interviews. DOE used a
product listing weighted-average (based on basic model listings in the
AHRI directory) to extrapolate individual manufacturer feedback to an
industry value for each efficiency level and for each product class.
Additionally, for the final rule, DOE explicitly incorporated
certification costs into the product conversion cost estimates used in
the GRIM. These certification costs occur in the base case and apply in
the standards cases. DOE modeled testing and certification costs under
the assumption

[[Page 38174]]

that larger manufacturers have would conduct all FER testing in-house,
while small manufacturers would outsource all certification testing.
DOE assumed a cost of $175 per test per basic model for large
manufacturers (derived from the test procedure estimate of a maximum of
4 hours per test) (79 FR 500 (Jan. 3, 2014)) and a cost of $2,000 per
test per basic model for small manufacturers (77 FR 28674 (May 15,
2012)). See Table IV.13 and Table IV.14 below for a summary of testing
and certification cost calculations and overall product conversion
costs. Conversion costs are discussed in detail in section V.B.2.a of
today's document and in chapter 12 of the final rule TSD.

Table IV.13--Testing and Certification Costs
------------------------------------------------------------------------
Value
------------------------------------------------------------------------
General assumptions:
[a] Number of FER tests required per Basic Model....... 2
[b] Total Industry Number of Basic Models \1\.......... 2,254
[c] Number of Basic Models for Large Manufacturers..... 1,943
[d] Number of Basic Models for Small Manufacturers..... 311
Large manufacturer assumptions:
[e] Labor rate ($/hr) \2\.............................. 43.73
[f] Time required per test (hours) \3\................. 4
Small manufacturer assumptions:
[g] Cost per FER test (outsource) ($) \4\ =............ $2,000
[h] FER costs per model for Large Manufacturer ($) = $350
[a]*[e]*[f]...........................................
[i] FER costs per model for Small Manufacturer ($) = $4,000
[a]*[g]...............................................
Total Industry FER costs ($ millions) = [h]*[c] + $1.9
[i]*[d]...............................................
Total Industry FER costs rescaled to account for EF/MB $2.2
and MH-EF/MB product classes ($ millions) \5\.........
------------------------------------------------------------------------
\1\ AHRI Directory: Residential Furnaces.
\2\ Bureau of Labor Statistics, 2012 mean hourly wage for all engineers.
\3\ 2012-05-15 Test Procedures for Residential Furnace Fans; Notice of
proposed rulemaking, section IV, part B.
\4\ 2012-05-15 Test Procedures for Residential Furnace Fans; Notice of
proposed rulemaking, section IV, part B.
\5\ The AHRI residential furnaces database does not contain electric
furnaces/modular blowers. In order to account for CC&E costs relates
to these products (standard and MH), DOE rescaled the $1.9 value by
12%, which is the estimated proportion of shipments for these two
categories combined. $2.2 is the value used in the GRIM.

Table IV.14--Product Conversion Costs
----------------------------------------------------------------------------------------------------------------
Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
----------------------------------------------------------------------------------------------------------------
Total Number of Basic Models 2,254 .......... .......... .......... .......... .......... ..........
\1\........................
Average Testing and 853 8,449 10,577 11,356 11,434 12,157 13,182
Certification Costs + R&D
Costs per Basic Model ($)..
Total Industry PCCs ($ 2.2 18.8 23.6 25.3 25.5 27.1 29.4
millions)..................
----------------------------------------------------------------------------------------------------------------
\1\ AHRI Directory: Residential Furnaces.

b. Cumulative Regulatory Burden
Interested parties expressed concern over the cumulative regulatory
burden that would result from a residential furnace fan energy
conservation standard. AHRI, Morrison, and Lennox commented that DOE
did not account for the cumulative impacts of additional DOE
regulations, including energy conservation standards or potential
standards for commercial and industrial fans and blowers, commercial
package air conditioners and heat pumps, and commercial warm air
furnaces. The three stakeholders also asserted that DOE did not address
testing burdens associated with the recently finalized test procedures
for two-stage and modulating condensing furnaces and boilers, and
potential updates to test procedures for residential furnaces and
boilers. (AHRI, No. 98 at p. 8-9; Morrison, No. 108 at p. 6; Lennox,
No. 100 at p. 8) Rheem argued that DOE failed to address cumulative
burdens relating to regulations for water heaters, boilers, pool
heaters, and commercial refrigeration equipment. (Rheem, No. 83 at p.
14)
DOE notes that the energy conservation standard rulemakings for
commercial and industrial fans and blowers, commercial package air
conditioners and heat pumps, commercial warm air furnaces, water
heaters, residential boilers, commercial boilers, and pool heaters are
all regulation currently in progress. No standards have been proposed,
and no final regulations have been issued for these rulemakings. It is
DOE's policy not to include the impacts of regulatory proposals until
the analyses are complete and the standards are finalized. Until such
rulemaking is complete, it is unclear what, if any, requirements will
be adopted for the products in question. Consequently, it would be
speculative to try to include incomplete regulatory actions in an
assessment of cumulative regulatory burden. With regard to the test
procedure final rule for residential furnaces and boilers published on
July 10, 2013, the changes have a compliance date of January 6, 2014.
78 FR 41265. Because the regulation goes into effect before 2016, it is
outside of the 3-year window set for consideration in the cumulative
regulatory burden analysis. With regard to the commercial refrigeration
equipment (CRE) energy conservation standard rulemaking, at the time of
the residential furnace fan rulemaking NOPR publication, the final rule
for CRE standards had not yet been published. The final rule for CRE
standards was published on March 28, 2014 and is now included in the
final rule cumulative regulatory burden review in section V.B.2.e. 79
FR 17725.
Johnson Controls commented that DOE should consider the cumulative
impacts of State or local weatherization programs that may be
restrictive on HVAC equipment selections, as well as building code
standards at State, national, and international levels. In addition,
JCI believes DOE should include the impact of commercial product energy
efficiency standards,

[[Page 38175]]

alternate refrigeration requirements, and modifications to existing or
the generation of new building performance standards, such as ASHRAE
standards. (JCI, No. 95 at p. 7).
DOE considers cumulative regulatory burden pursuant to the
directions in the Process Rule (10 CFR part 430, subpart C, appendix
A). DOE notes that States and localities are generally preempted from
requiring HVAC standards beyond the Federal minimum through building
codes or other regulatory requirements. Once finalized, Federal
commercial energy efficiency standards, alternative refrigeration
requirements, and ASHRAE 90.1 standards that go into effect within 3
years of the effective date of today's standard are considered in the
cumulative regulatory burden analysis.
AHRI and Morrison commented that DOE failed to provide quantitative
estimates of the incremental burden imposed by the additional DOE
standards impacting furnace fan manufacturers. As a result, both
parties do not feel that such impacts were adequately reflected in the
GRIM. (AHRI, No. 98 at p. 9, and Morrison, No. 108 at p. 7).
In the final rule cumulative regulatory burden section, DOE has
provided an explicit review of the conversion costs associated with DOE
energy conservation standards that impact the manufacturers covered
under the residential furnace fan rulemaking. For more information,
please see section V.B.2.e of this document.
c. Scope of MIA Coverage
AHRI and Rheem commented that impacts on motor manufacturers should
be included in the manufacturing impact analysis. (AHRI, No. 43 at p.
151, and Rheem, No. 83 at p. 6)
DOE's manufacturer impact analysis focuses on the manufacturers
that have the direct burden of complying with the energy conservation
standard. In this rulemaking, the manufacturer of the residential
furnace has the burden of certifying and labeling the furnace fan
performance. Motors manufacturers are a component supplier but do not
have a direct compliance burden associated with this rule.
d. Markups Analysis
AHRI provided comments relating to both markup scenarios used in
the GRIM. With regards to the preservation of gross margin percentage
markup scenario, AHRI commented that it is unreasonable for DOE to
assume that, as manufacturer production costs increase in response to
an energy conservation standard, manufacturers would be able to
maintain the same gross margin percentage markup as the base case.
(AHRI, No. 98 at p. 10) AHRI continued by commenting that the
preservation of operating profit scenario is also inaccurate since it
implies that manufacturer markups are set so that operating profit one
year after the compliance date of the new energy conservation standards
is the same as in the base case. AHRI believes that the one year time
period is an extremely optimistic assumption and that a five-year time
period would be a more realistic average for the industry. (AHRI, No.
98 at p. 10)
DOE intends for the preservation of gross margin percentage and
preservation of per-unit operating profit markup scenarios to represent
the upper and lower bounds for the performance of the industry as a
result of new standards. The preservation of gross margin percentage
scenario assumes that manufacturers are able to pass on all increases
in MPC that result from standards to their first customers.
Additionally, the scenario assumes manufacturers are able to maintain
the existing markup on the incremental manufacturer production costs
that result from the standard, thereby allowing manufacturers to
recover portions of their conversion cost investments. The preservation
of per-unit operating profit scenario assumes that manufacturers are
not able to generate greater operating profit per unit sold in the
standards case. Additionally, the scenario assumes that manufacturers
are not able to recover any of their conversion cost investments. By
applying these two scenarios, DOE models examine the range of potential
industry impacts that reflect manufacturers' varying ability to pass
costs on to customers and recover conversion costs. The scenario
described by AHRI appears to relate to manufacturers' ability to
recover conversion costs, which is likely not possible by one year
following the standard year. However, the preservation of operating
profit per-unit markup scenario assumes only that manufacturers will
maintain the same annual operating profit as in the base case in the
year after the standards go into effect. DOE believes that
manufacturers' annual operating profit will be relatively constant in
the years following the standard, and, accordingly, the choice between
a one-year and five-year time horizon for this scenario is arbitrary.
e. Employment Impacts
AHRI and EEI commented that it is unrealistic to assume there would
be no reductions in domestic production employment at TSLs 1 through 5.
This is because labor costs will increase with higher design options,
and, subsequently, manufacturers will try to compensate by reducing
labor. (AHRI, No. 98 at p. 10 and EEI, No. 43 at p. 349) Additionally,
AHRI commented that subsection 12.7.1 in the NOPR TSD accounts for
line-supervisors as production workers who contribute towards the
manufacture of furnace fans, but should also account for engineers and
managers in supervisory roles who may not be involved in the day-to-day
assembly line operations. (AHRI, No. 98 at p. 11)
At the NOPR stage, DOE's employment analysis only provided an upper
bound to employment changes. These upper bound impacts were directly
correlated to changes in shipments and changes in per-unit labor
inputs. For the final rule, DOE uses the same employment model to
determine the upper bound of employment impacts. At the lower bound,
DOE models the scenario in which all production moves to lower
production cost countries. In reference to AHRI's second comment, DOE
does account for non-production workers in the GRIM and presents these
results along with revised estimates of domestic production employment
in chapter 12 of the final rule TSD.
f. Consumer Utility
Morrison commented in support of DOE's previously-stated concern
relating to the use of multiple rating systems on a given product.
Morrison emphasized that this would indeed lead to consumer confusion.
(Morrison, No. 108 at p. 2)
DOE understands manufacturer concern relating to multiple ratings.
However, DOE is required by legislation to set a separate standard and
an associated metric for the covered product, furnace fans.
g. Small Businesses
In reference to the Regulatory Flexibility Analysis contained in
the NOPR, Mortex expressed concern that DOE significantly
underestimated capital and product conversion costs. According to
Mortex, even at the underestimated level, the calculated impact to
small businesses (conversion costs of 5.1 percent of annual revenues)
would be highly detrimental. (Mortex, No. 104 at pp. 2-3)
DOE has revised its analysis of conversion costs for the final
rule. The increase in conversion costs is reflected in the Final
Regulatory Flexibility Analysis (FRFA), in section VI.B of this notice.
To help portray the magnitude of

[[Page 38176]]

the conversion costs relative to the size of the average small
business, the conversion costs (which are invested over a five-year
period) are compared to the financial metric of a single year's
operation.

K. Emissions Analysis

In the emissions analysis, DOE estimated 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 (here, furnace fans). 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 (FFC). In accordance with DOE's FFC Statement of Policy
(76 FR 51281 (August 18, 2011) as amended at 77 FR 49701 (August 17,
2012)), this FFC analysis also includes impacts on emissions of methane
(CH4) and nitrous oxide (N2O), both of which are
recognized as greenhouse gases.
DOE primarily conducted the emissions analysis using emissions
factors for CO2 and most of the other gases derived from
data in AEO 2013, supplemented by data from other sources. DOE
developed separate emissions factors for power sector emissions and
upstream emissions. The method that DOE used to derive emissions
factors is described in chapter 13 of the final rule 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 each ton of the greenhouse 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,\49\ DOE used GWP values of 25 for CH4 and 298 for
N2O.
---------------------------------------------------------------------------

\49\ 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 the National Energy
Modeling System (NEMS). Each annual version of NEMS incorporates the
projected impacts of existing air quality regulations on emissions. AEO
2013 generally represents current legislation and environmental
regulations, including recent government actions, for which
implementing regulations were available as of December 31, 2012.
SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous States (42 U.S.C.
7651 et seq.) and the District of Columbia (DC). SO2
emissions from 28 eastern States and DC were also limited under the
Clean Air Interstate Rule (CAIR; 70 FR 25162 (May 12, 2005)), which
created an allowance-based trading program. CAIR was remanded to the
U.S. Environmental Protection Agency (EPA) by the U.S. Court of Appeals
for the District of Columbia, but it remained in effect.\50\ See North
Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA,
531 F.3d 896 (D.C. Cir. 2008). In 2011, EPA issued a replacement for
CAIR, the Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August
8, 2011). On August 21, 2012, the DC Circuit issued a decision to
vacate CSAPR.\51\ The court ordered EPA to continue administering CAIR.
The AEO 2013 emissions factors used for today's final rule assume that
CAIR remains a binding regulation through 2040.
---------------------------------------------------------------------------

\50\ 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).
\51\ See EME Homer City Generation, LP v. EPA, 696 F.3d 7, 38
(D.C. Cir. 2012), cert. granted, 81 U.S.L.W. 3567, 81 U.S.L.W. 3696,
81 U.S.L.W. 3702 (U.S. June 24, 2013) (No. 12-1182).
---------------------------------------------------------------------------

The attainment of emissions caps is typically flexible among EGUs
and is enforced through the use of tradable emissions allowances. Under
existing EPA regulations, any excess SO2 emissions
allowances resulting from the lower electricity demand caused by the
adoption of a new or amended efficiency standard could be used to allow
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.
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. AEO2013
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 that would be established by CAIR, so it is
unlikely that excess SO2 emissions allowances resulting from
the lower electricity demand would be needed or used to allow
offsetting increases in SO2 emissions by any regulated EGU.
Therefore, DOE believes that energy efficiency standards will reduce
SO2 emissions in 2015 and beyond.
CAIR 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 CAIR because excess NOX emissions
allowances resulting from the lower electricity demand could be used to
allow offsetting increases in NOX emissions. However,
standards would be expected to reduce NOX emissions in the
States not affected by the caps, so DOE estimated NOX
emissions reductions from the standards considered in today's final
rule for these States.
The MATS limit mercury emissions from power plants, but they do not
include emissions caps, and, as such, DOE's energy conservation
standards would likely reduce Hg emissions. DOE estimated mercury
emissions reduction using emissions factors based on AEO 2013, which
incorporates the MATS.
JCI and EEI stated that DOE did not consider the impact of the EPA
rulemakings on new and existing power plants, which likely will
materially affect the projections of CO2 emissions
reductions on which the DOE's SCC benefit calculations are based. (JCI,
No. 95 at p. 10-11; EEI, No. 87 at p. 9) Consistent with past practice,
DOE has

[[Page 38177]]

concluded that it would not be appropriate for its analysis to assume
implementation of regulations that are not in effect at this time. The
shape of any final EPA regulations is uncertain, as is the outcome of
potential legal challenges to those regulations.
EEI stated that, to be consistent with other rulemakings, DOE
should use modeling that calculates no emissions reductions as a result
of efficiency standards where such emissions are capped by State,
regional, or Federal regulations. In particular, DOE should eliminate
any estimated CO2 reductions in California and in the
Northeastern/Mid-Atlantic states that participate in the Regional
Greenhouse Gas Initiative (RGGI). (EEI, No. 87 at p. 10) Morrison
stated that different agencies simultaneously addressing similar
sources of CO2 emissions should not double-count emissions
reductions. (Morrison, No. 108 at p. 10)
As stated above, DOE based its emissions analysis on AEO 2013,
which represents current legislation and environmental regulations,
including recent government actions, for which implementing regulations
were available as of December 31, 2012. AEO 2013 accounts for the
implementation of regional and State air emissions regulations,
including those cited by EEI.\52\ Its analysis also considers the
impact of caps set by Federal regulations, as discussed above.
Consequently, the emissions reductions estimated to result from today's
standards are over and above any reductions attributable to other
State, regional, or Federal regulations.
---------------------------------------------------------------------------

\52\ See Assumptions to AEO 2013 (Available at: https://www.eia.gov/forecasts/aeo/assumptions/).
---------------------------------------------------------------------------

EEI stated that DOE's analysis significantly overestimates the
future emissions from power plants, as coal-fired power plants are
being retired and large amounts of wind and solar capacity are being
added. It stated that due to these factors, along with EPA regulations,
there will be a significant reduction in the baseline emissions from
power plants and a reduced emissions impact from any efficiency
standard. (EEI, No. 87 at p. 9)
DOE bases its emissions analysis on the latest projections from the
AEO, which consider retirement of coal-fired power plants, addition of
wind and solar capacity, and current EPA regulations. Decline in
baseline emissions from power plants does not mean that there would be
reduced impact from any efficiency standard, however. The impact of
standards on electricity demand takes place at the margin, and DOE's
analysis endeavors to reflect this marginal impact.
EEI stated that it is not clear how or why the power plant
emissions factors would increase for any regulated emission
(SO2, NOX, Hg, and CO2) after 2025 or
2030, based on current trends and Federal and State regulations. (EEI,
No. 87 at p. 10) DOE agrees that average power plant emissions factors
for the Nation as a whole would likely not increase after 2025 or 2030.
DOE's analysis uses marginal emissions factors, however, which depend
on changes to the mix of generation capacity by fuel type induced by a
marginal reduction in electricity demand for a particular end use
(e.g., residential heating). The behavior of marginal emissions factors
can be significantly different from the behavior of average emissions
factors. Marginal emissions factors are very sensitive to shifts in the
capacity mix relative to the AEO reference case, whereas average
emissions factors are not affected by these small shifts.

L. Monetizing Carbon Dioxide and Other Emissions Impacts

As part of the development of the standards in this final rule, DOE
considered the estimated monetary benefits from the reduced emissions
of CO2 and NOX that are expected to result from
each of the TSLs considered. In order to make this calculation
analogous to the calculation of the NPV of consumer benefit, DOE
considered the reduced emissions expected to result over the lifetime
of equipment shipped in the forecast period for each TSL. This section
summarizes the basis for the monetary values used for each of these
emissions and presents the values considered in this final rule.
For today's final rule, DOE is relying on a set of values for the
SCC that was developed by a Federal interagency process. The basis for
these values is summarized below, and a more detailed description of
the methodologies used is provided as an appendix to chapter 14 of the
final rule 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) of Executive Order 12866, agencies must, to the
extent permitted by law, ``assess both the costs and the benefits of
the intended regulation and, recognizing that some costs and benefits
are difficult to quantify, propose or adopt a regulation only upon a
reasoned determination that the benefits of the intended regulation
justify its costs.'' The purpose of the SCC estimates presented here is
to allow agencies to incorporate the monetized social benefits of
reducing CO2 emissions into cost-benefit analyses of
regulatory actions. The estimates are presented with an acknowledgement
of the many uncertainties involved and with a clear understanding that
they should be updated over time to reflect increasing knowledge of the
science and economics of climate impacts.
As part of the interagency process that developed these SCC
estimates, technical experts from numerous agencies met on a regular
basis to consider public comments, explore the technical literature in
relevant fields, and discuss key model inputs and assumptions. The main
objective of this process was to develop a range of SCC values using a
defensible set of input assumptions grounded in the existing scientific
and economic literatures. In this way, key uncertainties and model
differences transparently and consistently inform the range of SCC
estimates used in the rulemaking process.
Monetizing Carbon Dioxide Emissions
When attempting to assess the incremental economic impacts of
carbon dioxide emissions, the analyst faces a number of challenges. A
report from the National Research Council \53\ points out that any
assessment will suffer from uncertainty, speculation, and lack of
information about: (1) Future emissions of GHGs; (2) the effects of
past and future emissions on the climate system; (3) the impact of
changes in climate on the physical and biological environment; and (4)
the translation of these environmental impacts into economic damages.
As a result, any effort to quantify and monetize the harms associated
with climate change will raise questions of science, economics, and
ethics and should be viewed as provisional.
---------------------------------------------------------------------------

\53\ National Research Council. Hidden Costs of Energy: Unpriced
Consequences of Energy Production and Use (2009) National Academies
Press: Washington, DC.

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

[[Page 38178]]

Despite the limits of both quantification and monetization, SCC
estimates can be useful in estimating the social benefits of reducing
CO2 emissions. The agency can estimate the benefits from
reduced (or costs from increased) emissions in any future year by
multiplying the change in emissions in that year by the SCC values
appropriate for that year. The net present value of the benefits can
then be calculated by multiplying each of these future benefits by an
appropriate discount factor and summing across all affected years.
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.
Development of Social Cost of Carbon Values
In 2009, an interagency process was initiated to offer a
preliminary assessment of how best to quantify the benefits from
reducing carbon dioxide emissions. To ensure consistency in how
benefits are evaluated across Federal 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.
Current Approach and Key Assumptions
After the release of the interim values, the interagency group
reconvened on a regular basis to generate improved SCC estimates.
Specially, 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 (IPCC).
Each model was given equal weight in the SCC values that were
developed.
Each model takes a slightly different approach to model how changes
in emissions result in changes in economic damages. A key objective of
the interagency process was to enable a consistent exploration of the
three models, while respecting the different approaches to quantifying
damages taken by the key modelers in the field. An extensive review of
the literature was conducted to select three sets of input parameters
for these models: climate sensitivity, socio-economic and emissions
trajectories, and discount rates. A probability distribution for
climate sensitivity was specified as an input into all three models. In
addition, the interagency group used a range of scenarios for the
socio-economic parameters and a range of values for the discount rate.
All other model features were left unchanged, relying on the model
developers' best estimates and judgments.
The interagency group selected four sets of SCC values for use in
regulatory analyses. Three sets of values are based on the average SCC
from the three IAMs, at discount rates of 2.5, 3, and 5 percent. The
fourth set, which represents the 95th percentile SCC estimate across
all three models at a 3-percent discount rate, was included to
represent higher-than-expected impacts from temperature 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,\54\ although preference is
given to consideration of the global benefits of reducing
CO2 emissions. Table IV.15 presents the values in the 2010
interagency group report,\55\ which is reproduced in appendix 14A of
the DOE final rule TSD.
---------------------------------------------------------------------------

\54\ It is recognized that this calculation for domestic values
is approximate, provisional, and highly speculative. There is no a
priori reason why domestic benefits should be a constant fraction of
net global damages over time.
\55\ Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866. Interagency Working Group on Social Cost of
Carbon, United States Government (February 2010) (Available at:
www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf).

Table IV.15--Annual SCC Values From 2010 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
---------------------------------------------------------------------------
Year 5% 3% 2.5% 3%
---------------------------------------------------------------------------
Average Average Average 95th 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
----------------------------------------------------------------------------------------------------------------

[[Page 38179]]

The SCC values used for today's notice were generated using the
most recent versions of the three integrated assessment models that
have been published in the peer-reviewed literature.\56\
---------------------------------------------------------------------------

\56\ Technical Update of the Social Cost of Carbon for
Regulatory Impact Analysis Under Executive Order 12866, Interagency
Working Group on Social Cost of Carbon, United States Government
(May 2013; revised November 2013) (Available at: https://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf).
---------------------------------------------------------------------------

Table IV.16 shows the updated sets of SCC estimates in 5-year
increments from 2010 to 2050. The full set of annual SCC estimates
between 2010 and 2050 is reported in appendix 14B of the DOE final rule
TSD. 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.

Table IV.16--Annual SCC Values From 2013 Interagency Report, 2010-2050
[2007$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate
---------------------------------------------------------------------------
Year 5% 3% 2.5% 3%
---------------------------------------------------------------------------
Average Average Average 95th percentile
----------------------------------------------------------------------------------------------------------------
2010................................ 11 32 51 89
2015................................ 11 37 57 109
2020................................ 12 43 64 128
2025................................ 14 47 69 143
2030................................ 16 52 75 159
2035................................ 19 56 80 175
2040................................ 21 61 86 191
2045................................ 24 66 92 206
2050................................ 26 71 97 220
----------------------------------------------------------------------------------------------------------------

It is important to recognize that a number of key uncertainties
remain, and that current SCC estimates should be treated as provisional
and revisable because they will evolve with improved scientific and
economic understanding. The interagency group also recognizes that the
existing models are imperfect and incomplete. The 2009 National
Research Council report mentioned above points out that there is
tension between the goal of producing quantified estimates of the
economic damages from an incremental ton of carbon and the limits of
existing efforts to model these effects. There are a number of
analytical challenges that are being addressed by the research
community, including research programs housed in many of the Federal
agencies participating in the interagency process to estimate the SCC.
The interagency group intends to periodically review and reconsider
those estimates to reflect increasing knowledge of the science and
economics of climate impacts, as well as improvements in modeling.
In summary, in considering the potential global benefits resulting
from reduced CO2 emissions, DOE used the values from the
2013 interagency report adjusted to 2013$ using the GDP price deflator.
For each of the four sets of SCC values, the values for emissions in
2015 were $12.0, $40.5, $62.4, and $119 per metric ton avoided (values
expressed in 2013$). DOE derived values after 2050 using the relevant
growth rates for the 2040-2050 period in the interagency update.
DOE multiplied the CO2 emissions reduction estimated for
each year by the SCC value for that year in each of the four cases. To
calculate a present value 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.
In responding to the NOPR, many commenters questioned the
scientific and economic basis of the SCC values.
A number of stakeholders stated that DOE should not use SCC values
to establish monetary figures for emissions reductions until the SCC
undergoes a more rigorous notice, review, and comment process.
(Morrison, No. 108 at p. 9; JCI, No. 95 at p. 10; AHRI, No. 98 at pp.
12-13; The Associations, No. 99 at p. 2; NAM, No. 84 at p. 1-2; Cato
Institute, No. 81 at p. 2) Ingersoll Rand agrees with AHRI's comments.
(Ingersoll Rand, No. 107 at p. 11) Rheem stated that the Federal
Interagency Working Group has failed to disclose and quantify key
uncertainties to inform decision makers and the public about the
effects and uncertainties of alternative regulatory actions, as
required by OMB. (Rheem, No. 83 at p. 9) NAM stated that the SCC
estimates were developed without sufficient transparency, inadequate
supporting information related to assumptions and other data, and a
failure to peer-review critical model inputs. (NAM, No. 84 at pp. 1-2)
Morrison stated that the SCC estimates are the product of an opaque
process and that any pretensions to their supposed accuracy are
unsupportable. (Morrison, No. 108 at p. 9) JCI stated that the SCC has
not been adequately noticed and reviewed before being used in this NOPR
or any other rulemaking. JCI added that it is aware that the SCC
process is undergoing a current review and comment process, which has
the potential for significant changes in how those SCC calculations are
used in any rulemakings. (JCI, No. 95 at p. 10) Rheem stated that even
if the SCC estimate development process were transparent, rigorous, and
peer-reviewed, the modeling conducted in this effort does not offer a
reasonably acceptable range of accuracy for use in policymaking.
(Rheem, No. 83 at p. 9)
In conducting the interagency process that developed the SCC
values, 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. Key
uncertainties and model differences transparently and consistently
inform the range of SCC estimates. These uncertainties and model
differences are discussed in the interagency working group's reports,
which are reproduced in appendix 14A and 14B of the final rule TSD, as
are the major assumptions. The 2010 SCC

[[Page 38180]]

values have been used in a number of Federal rulemakings in which the
public had opportunity to comment. In November 2013, the OMB announced
a new opportunity for public comment on the TSD underlying the revised
SCC estimates. See 78 FR 70586 (Nov. 26, 2013). OMB is currently
reviewing comments and considering whether further revisions to the
2013 SCC estimates are warranted. DOE stands ready to work with OMB and
the other members of the interagency working group on further review
and revision of the SCC estimates as appropriate.
NAM stated that in using the SCC estimates, DOE fails to adhere to
its own guidelines for ensuring and maximizing the quality,
objectivity, utility, and integrity of information disseminated by the
DOE. (NAM, No. 84 at pp. 1-2) DOE has sought to ensure that the data
and research used to support its policy decisions--including the SCC
values--are of high scientific and technical quality and objectivity,
as called for by the Secretarial Policy Statement on Scientific
Integrity.\57\ See section VI.J for DOE's evaluation of today's final
rule and supporting analyses under the DOE and OMB information quality
guidelines.
---------------------------------------------------------------------------

\57\ See https://www.directives.doe.gov/directives-documents/0411.2-APolicy.
---------------------------------------------------------------------------

Rheem stated that the modeling systems used for the SCC estimates
and the subsequent analyses were not subject to peer review as
appropriate. (Rheem, No. 83 at p. 9) The Cato Institute stated that the
determination of the SCC is discordant with the best scientific
literature on the equilibrium climate sensitivity and the fertilization
effect of carbon dioxide--two critically important parameters for
establishing the net externality of carbon dioxide emissions. (Cato
Institute, No. 81 at p. 2)
The three integrated assessment models used to estimate the SCC are
frequently cited in the peer-reviewed literature and were used in the
last assessment of the IPCC. In addition, new versions of the models
that were used in 2013 to estimate revised SCC values were published in
the peer-reviewed literature (see appendix 14B of the final rule TSD).
The revised estimates that were issued in November 2013 are based on
the best available scientific information on the impacts of climate
change. The issue of equilibrium climate sensitivity is addressed in
section 14A.4 of appendix 14A in the final rule TSD. The EPA, in
collaboration with other Federal agencies, continues to investigate
potential improvements to the way in which economic damages associated
with changes in CO2 emissions are quantified.
Morrison stated that the CO2 emissions reductions
benefits are overestimated, because the SCC values do not account for
any prior changes that impact the baseline emissions trends in previous
years. According to the commenter, DOE fails to take into consideration
EPA regulations of greenhouse gas emissions from power plants, which
would affect the SCC values. (Morrison, No. 108 at p. 10)
The SCC values are based on projections of global GHG emissions
over many decades. Such projections are influenced by many factors,
particularly economic growth rates and prices of different energy
sources. In the context of these projections, the proposed EPA
regulations of greenhouse gas emissions from new power plants are a
minor factor. In any case, it would not be appropriate for DOE to
account for regulations that are not currently in effect, because
whether such regulations will be adopted and their final form are
matters of speculation at this time.
Miller stated that the Department appears to violate the directive
in OMB Circular A-4, which states: ``The analysis should focus on
benefits and costs that accrue to citizens and residents of the United
States. Where the agency chooses to evaluate a regulation that is
likely to have effects beyond the borders of the United States, these
effects should be reported separately.'' Miller stated that instead of
focusing on domestic benefits and separately reporting any
international effects, the Department focused on much-larger global
benefits in the text of the proposed rule and separately reported the
(much smaller) domestic effects in a chapter of the TSD. (Miller, No.
79 at pp. 6-7) Similarly, Rheem stated that by presenting only global
SCC estimates and downplaying domestic SCC estimates in 2013, the IWG
has severely limited the utility of the SCC for use in benefit-cost
analysis and policymaking. (Rheem, No. 83 at p. 9) Mercatus stated that
OMB guidelines specifically require that benefit-cost analysis of
Federal regulations be reported for domestic estimates, with global
estimates being optional. Mercatus argued that by using the global
estimate at a three-percent discount rate, DOE inflated the benefits of
reducing carbon emissions by almost double compared to using a domestic
SCC at five percent. (Mercatus, No. 82 at pp. 7-8) EEI stated that the
use of global SCC values, which are estimates that are based on many
global assumptions and are subject to a great deal of uncertainty, may
be important in assessing the overall costs and benefits of particular
regulations, but using these values in the context of setting energy
conservation standards is problematic, as the geographic and temporal
scales of the LCC and SCC values are very different. (EEI, No. 87 at p.
10-11)
Although the relevant analyses address both domestic and global
impacts, the interagency group has determined that it is appropriate to
focus on a global measure of SCC because of the distinctive nature of
the climate change problem, which is highly unusual in at least two
respects. First, it involves a global externality: Emissions of most
greenhouse gases contribute to damages around the world when they are
emitted in the United States. Second, climate change presents a problem
that the United States alone cannot solve. The issue of global versus
domestic measures of the SCC is further discussed in appendix 14A of
the final rule TSD.
NAM stated that under DOE's analysis, the cost-benefit results and
the proposed rule are legally sufficient without the inclusion of the
SCC estimate. (NAM, No. 84 at p. 3) In contrast, JCI stated that the
monetary value of the CO2 emissions reduction plays a
significant role in DOE's justification to set the TSL 4 levels as the
national standards. (JCI, No. 95 at p. 10)
DOE disagrees with NAM's assessment, which suggests that
consideration of the SCC in the context of this rulemaking is somehow
unnecessary or unimportant. When selecting a proposed standard level or
adopting a final standard level, DOE considers and carefully weighs all
relevant factors. Thus, the monetary value of the CO2
emissions reduction did play a role in DOE's decision to propose TSL 4
(and to adopt TSL 4 in today's notice), as appropriate. DOE has
determined that today's standards are expected to achieve the maximum
improvement in energy efficiency that is technologically feasible and
economically justified, with or without consideration of the economic
benefits associated with reduced CO2 emissions.
Morrison stated that DOE does not conduct the cost-benefit analysis
for NPV and SCC values over the same time frame and within the same
scope, an important principle of cost-benefit analysis. (Morrison, No.
108 at p. 9)
For the analysis of national impacts of standards, DOE considers
the lifetime impacts of equipment shipped in a 30-year period. With
respect to energy and energy cost savings, impacts continue past 30
years until all of the equipment

[[Page 38181]]

shipped in the 30-year period is retired. With respect to the valuation
of CO2 emissions reductions, the SCC estimates developed by
the interagency working group are meant to represent the full
discounted value (using an appropriate range of discount rates) of
emissions reductions occurring in a given year. DOE is thus comparing
the costs of achieving the emissions reductions in each year of the
analysis, with the carbon reduction value of the emissions reductions
in those same years. Neither the costs nor the benefits of emissions
reductions outside the analytic time frame are included in the
analysis.

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,\58\ 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 final rule TSD describes the utility impact analysis in further
detail.
---------------------------------------------------------------------------

\58\ 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).
---------------------------------------------------------------------------

EEI stated that it is not possible under most operational scenarios
to increase electric capacity and decrease the amount of electric
generation, as is indicated by DOE's analysis. (EEI, No. 87 at p. 8) In
response, it would appear that the commenter has misinterpreted Table
15.3.1 in the NOPR TSD. The figure shows the capacity reduction as a
positive value; it is not an increase as it might appear at first
glance.
EEI stated that it is ironic that DOE is showing that an estimated
reduction of renewable power plants provides an economic benefit to the
United States. (EEI, No. 87 at p. 9) DOE reports the projected changes
in the installed capacity of different types of power plants resulting
from potential standards. Since the change in demand occurs at the
margin, it is not surprising that plant types with relatively high
first cost (such as solar and wind power) would be affected by
standards. When assessing the energy savings associated with energy
conservation standards, DOE does not claim that any particular changes
in installed capacity of different types of power plants provide an
economic benefit to the Nation relative to other types of power plant
facilities.
EEI stated that the analysis appears to ignore the impacts of
renewable portfolio standards in 29 States and the District of Columbia
(as well as the renewable power goals in 8 other States). (EEI, No. 87
at p. 9) DOE disagrees with EEI's assertion regarding DOE's
consideration of renewable portfolio standards. In the utility impact
analysis, DOE used the projections of electricity generation by plant
type in AEO 2013. These projections account for the estimated impacts
of all renewable portfolio standards that were in place at the end of
2012.
Several stakeholders stated that DOE did not adequately consider
power quality issues, specifically that DOE did not account for the
effect of such a large number of non-linear power supplies (constant-
torque BPM motors and multi-staging controls) without power factor
correction on the grid. Several of them stated that the non-linear
loads produced by constant-torque and constant-airflow BPM motors tend
to cause harmonic distortions in both voltage and current, and could
potentially cause voltage control problems within a power grid system.
(JCI, No. 95 at p. 9; Morrison, No. 108 at p. 7; AHRI, No. 98 at p. 11)
JCI stated that the Electric Power Research Institute suggests that
while harmonic emissions from a single system may not have a major
impact on the grid, the cumulative impact of millions of furnaces could
be significant on the grid systems within the U.S. (JCI, No. 95 at p.
9) Southern Company stated that the BPM motors considered in this
rulemaking typically have poor power factors and emit strong 3rd and
5th order harmonics, which is likely to cause problems with utility
systems at a future date when most of the older equipment has been
retired and replaced by BPM motors. (Southern Company, No. 85 at p. 4)
JCI, Morrison, and AHRI stated that the mitigation costs associated
with harmonic distortions would have a significant impact on consumers,
especially related to failure rates, maintenance and repair costs, and
the overall economic analysis for life-cycle costs. (JCI, No. 95 at p.
9; Morrison, No. 108 at p. 7; AHRI, No. 98 at p. 11) Southern Company
stated that, for furnace fans with BPM motors, DOE could assume a
percentage of households would require wiring upgrades and some
additional costs to either the utility or the homeowner for filtering
of harmonics or power factor correction. (Southern Company, No. 85 at
p. 4) APGA stated that DOE should include the cost of installation of
harmonic filters in the LCC analysis and recalculate the economic
justification of design options incorporating ECM motors. (APGA, No.
110 at p. 3)
Regarding these comments, DOE notes that a number of studies assume
that output from BPM motors is constant at full load at time of use,
similar to operation of PSC motors. However, BPM motors are
specifically designed to accommodate reduced-load operation, and,
therefore, most of the time, they will operate at part load (i.e., at
lower speeds and higher efficiency). The current of a BPM motor at
lower-speed operation is significantly lower than a PSC motor at normal
operation; therefore, total current contribution will not exceed the
existing system grid capacity. In addition, the harmonic contribution
is a small part of total circuit loading, at the lower current levels.
For example, motor performance data from GE \59\ shows an increase in
power of 133 volt-amperes (VA) from a \1/3\ HP PSC to BPM at full
output. On average, 5 to 20 residential customers are served per
distribution transformer, which are normally rated between 15 and 50
kVA.^{60 61} An increase of this current would result in an
increase in loading less than 3 percent at the extreme case. (The
extreme case is all HVAC at full load concurrently, served by the same
distribution transformer.) The transformers are normally rated
approximately 30 percent to 50 percent above predicted peak load.\62\
In this case, the increased current draw (VA) would have negligible
impact. Measured

[[Page 38182]]

performance data \63\ show a decrease in current drawn for cooling
functionality (152 VA) and an increase for heating functionality (32
VA) from PSC to equivalent BPM, confirming the small BPM loading
impact. In addition, an evaluation of increased penetration of BPM
motors in commercial buildings was presented at the ASHRAE 6 ECM Motor
Workshop at the CEC, which reviewed California Utility Codes with
regards to the BPM-specific issue.\64\ It was stated in this study that
while the power factor could be reduced to 50 percent, a BPM motor will
have a lower current draw than a PSC motor at 100 percent power factor
due to efficiency gains.
---------------------------------------------------------------------------

\59\ GE Industrial Systems, GE ECM 2.3 Series motors datasheet
(Available at: https://www.columbiaheating.com/page_images/file/GET-8068.pdf).
\60\ Farmer, C., Hines, P., Dowds, J., Blumsack, S., Modeling
the Impact of Increasing PHEV Loads on the Distribution
Infrastructure, Proceedings of the 43rd International Conference on
System Sciences (2010).
\61\ NEMA. NEMA TP 1-2002: Guide for Determining Energy
Efficiency for Distribution Transformers.
\62\ NEMA Standards Publication TP 1-2002: Guide for Determining
Energy Efficiency for Distribution Transformers (Available at:
https://www.nema.org/Standards/Pages/Guide-for-Determining-Energy-Efficiency-for-Distribution-Transformers.aspx?#download).
\63\ Gusdorf, J., M. Swinton, C. Simpson, E. Enchev, S. Hayden,
D. Furdas, and B. Castellan, Saving Electricity and Reducing GHG
Emissions with ECM Furnace Motors: Results from the CCHT and
Projections to Various Houses and Locations (2004) ACEEE Proceedings
(Available at: https://aceee.org/files/proceedings/2004/data/papers/SS04_Panel1_Paper12.pdf).
\64\ Taylor Engineering LLC, ASHRAE 6 ECM Motors, August 17th
CEC Workshop (2011) California Statewide Utility Code and Standard
Program (Available at: https://www.energy.ca.gov/title24/2013standards/prerulemaking/documents/2011-08-17_workshop/presentations/08%20EC%20Motors.pdf).
---------------------------------------------------------------------------

Regarding the EPRI study \65\ referenced in the JCI comment, DOE
noticed that the power factor impacts are associated with several types
of loads becoming common in the modern household: Low power factor
lighting, modern entertainment systems, and electric vehicle chargers,
as well as HVAC with BPM motors. This reference indicates that the
power quality issues caused by the BPM motors are a small contributor
to the total harmonic distortion experienced at the utility level
compared to all contributing loads. The study indicated that for
devices with an existing 3rd harmonic resonance, the contribution of
all new devices would require filtering; however, this correction is
not attributed to the high penetration of EC motors alone. The BPM's
third harmonic distortion contributed a 1.5-percent current increase to
the circuit. The study showed the overall impact on the 3rd, 5th, 7th
order and included in total harmonic distortion (THD) was within 0.1
percent of the original harmonic profile applied to the studied feeder.
In summary, the impact of introducing BPM motors for HVAC under a high
penetration scenario on a residential line was negligible.
---------------------------------------------------------------------------

\65\ Sharma, H. M. Rylander, and D. Dorr, Grid Impacts due to
Increased Penetration of Newer Harmonic Sources, Proceedings of IEEE
Rural Electric Power Conference (April 2013) pp. B5-1--B5-5
(Available at: https://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=6681854).
---------------------------------------------------------------------------

With regards to household power quality, furnaces have a minimum
basic electrical requirement for THD of 5 percent, and individual
harmonic distortion of 3 percent.^{66 67} Furnaces supplied
with voltages with harmonic distortion greater than 8 percent THD may
not be operated.\68\ The EPRI study, which simulates a harmonic
spectrum of a large number of BPM-based HVAC, shows that the BPM-
related harmonic distortions are within the 5 percent THD limit, and
within the 3 percent individual harmonic limit. Therefore, DOE
concludes the BPM-related harmonic distortions would not cause the
problems cited by the commenters.
---------------------------------------------------------------------------

\66\ IEEE Standard 519-1992--IEEE Recommended Practices and
Requirements for Harmonic Control in Electric Power Systems (April 9
1993) pp. 1-112 (Available at: https://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=210894).
\67\ Fluke Corporation, Generator power quality and furnaces:
The effects of harmonic distortion (2009) (Available at: https://support.fluke.com/find-sales/Download/Asset/3497420_6112_ENG_A_W.PDF).
\68\ Id.
---------------------------------------------------------------------------

In addition to the analysis described above, 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
final rule TSD.

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.\69\ 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.
---------------------------------------------------------------------------

\69\ 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 today's document, 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).\70\ 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

[[Page 38183]]

may over-estimate actual job impacts over the long run. For the final
rule, DOE used ImSET only to estimate short-term (2019 and 2024)
employment impacts.
---------------------------------------------------------------------------

\70\ 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 final rule TSD.

O. Comments on Proposed Standards

NEEP, CA IOUs, and the Joint Advocates support the selection of
DOE's proposed trial standard level, given the limited impact on
furnace fan manufacturers, positive benefits to consumers, and
substantial energy savings. (NEEP, No. 109 at p. 2; CA IOUs, No. 106 at
p. 2; Joint Advocates, No. 105 at p. 1)
A number of stakeholders disagreed with the proposed selection of
TSL 4. Rheem argued that TSL 4 is not economically justified. (Rheem,
No. 83 at p. 7) Lennox stated that because TSL 4 likely has costs that
are understated, and overly optimistic efficiency projections, DOE
should not pursue TSL 4, and instead adopt standards based on a less-
stringent, less-costly technology. (Lennox, No. 100 at p. 2) EEI
suggested the adoption of TSL 1 or TSL 2 to conserve energy, minimize
economic harm to consumers, and minimize the possible negative impacts
on the electric grid from the motors that would be able to meet the
proposed standard. (EEI, No. 87 at p. 2)
DOE has addressed specific issues regarding costs, efficiency
projections, and possible negative impacts on the electric grid in
previous parts of section IV of this document. DOE addresses the
economic justification for today's standards in section V.C of this
document.
Southern Company believes that under TSL 4, too large a proportion
of consumers have net costs. Southern Company would prefer that a
substantial majority of consumers derive benefits from a proposed rule.
(Southern Company, No. 85 at p. 3) EEI also stated that a much higher
percentages of consumers will experience a net cost than is the case
with many other DOE energy conservation standards. (EEI, No. 87 at p.
2) The Mercatus Center stated that the proposed rule will confer net
benefits on a majority of the consumers for only one product class
(i.e., non-weatherized, non-condensing gas furnace fans). It added that
the aggregate financial benefits to consumers are not spread uniformly
over the population, but instead are mostly concentrated in a minority
of households. (Mercatus Center, No. 82 at p. 7)
As shown in Table V.31 of today's final rule, more consumers would
have a net benefit from standards at TSL 4 than would have a net cost
for all of the considered product classes. For the two largest product
classes (non-weatherized non-condensing gas furnace fans and non-
weatherized condensing gas furnace fans), nearly twice as many
consumers would have a net benefit from standards at TSL 4 as would
have a net cost.
The Mercatus Center stated that seven out of eight proposed
standards at TSL 4 fail the rebuttable payback period benchmark,
thereby making it difficult for DOE to demonstrate economic
justification for the proposed rule. (Mercatus Center, No. 82 at p. 6)
In response, the commenter has misinterpreted the role of the
rebuttable payback period presumption. 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)(iii)) To determine economic
justification, DOE routinely conducts an analysis that considers the
full range of impacts, including those 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 to definitively evaluate the economic justification for a potential
standard level, thereby supporting or rebutting the results of any
preliminary determination of economic justification.
Rheem and Miller stated that the proposed standard may act as a
transfer payment from lower-income households, who are more likely to
bear net costs as a result of this rule, to higher-income households;
and that higher-priced furnace fans resulting from this rule will be
out of reach for some consumers. They stated that these distributive
impacts necessitate close scrutiny from the Department in order to
determine whether the proposed standards will actually improve social
welfare. (Rheem, No. 83 at p. 14; Miller, No. 79 at p. 14)
DOE's consumer subgroup analysis indicates that, for non-
weatherized gas furnace fans, lower-income households would have
positive average LCC savings and median PBPs less than five years (see
section V.B.1). Furthermore, many lower-income households rent rather
than own their dwelling, and are responsible for utility bills but not
for purchase of a furnace. To the extent that there is delay in the
landlords' passing of extra costs into the rent, consumers that rent
will benefit more those who own, all else being equal.
Ingersoll Rand stated that promulgating a rule at TSL4 would force
the future generation of furnaces sold in the U.S. to be less reliable
than many of those on the market today as a result of eliminating PSC
motors from the market. (Ingersoll Rand, No. 107 at p. 7) DOE notes
that furnace fans meeting today's standards are already widely
available as a substitute for units with baseline motors. DOE evaluated
issues related to reliability, as discussed in section IV.F.2, and
concluded that the benefits to consumers outweigh any costs related to
reliability that may be associated with products meeting the standards.

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 standard levels ultimately adopted by DOE in
today's final rule. Additional details regarding DOE's analyses are
contained in the TSD supporting this document.

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 mobile home furnace fans. TSL 1 consists of the most
common efficiency levels in the current 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

[[Page 38184]]

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...................................
Mobile Home Non-Weatherized, Non-Condensing 1 1 3 1 3 6
Gas Furnace Fan..............................
Mobile Home Non-Weatherized, Condensing Gas 1 1 3 1 3 6
Furnace Fan..................................
Mobile Home Electric Furnace/Modular Blower 1 1 3 4 4 6
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
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 final rule 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 final rule 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 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $347 $2,194 $2,541 $0 0 100 0 .........
1..................................... 1.................. 359 1,933 2,292 85 1 68 30 1.1
2..................................... ................... 408 1,655 2,063 263 25 25 50 3.8
3..................................... 2, 3............... 423 1,367 1,791 471 17 25 58 2.6
4..................................... 4, 5............... 501 1,249 1,750 506 30 14 56 5.4
5..................................... ................... 658 1,244 1,902 373 47 12 41 10.6
6..................................... 6.................. 694 1,150 1,844 431 50 0 50 10.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 38185]]

Table V.3--LCC and PBP Results for Non-Weatherized, Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $343 $2,134 $2,478 $0 0 100 0 .........
1..................................... 1.................. 355 1,909 2,264 58 1 75 24 1.2
2..................................... ................... 403 1,666 2,070 182 21 41 38 4.2
3..................................... 2, 3............... 416 1,402 1,818 335 11 41 48 2.9
4..................................... 4, 5............... 493 1,319 1,812 341 23 34 43 5.8
5..................................... ................... 652 1,334 1,987 219 42 29 30 12.0
6..................................... 6.................. 687 1,250 1,937 268 51 0 49 11.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table V.4--LCC and PBP Results for Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No Impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $333 $2,667 $3,000 $0 0 100 0 .........
1..................................... 1.................. 345 2,329 2,674 67 0 81 19 0.7
2..................................... ................... 393 2,025 2,418 189 8 56 36 3.2
3..................................... 2, 3............... 406 1,609 2,015 378 3 56 41 1.8
4..................................... 4, 5............... 481 1,434 1,914 447 16 33 51 4.4
5..................................... ................... 633 1,476 2,109 304 38 27 35 10.3
6..................................... 6.................. 668 1,354 2,022 391 41 0 59 8.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table V.5--LCC and PBP Results for Non-Weatherized, Non-Condensing Oil Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $417 $2,510 $2,927 $0 0 100 0 .........
1..................................... 1, 2, 4............ 427 2,356 2,783 46 13 71 17 1.7
2..................................... ................... 501 2,090 2,592 181 46 28 26 10.3
3..................................... 3, 5............... 507 1,979 2,486 259 44 28 28 4.6
4..................................... ................... 589 1,920 2,509 244 48 28 24 8.1
5..................................... ................... 813 1,922 2,736 80 56 28 16 18.3
6..................................... 6.................. 863 1,873 2,736 80 78 0 22 18.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table V.6--LCC and PBP Results for Non-Weatherized Electric Furnace/Modular Blower Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $244 $1,211 $1,455 $0 0 100 0 .........
1..................................... 1.................. 255 1,079 1,335 29 4 73 22 1.9
2..................................... ................... 299 941 1,241 88 27 37 36 6.2
3..................................... 2, 3............... 292 797 1,089 181 17 37 45 2.6
4..................................... 4, 5............... 309 747 1,055 204 23 25 51 3.2
5..................................... ................... 444 796 1,240 66 48 25 27 12.0
6..................................... 6.................. 477 748 1,225 81 60 0 39 11.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 38186]]

Table V.7--LCC and PBP Results for Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $256 $1,118 $1,374 $0 0 100 0 .........
1..................................... 1, 2, 4............ 268 1,026 1,293 36 10 56 34 2.7
2..................................... ................... 313 930 1,243 87 62 0 38 10.2
3..................................... 3, 5............... 318 867 1,185 144 55 0 45 6.8
4..................................... ................... 390 831 1,222 108 67 0 33 12.7
5..................................... ................... 530 853 1,383 (54) 81 0 19 24.3
6..................................... 6.................. 563 824 1,388 (58) 80 0 20 24.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

Table V.8--LCC and PBP Results for Mobile Home Non-Weatherized, Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $274 $1,283 $1,556 $0 0 100 0 .........
1..................................... 1, 2, 4............ 285 1,170 1,454 35 5 68 27 2.3
2..................................... ................... 330 1,061 1,391 79 43 29 28 9.7
3..................................... 3, 5............... 339 977 1,316 133 37 29 33 6.6
4..................................... ................... 411 936 1,347 103 66 4 29 15.8
5..................................... ................... 558 953 1,510 (53) 80 4 16 33.3
6..................................... 6.................. 591 917 1,508 (51) 82 0 18 31.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

Table V.9--LCC and PBP Results for Mobile Home Electric Furnace/Modular Blower Fan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Life-cycle cost 2013$ Life-cycle cost savings
----------------------------------------------------------------------------------
Percent of consumers that Median
Efficiency level TSL Discounted Average experience payback
Installed operating LCC savings --------------------------------- period
cost cost 2013$ Net years
Net cost No impact benefit
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline.............................. ................... $194 $643 $837 $0 0 100 0 .........
1..................................... 1, 2............... 204 575 778 19 7 71 22 2.1
2..................................... ................... 245 531 777 20 36 38 26 8.9
3..................................... 3.................. 237 466 702 70 26 38 37 3.6
4..................................... 4, 5............... 251 433 685 85 32 26 43 4.1
5..................................... ................... 375 487 862 (48) 57 26 18 15.0
6..................................... 6.................. 406 462 868 (54) 75 0 25 14.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses indicate negative values.

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.10) than for
non-weatherized, condensing gas furnace fans (see Table V.11). Chapter
11 of the final rule TSD provides more detailed discussion on the
consumer subgroup analysis and results for the other product classes.

[[Page 38187]]

Table V.10--Comparison of Impacts for Consumer Subgroups With All Consumers, Non-Weatherized, Non-Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average life-cycle cost savings (2013$) Median payback period (years)
-----------------------------------------------------------------------------------------------------------
Efficiency level All All
TSL Senior-only Low-income consumers Senior-only Low-income consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................... 1........................... $65 $48 $85 1.6 1.7 1.1
2........................................... ............................ 209 133 263 5.2 6.3 3.8
3........................................... 2, 3........................ 366 251 471 3.7 3.6 2.6
4........................................... 4, 5........................ 373 234 506 7.6 7.8 5.4
5........................................... ............................ 226 77 373 14.5 15.9 10.6
6........................................... 6........................... 264 96 431 13.7 15.3 10.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table V.11--Comparison of Impacts for Consumer Subgroups With All Consumers, Non-Weatherized, Condensing Gas Furnace Fans
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average life-cycle cost savings (2013$) Median payback period (years)
-----------------------------------------------------------------------------------------------------------
Efficiency level All All
TSL Senior-only Low-income consumers Senior-only Low-income consumers
--------------------------------------------------------------------------------------------------------------------------------------------------------
1........................................... 1........................... $49 $38 $58 1.5 2.0 1.2
2........................................... ............................ 155 121 182 5.5 7.1 4.2
3........................................... 2, 3........................ 288 230 335 3.7 4.4 2.9
4........................................... 4, 5........................ 275 202 341 7.5 9.7 5.8
5........................................... ............................ 141 66 219 15.4 19.5 12.0
6........................................... 6........................... 178 90 268 12.2 17.0 11.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Rebuttable Presumption Payback
As discussed in section III.E.2, 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.12 shows the rebuttable
presumption payback results to determine whether any of them meet the
rebuttable presumption conditions for the residential furnace fans
product classes.

Table V.12--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 3.3 5.3 5.3 10.3 10.3 19.4
Fan..........................................
Non-Weatherized, Condensing Gas Furnace Fan... 3.1 4.9 4.9 9.6 9.6 18.2
Weatherized Non-Condensing Gas Furnace Fan.... 3.0 4.8 4.8 9.4 9.4 17.6
Non-Weatherized, Non-Condensing Oil Furnace 2.3 2.3 5.9 2.3 5.9 19.8
Fan..........................................
Non-Weatherized Electric Furnace/Modular 3.2 5.1 5.1 5.8 5.8 15.4
Blower Fan...................................
Mobile Home Non-Weatherized, Non-Condensing 3.8 3.8 6.1 3.8 6.1 22.1
Gas Furnace Fan..............................
Mobile Home Non-Weatherized, Condensing Gas 3.5 3.5 5.7 3.5 5.7 20.9
Furnace Fan..................................
Mobile Home Electric Furnace/Modular Blower 4.3 4.3 6.8 7.7 7.7 20.2
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 final rule TSD
explains the analysis in further detail.
Industry Cash-Flow Analysis Results
Table V.13 and Table V.14 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

[[Page 38188]]

margin percentage; and (2) the preservation of per-unit 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 per-unit operating profit
markup scenario, which assumes that manufacturers would be able to earn
the same operating margin in absolute dollars per-unit 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 per unit and decreases as a percentage of
revenue.
The set of results below shows potential INPV impacts for
residential furnace fan manufacturers; Table V.13 reflects the lower
bound of impacts, and Table V.14 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 2014 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.

Table V.13--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.......................................... $M......................... 349.6 336.6 360.0 359.1 397.8 397.6 422.4
Change in INPV................................ $M......................... ......... (13.0) 10.4 9.4 48.2 48.0 72.8
(%)........................ ......... (3.7) 3.0 2.7 13.8 13.7 20.8
Product Conversion Costs...................... $M......................... 2.2 18.8 23.6 25.3 25.5 27.1 29.4
Capital Conversion Costs...................... $M......................... ......... 8.8 11.1 11.8 15.1 15.7 134.7
Total Conversion Costs........................ $M......................... 2.2 27.7 34.7 37.1 40.6 42.8 164.2
Free Cash Flow (2018)......................... $M......................... 20.3 11.3 8.8 8.0 6.4 5.6 (48.6)
Free Cash Flow (change from Base Case) (2018). %.......................... 0.0 (44.5) (56.7) (60.8) (68.3) (72.2) (339.8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
M = millions.

Table V.14--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.......................................... $M......................... 349.6 332.3 313.2 311.0 290.6 288.8 147.2
Change in INPV................................ $M......................... ......... (17.3) (36.4) (38.6) (59.0) (60.8) (202.5)
(%)........................ ......... (5.0) (10.4) (11.0) (16.9) (17.4) (57.9)
Product Conversion Costs...................... $M......................... 2.2 18.8 23.6 25.3 25.5 27.1 29.4
Capital Conversion Costs...................... $M......................... ......... 8.8 11.1 11.8 15.1 15.7 134.7
Total Conversion Costs........................ $M......................... 2.2 27.7 34.7 37.1 40.6 42.8 164.2
Free Cash Flow................................ $M......................... 20.3 11.3 8.8 8.0 6.4 5.6 (48.6)
Free Cash Flow (change from Base Case)........ %.......................... 0.0 (44.5) (56.7) (60.8) (68.3) (72.2) (339.8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Values in parentheses are negative values. All values have been rounded to the nearest tenth.
M = millions.

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 -$17.3 million
to -$13.0 million, or a change in INPV of -5.0 percent to -3.7 percent.
At this potential standard level, industry free cash flow is estimated
to decrease by as much as 44.5 percent to $11.3 million, compared to
the base-case value of $20.3 million in the year before the compliance
date (2018). DOE anticipates industry conversion costs totaling $27.7
million at TSL 1.
TSL 2 represents EL 1 for the oil and mobile 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 -$36.4
million to $10.4 million, or a change in INPV of -10.4 percent to 3.0
percent. At this potential standard level, industry free cash flow is
estimated to decrease by as much as 56.7 percent to $8.8 million,
compared to the base-case value of $20.3 million in the year before the
compliance date (2018). DOE anticipates industry conversion costs of
$34.7 million at TSL 2.
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 -$38.6 million to $9.4 million, or a change in INPV of -11.0
percent to 2.7 percent. At this potential standard level,

[[Page 38189]]

industry free cash flow is estimated to decrease by as much as 60.8
percent to $8.0 million, compared to the base-case value of $20.3
million in the year before the compliance date (2018). DOE anticipates
industry conversion costs of $37.1 million at TSL 3.
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 -$59.0 million to $48.2 million, or a
change in INPV of -16.9 percent to 13.8 percent. At this potential
standard level, industry free cash flow is estimated to decrease by as
much as 68.3 percent to $6.4 million, compared to the base-case value
of $20.3 million in the year before the compliance date (2018). DOE
anticipates industry conversion costs totaling $40.6 million at TSL 4.
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 -$60.8
million to $48.0 million, or a change in INPV of -17.4 percent to 13.7
percent. At this potential standard level, industry free cash flow is
estimated to decrease by as much as 72.2 percent to $5.6 million,
compared to the base-case value of $20.3 million in the year before the
compliance date (2018). DOE anticipates industry conversion costs of
$42.8 million at TSL 5.
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 -$202.5 million to $72.8
million, or a change in INPV of -57.9 percent to 20.8 percent. At this
potential standard level, industry free cash flow is estimated to
decrease by as much as 339.8 percent to -$48.6 million, compared to the
base-case value of $20.3 million in the year before the compliance date
(2018). DOE anticipates industry conversion costs totaling $164.2
million at TSL 6.
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.
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 2014 through
2048. DOE used statistical data from the U.S. Census Bureau's 2011
Annual Survey of Manufacturers (ASM),\71\ 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.
---------------------------------------------------------------------------

\71\ ``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.

Table V.15--Potential Changes in the Number of Furnace Fan Industry Employment in 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
Trial standard level *
------------------------------------------------------------------------------------------------------------------------
Base case 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Domestic 303 303............ 303........... 303........... 301............... 301............... 349.
Production Workers in 2019
(assuming no changes in
production locations).
Total Number of Domestic Non- 107 107............ 107........... 107........... 106............... 106............... 123.
Production Workers in 2019.
Range of Potential Changes in .......... (410) to 0..... (410) to 0.... (410) to 0.... (410) to (3)...... (410) to (3)...... (410) to 62.
Domestic Workers in 2019 **.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses represent negative values.
** DOE presents a range of potential employment impacts, where the lower range represents the scenario in which all domestic manufacturers move
production to other countries.

The employment impacts shown in Table V.15 represent the potential
production and non-production employment changes that could result
following the compliance date of a new energy conservation standard for
residential furnace fans. The upper end of the results in the table
estimates the maximum increase in the number of production and non-
production workers after the implementation of new energy conservation
standards, and it assumes

[[Page 38190]]

that manufacturers would continue to produce the same scope of covered
products within the United States. The lower end of the range indicates
the total number of U.S. production and non-production workers in the
industry who could lose their jobs if all existing production were
moved outside of the United States or if companies exited the market.
This scenario is highly conservative. Even if all production was
relocated overseas, manufacturers would likely maintain large portions
of domestic non-production staff (e.g., sales, marketing, technical,
and management employees). The industry did not provide sufficient
information for DOE fully quantify the percentage of the non-production
workers that would leave the country or be eliminated at each evaluated
standard level.
For residential furnace fans, DOE does not expect significant
changes in domestic employment levels from baseline to TSL 5. Based on
the engineering analysis, DOE has concluded that most product lines
could be converted to meet the standard with changes in motor
technology and the application of multi-staging designs. While such
designs require more controls and have more complex assembly, DOE does
not believe the per-unit labor requirements for the furnace fan
assembly would change significantly.
The only standard level at which significant changes in employment
would be expected is at TSL 6, the max-tech level. At TSL 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. Backward-
inclined impeller assemblies could require manufacturers to adjust
their assembly processes, with the potential for increases in per-unit
labor requirements. However, DOE received limited feedback from
manufacturers regarding the labor required to produce furnace 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 final rule TSD.
Impacts on Manufacturing Capacity
According to the residential furnace fan manufacturers interviewed,
the new energy conservation standards being adopted in today's final
rule would not significantly affect manufacturers' production capacity,
or throughput levels. Some manufacturers noted in interviews that
testing resources could potentially be a bottleneck to the conversion
process and cited the potential need for adding in-house testing
capacity. However, in written comments, stakeholders generally agreed
that a five-year lead time between the publication date and compliance
date is appropriate for this rulemaking.
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 15 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 final rule TSD.
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.
While the cumulative regulatory burden analysis contained in the
NOPR reflects manufacturers' concerns regarding CC&E costs, DOE has
decided to exclude CC&E costs from the cumulative burden analysis for
the final rule. The furnace fan test procedure changed from the NOPR to
the final rule. Much of the concern relating to CC&E costs expressed by
stakeholders, and summarized in the NOPR, had to do with the old test
procedure. The new test procedure reduces burden substantially. Also,
for the final rule, CC&E costs have been explicitly incorporated into
product conversion costs inputted into the GRIM, so they are no longer
considered separately in the cumulative regulatory burdens section.
DOE Energy Conservation Standards
Companies that produce a wide range of regulated products and
equipment may face more capital and product development expenditures
than competitors with a narrower scope of products and equipment. Many
furnace fan manufacturers also produce other residential and commercial
equipment. In addition to the amended energy conservation standards for
furnace fans, these manufacturers contend with several other Federal
regulations and pending regulations that apply to other products and
equipment. DOE recognizes that each regulation can significantly affect
a manufacturer's financial operations. Multiple regulations affecting
the same manufacturer can quickly strain manufacturers' profits and
possibly cause an exit from the market. Table V.16 lists the other DOE
energy conservation standards that could also affect manufacturers of
furnace fans in the 3 years leading up to and after the compliance date
of the new energy conservation standards for this equipment.
Additionally, at the request of stakeholders, DOE has listed several
DOE rulemakings in the table below that are currently in process but
that have not been finalized.

[[Page 38191]]

Table V.16--Other DOE Regulations Impacting Furnace Fan Manufacturers
----------------------------------------------------------------------------------------------------------------
Number of
Regulation Compliance impacted Estimated total industry conversion costs
year companies
----------------------------------------------------------------------------------------------------------------
Commercial Refrigeration Equipment... 2017 4 $184.0 million (2012$).
Commercial Packaged Air-Conditioning * 2018 24 N/A.**
and Heating Equipment.
Commercial/Industrial Fans and * 2019 29 N/A.**
Blowers.
Residential Boilers.................. * 2019 9 N/A.**
Residential Non-Weatherized Gas n/a 38 N/A.**
Furnaces.
----------------------------------------------------------------------------------------------------------------
* The dates listed are an approximation. The exact dates are pending final DOE action.
** For energy conservation standards that have not been issued, DOE does not have finalized industry conversion
cost data available.

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. As they are voluntary standards,
they are not considered by DOE to be part of manufacturers' cumulative
regulatory burden.
DOE discusses these and other requirements (e.g., Canadian Energy
Efficiency Regulations, California Title 24, Low NOX
requirements), and includes the full details of the cumulative
regulatory burden analysis, in chapter 12 of the final rule TSD. DOE
also discusses the impacts on the small manufacturer subgroup in the
regulatory flexibility analysis in section VI.B of this final rule.
3. National Impact Analysis
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.18 presents the estimated primary energy savings
for each considered TSL, and Table V.19 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. 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 percent), because the
upstream energy savings associated with the electricity savings are
partially or fully offset by the upstream energy use from the
additional gas or oil used by the furnace due to higher-efficiency
furnace fans.

Table V.18--Cumulative National Primary Energy Savings for Trial Standard Levels for Residential Furnace Fans
Sold in 2019-2048
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class -----------------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
quads
-----------------------------------------------------------------------------
Non-Weatherized, Non-Condensing 0.296 1.341 1.341 1.796 1.796 2.426
Gas Furnace Fan..................
Non-Weatherized, Condensing Gas 0.278 1.188 1.188 1.614 1.614 2.324
Furnace Fan......................
Weatherized Non-Condensing Gas 0.048 0.224 0.224 0.330 0.330 0.462
Furnace Fan......................
Non-Weatherized, Non-Condensing 0.006 0.006 0.022 0.006 0.022 0.046
Oil Furnace Fan..................
Non-Weatherized Electric Furnace/ 0.032 0.143 0.143 0.193 0.193 0.264
Modular Blower Fan...............
Mobile Home Non-Weatherized, Non- 0.009 0.009 0.023 0.009 0.023 0.053
Condensing Gas Furnace Fan.......

[[Page 38192]]

Mobile Home Non-Weatherized, 0.001 0.001 0.003 0.001 0.003 0.008
Condensing Gas Furnace Fan.......
Mobile Home Electric Furnace/ 0.009 0.009 0.030 0.044 0.044 0.055
Modular Blower Fan...............
-----------------------------------------------------------------------------
Total--All Classes............ 0.679 2.922 2.974 3.994 4.024 5.639
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

Table V.19--Cumulative National Full-Fuel-Cycle Energy Savings for Trial Standard Levels for Residential Furnace
Fans Sold in 2019-2048
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class -----------------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
quads
-----------------------------------------------------------------------------
Non-Weatherized, Non-Condensing 0.297 1.338 1.338 1.793 1.793 2.428
Gas Furnace Fan..................
Non-Weatherized, Condensing Gas 0.278 1.176 1.176 1.604 1.604 2.314
Furnace Fan......................
Weatherized Non-Condensing Gas 0.048 0.225 0.225 0.331 0.331 0.463
Furnace Fan......................
Non-Weatherized, Non-Condensing 0.006 0.006 0.020 0.006 0.020 0.044
Oil Furnace Fan..................
Non-Weatherized Electric Furnace/ 0.032 0.145 0.145 0.196 0.196 0.268
Modular Blower Fan...............
Mobile Home Non-Weatherized, Non- 0.009 0.009 0.022 0.009 0.022 0.052
Condensing Gas Furnace Fan.......
Mobile Home Non-Weatherized, 0.001 0.001 0.003 0.001 0.003 0.008
Condensing Gas Furnace Fan.......
Mobile Home Electric Furnace/ 0.010 0.010 0.030 0.045 0.045 0.056
Modular Blower Fan...............
Total--All Classes............ 0.680 2.909 2.958 3.986 4.014 5.635
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

OMB Circular A-4 \72\ 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 nine, rather than 30, years
of product shipments. The choice of a nin-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.\73\ The review timeframe established in EPCA is generally
not synchronized 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.20. The impacts are counted over the lifetime of products purchased
in 2019-2027.
---------------------------------------------------------------------------

\72\ 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/.)
\73\ Section 325(m) of EPCA requires DOE to review its 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. 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.20--Cumulative National Primary Energy Savings for Trial Standard Levels for Residential Furnace Fans
Sold in 2019-2027
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class -----------------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
quads
-----------------------------------------------------------------------------
Non-Weatherized, Non-Condensing 0.099 0.454 0.454 0.611 0.611 0.838
Gas Furnace Fan..................
Non-Weatherized, Condensing Gas 0.075 0.316 0.316 0.429 0.429 0.612
Furnace Fan......................
Weatherized Non-Condensing Gas 0.016 0.075 0.075 0.108 0.108 0.150
Furnace Fan......................
Non-Weatherized, Non-Condensing 0.002 0.002 0.009 0.002 0.009 0.020
Oil Furnace Fan..................
Non-Weatherized Electric Furnace/ 0.009 0.043 0.043 0.058 0.058 0.080
Modular Blower Fan...............

[[Page 38193]]

Mobile Home Non-Weatherized, Non- 0.003 0.003 0.007 0.003 0.007 0.018
Condensing Gas Furnace Fan.......
Mobile Home Non-Weatherized, 0.000 0.000 0.001 0.000 0.001 0.002
Condensing Gas Furnace Fan.......
Mobile Home Electric Furnace/ 0.003 0.003 0.009 0.013 0.013 0.017
Modular Blower Fan...............
-----------------------------------------------------------------------------
Total--All Classes............ 0.207 0.897 0.914 1.225 1.236 1.737
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

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,\74\ DOE calculated NPV using both a 7-percent and a 3-percent
real discount rate. Table V.21 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.
---------------------------------------------------------------------------

\74\ OMB Circular A-4, section E (Sept. 17, 2003) (Available at:
https://www.whitehouse.gov/omb/circulars_a004_a-4).

Table V.21--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 % 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
billion 2013$ *
------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............. 3 2.150 12.031 12.031 13.309 13.309 11.943
Non-Weatherized, Condensing Gas Furnace Fan................. 1.842 10.769 10.769 11.444 11.444 10.156
Weatherized Non-Condensing Gas Furnace Fan.................. 0.335 1.849 1.849 2.288 2.288 2.082
Non-Weatherized, Non-Condensing Oil Furnace Fan............. 0.028 0.028 0.154 0.028 0.154 0.078
Non-Weatherized Electric Furnace/Modular Blower Fan......... 0.215 1.237 1.237 1.480 1.480 0.615
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan. 0.045 0.045 0.171 0.045 0.171 (0.039)
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan..... 0.007 0.007 0.025 0.007 0.025 (0.005)
Mobile Home Electric Furnace/Modular Blower Fan............. 0.047 0.047 0.168 0.209 0.209 (0.099)
------------------------------------------------------------------------------
Total--All Classes...................................... 4.668 26.013 26.403 28.810 29.079 24.731
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............. 7 0.823 4.502 4.502 4.713 4.713 3.381
Non-Weatherized, Condensing Gas Furnace Fan................. 0.677 3.856 3.856 3.876 3.876 2.686
Weatherized Non-Condensing Gas Furnace Fan.................. 0.129 0.702 0.702 0.825 0.825 0.604
Non-Weatherized, Non-Condensing Oil Furnace Fan............. 0.012 0.012 0.061 0.012 0.061 0.006
Non-Weatherized Electric Furnace/Modular Blower Fan......... 0.078 0.438 0.438 0.515 0.515 0.014
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan. 0.017 0.017 0.058 0.017 0.058 (0.071)
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan..... 0.003 0.003 0.008 0.003 0.008 (0.010)
Mobile Home Electric Furnace/Modular Blower Fan............. 0.017 0.017 0.054 0.065 0.065 (0.102)
------------------------------------------------------------------------------

[[Page 38194]]

Total--All Classes...................................... 1.754 9.545 9.679 10.024 10.120 6.509
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Numbers in parentheses indicate negative NPV.

The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.22. 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.22--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 % 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
billion 2013$ *
------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............. 3 0.893 5.028 5.028 5.527 5.527 4.908
Non-Weatherized, Condensing Gas Furnace Fan................. 0.652 3.784 3.784 4.005 4.005 3.550
Weatherized Non-Condensing Gas Furnace Fan.................. 0.139 0.777 0.777 0.945 0.945 0.864
Non-Weatherized, Non-Condensing Oil Furnace Fan............. 0.015 0.015 0.082 0.015 0.082 0.064
Non-Weatherized Electric Furnace/Modular Blower Fan......... 0.080 0.463 0.463 0.549 0.549 0.217
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan. 0.019 0.019 0.073 0.019 0.073 (0.012)
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan..... 0.003 0.003 0.010 0.003 0.010 (0.001)
Mobile Home Electric Furnace/Modular Blower Fan............. 0.017 0.017 0.061 0.074 0.074 (0.052)
------------------------------------------------------------------------------
Total--All Classes...................................... 1.819 10.106 10.278 11.137 11.266 9.537
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace Fan............. 7 0.444 2.433 2.433 2.531 2.531 1.799
Non-Weatherized, Condensing Gas Furnace Fan................. 0.325 1.840 1.840 1.845 1.845 1.290
Weatherized Non-Condensing Gas Furnace Fan.................. 0.070 0.384 0.384 0.446 0.446 0.333
Non-Weatherized, Non-Condensing Oil Furnace Fan............. 0.008 0.008 0.040 0.008 0.040 0.015
Non-Weatherized Electric Furnace/Modular Blower Fan......... 0.039 0.220 0.220 0.257 0.257 0.001
Mobile Home Non-Weatherized, Non-Condensing Gas Furnace Fan. 0.009 0.009 0.033 0.009 0.033 (0.037)
Mobile Home Non-Weatherized, Condensing Gas Furnace Fan..... 0.001 0.001 0.004 0.001 0.004 (0.005)
Mobile Home Electric Furnace/Modular Blower Fan............. 0.008 0.008 0.026 0.031 0.031 (0.059)
------------------------------------------------------------------------------
Total--All Classes...................................... 0.905 4.904 4.980 5.128 5.186 3.338
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 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 final rule
TSD.
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

[[Page 38195]]

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 today's 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 final rule TSD presents more detailed
results about anticipated indirect employment impacts.
4. Impact on Product Utility or Performance
DOE has concluded that the standards it is adopting in this final
rule would not lessen the utility or performance of residential furnace
fans.
5. 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 in writing 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))
To assist the Attorney General in making such a determination for
today's standards, DOE provided the Department of Justice (DOJ) with
copies of the NOPR and the TSD for review. In its assessment letter
responding to DOE, DOJ concluded that the proposed energy conservation
standards for residential furnace fans are unlikely to have a
significant adverse impact on competition. DOE is publishing the
Attorney General's assessment at the end of this final rule.
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 final rule TSD.
Energy savings from standards for the residential furnace fan
products covered in today's final rule could also produce environmental
benefits in the form of reduced emissions of air pollutants and
greenhouse gases associated with electricity production. Table V.23
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 final
rule TSD.
As discussed in section IV.K, DOE did not include NOX
emissions reduction from power plants in States subject to CAIR,
because an energy conservation standard would not affect the overall
level of NOX emissions in those States due to the emissions
caps mandated by CAIR. For SO2, under the MATS, projected
emissions will be far below the cap established by CAIR, so it is
unlikely that excess SO2 emissions allowances resulting from
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.

Table V.23--Cumulative Emissions Reduction for Potential Standards for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
TSL
-----------------------------------------------------------------------------------
1 2 3 4 5 6
----------------------------------------------------------------------------------------------------------------
Primary Energy Emissions *
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)... 29.3 124.5 126.3 171.1 172.0 241.5
SO2 (thousand tons)......... 38.1 174.3 178.0 232.5 235.2 323.5
NOX (thousand tons)......... (5.2) (32.4) (33.8) (38.7) (40.2) (51.1)
Hg (tons)................... 0.1 0.3 0.3 0.4 0.4 0.5
N2O (thousand tons)......... 1.0 4.5 4.6 6.0 6.1 8.4
CH4 (thousand tons)......... 5.2 23.4 23.9 31.3 31.6 43.7
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)... 1.7 6.7 6.7 9.6 9.5 13.7
SO2 (thousand tons)......... 0.5 2.4 2.4 3.2 3.2 4.4
NOX (thousand tons)......... 22.5 84.9 85.0 122.8 122.0 177.5
Hg (tons)................... 0.0 0.0 0.0 0.0 0.0 0.0
N2O (thousand tons)......... 0.0 0.1 0.1 0.1 0.1 0.2
CH4 (thousand tons)......... 127.0 447.7 455.4 663.7 666.1 984.3
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)... 31.0 131.2 133.1 180.6 181.5 255.2
SO2 (thousand tons)......... 38.6 176.7 180.4 235.7 238.4 327.9
NOX (thousand tons)......... 17.2 52.6 51.2 84.0 81.8 126.4
Hg (tons)................... 0.1 0.3 0.3 0.4 0.4 0.5
N2O (thousand tons)......... 1.0 4.6 4.7 6.2 6.2 8.6
N2O thousand tons CO2eq **.. 302.2 1378.9 1402.4 1843.7 1859.3 2569.2
CH4 (thousand tons)......... 132.1 471.1 479.3 695.0 697.7 1028.0

[[Page 38196]]

CH4 million tons CO2eq **... 3303.3 11778 11982 17375 17442 25700
----------------------------------------------------------------------------------------------------------------
* 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).
Note: Parentheses indicate negative values.

As part of the analysis for this final rule, 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 2013$, are $12.0/ton, $40.5/ton, $62.4/ton, and $119/ton.
The values for later years are higher due to increasing damages as the
magnitude of projected climate change increases. Table V.24 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 final rule TSD.

Table V.24--Global Present Value of CO2 Emissions Reduction for Potential Standards for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
SCC Case *
---------------------------------------------------------------
TSL 3% discount
5% discount 3% discount 2.5% discount rate, 95th
rate, average rate, average rate, average percentile
----------------------------------------------------------------------------------------------------------------
million 2013$
----------------------------------------------------------------------------------------------------------------
Primary Energy Emissions **
----------------------------------------------------------------------------------------------------------------
1............................................... 184 880 1,409 2,722
2............................................... 785 3,755 6,007 11,612
3............................................... 797 3,811 6,096 11,784
4............................................... 1,077 5,152 8,245 15,934
5............................................... 1,083 5,181 8,291 16,023
6............................................... 1,517 7,265 11,628 22,467
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 10.2 50.1 81 155
2............................................... 40.0 196 315 607
3............................................... 40.0 196 316 608
4............................................... 57.0 279 449 866
5............................................... 56.6 278 447 861
6............................................... 81.7 401 644 1,241
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
1............................................... 194 930 1,489 2,878
2............................................... 825 3,951 6,323 12,219
3............................................... 837 4,007 6,412 12,392
4............................................... 1,134 5,432 8,694 16,799
5............................................... 1,140 5,459 8,737 16,884
6............................................... 1,599 7,666 12,272 23,709
----------------------------------------------------------------------------------------------------------------
* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.0, $40.5, $62.4, and $119
per metric ton (2013$). 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

[[Page 38197]]

uncertainty involved with this particular issue, DOE has included in
this final rule 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 final rule. The dollar-per-ton
values that DOE used are discussed in section IV.L. Table V.25 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.25--Present Value of NOX Emissions Reduction for Potential
Standards for Residential Furnace Fans
------------------------------------------------------------------------
TSL 3% Discount rate 7% Discount rate
------------------------------------------------------------------------
million 2013$
------------------------------------------------------------------------
Power Sector and Site Emissions *
------------------------------------------------------------------------
1............................... (3.8) 0.0
2............................... (27.1) (3.7)
3............................... (28.6) (4.1)
4............................... (31.0) (2.8)
5............................... (32.5) (3.3)
6............................... (39.4) (2.1)
------------------------------------------------------------------------
Upstream Emissions
------------------------------------------------------------------------
1............................... 25.9 10.2
2............................... 98.1 38.7
3............................... 98.3 38.8
4............................... 141.8 55.9
5............................... 140.9 55.6
6............................... 205.5 81.4
------------------------------------------------------------------------
Total FFC Emissions **
------------------------------------------------------------------------
1............................... 22.1 10.2
2............................... 71.0 35.1
3............................... 69.7 34.7
4............................... 110.8 53.1
5............................... 108.4 52.3
6............................... 166.1 79.3
------------------------------------------------------------------------
* Includes site emissions from additional use of natural gas associated
with more-efficient furnace fans.
** Components may not sum to total due to rounding.
Note: Parentheses indicate negative values.

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.26 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.

Table V.26--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 $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
TSL metric ton CO2* metric ton CO2* metric ton CO2* metric ton CO2*
and low value for and medium value and medium value and high value
NOX** for NOX** for NOX** for NOX**
----------------------------------------------------------------------------------------------------------------
billion 2013$
----------------------------------------------------------------------------------------------------------------
1................................... 4.9 5.6 6.2 7.6
2................................... 26.9 30.0 32.4 38.3
3................................... 27.3 30.5 32.9 38.9
4................................... 30.1 34.4 37.6 45.7
5................................... 30.3 34.6 37.9 46.1
6................................... 26.5 32.6 37.2 48.6
----------------------------------------------------------------------------------------------------------------

[[Page 38198]]

Consumer NPV at 7% Discount Rate added with:
---------------------------------------------------------------------------
SCC Case $12.0/ SCC Case $40.5/ SCC Case $62.4/ SCC Case $119/
TSL metric ton CO2* metric ton CO2* metric ton CO2* metric ton CO2*
and low value for and medium value and medium value and high value
NOX** for NOX** for NOX** for NOX**
----------------------------------------------------------------------------------------------------------------
billion 2013$
----------------------------------------------------------------------------------------------------------------
1................................... 2.0 2.7 3.3 4.6
2................................... 10.4 13.5 15.9 21.8
3................................... 10.6 13.7 16.1 22.1
4................................... 11.2 15.5 18.8 26.9
5................................... 11.3 15.6 18.9 27.1
6................................... 8.2 14.3 18.9 30.3
----------------------------------------------------------------------------------------------------------------
* These label values represent the global SCC in 2015, in 2013$.
** Low Value corresponds to $476 per ton of NOX emissions. Medium Value corresponds to $2,684 per ton, and High
Value corresponds to $4,893 per ton.

C. Conclusions

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 today's final rule, 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 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 final rule TSD. DOE's current analysis
does not explicitly control for heterogeneity in consumer preferences,
preferences across subcategories of products or specific features, or

[[Page 38199]]

consumer price sensitivity variation according to household income.\75\
---------------------------------------------------------------------------

\75\ 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.\76\ 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.
---------------------------------------------------------------------------

\76\ 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.27 through Table V.29 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 final rule TSD.

Table V.27--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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.680 2.909 2.958 3.986 4.014 5.635
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NPV of Consumer Benefits 2013$ billion
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3% discount rate................. 4.668 26.013 26.403 28.810 29.079 24.731
7% discount rate................. 1.754 9.545 9.679 10.024 10.120 6.509
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Emissions Reduction (FFC Emissions)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 million metric tons.......... 31.0 131.2 133.1 180.6 181.5 255.2
SO2 thousand tons................ 38.6 176.7 180.4 235.7 238.4 327.9
NOX thousand tons................ 17.2 52.6 51.2 84.0 81.8 126.4
Hg tons.......................... 0.1 0.3 0.3 0.4 0.4 0.5
N2O thousand tons................ 1.0 4.6 4.7 6.2 6.2 8.6
N2O thousand tons CO2eq *........ 302.2 1378.9 1402.4 1843.7 1859.3 2569.2
CH4 thousand tons................ 132.1 471.1 479.3 695.0 697.7 1028.0
CH4 million tons CO2eq *......... 3303 11778 11982 17375 17442 25700
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Value of Emissions Reduction (FFC Emissions) 2013$ billion
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CO2 **........................... 0.194 to 2.878 0.825 to 12.219 0.837 to 12.392 1.134 to 16.799 1.140 to 16.884 1.599 to 23.709
NOX--3% discount rate............ 0.0221 0.0710 0.0697 0.1108 0.1084 0.1661
NOX--7% discount rate............ 0.0102 0.0351 0.0347 0.0531 0.0523 0.0793
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* 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.

Table V.28--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 (baseline value is 349.6) 332.3 to 313.2 to 311.0 to 290.6 to 288.8 to 147.2 to
(2013$ in millions).................... 336.6 360.0 359.1 397.8 397.6 422.4
Change in Industry NPV (% change)....... (5.0) to (10.4) to (11.0) to (16.9) to (17.4) to (57.9) to
(3.7) 3.0 2.7 13.8 13.7 20.8
----------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2013$)
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-condensing Gas $85 $471 $471 $506 $506 $431
Furnace Fan............................
Non-Weatherized, Condensing Gas Furnace $58 $335 $335 $341 $341 $268
Fan....................................
Weatherized Non-Condensing Gas Furnace $67 $378 $378 $447 $447 $391
Fan....................................
Non-Weatherized, Non-Condensing Oil $46 $46 $259 $46 $259 $80
Furnace Fan............................
Non-Weatherized Electric Furnace/Modular $29 $181 $181 $204 $204 $81
Blower Fan.............................
Mobile Home Non-Weatherized, Non- $36 $36 $144 $36 $144 ($58)
condensing Gas Furnace Fan.............
Mobile Home Non-Weatherized, Condensing $35 $35 $133 $35 $133 ($51)
Gas Furnace Fan........................

[[Page 38200]]

Mobile Home Electric Furnace/Modular $19 $19 $70 $85 $85 ($54)
Blower Fan.............................
----------------------------------------------------------------------------------------------------------------
Consumer Median PBP (years)
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-condensing Gas 1.12 2.60 2.60 5.41 5.41 10.16
Furnace Fan............................
Non-Weatherized, Condensing Gas Furnace 1.18 2.87 2.87 5.78 5.78 11.01
Fan....................................
Weatherized Non-Condensing Gas Furnace 0.73 1.79 1.79 4.42 4.42 8.19
Fan....................................
Non-Weatherized, Non-Condensing Oil 1.70 1.70 4.65 1.70 4.65 18.56
Furnace Fan............................
Non-Weatherized Electric Furnace/Modular 1.94 2.64 2.64 3.21 3.21 11.45
Blower Fan.............................
Mobile Home Non-Weatherized, Non- 2.72 2.72 6.84 2.72 6.84 24.38
condensing Gas Furnace Fan.............
Mobile Home Non-Weatherized, Condensing 2.31 2.31 6.65 2.31 6.65 31.27
Gas Furnace Fan........................
Mobile Home Electric Furnace/Modular 2.07 2.07 3.58 4.09 4.09 14.90
Blower Fan.............................
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative values.

Table V.29--Summary of Analytical Results for Residential Furnace Fan Standards: Distribution of Consumer LCC
Impacts
----------------------------------------------------------------------------------------------------------------
Product Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6
----------------------------------------------------------------------------------------------------------------
Non-Weatherized, Non-Condensing Gas Furnace
Fan:
Net Cost.................................. 1% 17% 17% 30% 30% 50%
No Impact................................. 68% 25% 25% 14% 14% 0%
Net Benefit............................... 30% 58% 58% 56% 56% 50%
Non-Weatherized, Condensing Gas Furnace Fan:
Net Cost.................................. 1% 11% 11% 23% 23% 51%
No Impact................................. 75% 41% 41% 34% 34% 0%
Net Benefit............................... 24% 48% 48% 43% 43% 49%
Weatherized Non-Condensing Gas Furnace Fan:
Net Cost.................................. 0% 3% 3% 16% 16% 41%
No Impact................................. 81% 56% 56% 33% 33% 0%
Net Benefit............................... 19% 41% 41% 51% 51% 59%
Non-Weatherized, Non-Condensing Oil Furnace
Fan:
Net Cost.................................. 13% 13% 44% 13% 44% 78%
No Impact................................. 71% 71% 28% 71% 28% 0%
Net Benefit............................... 17% 17% 28% 17% 28% 22%
Non-Weatherized Electric Furnace/Modular
Blower Fan:
Net Cost.................................. 4% 17% 17% 23% 23% 60%
No Impact................................. 73% 37% 37% 25% 25% 0%
Net Benefit............................... 22% 45% 45% 51% 51% 39%
Mobile Home Non-Weatherized, Non-Condensing
Gas Furnace Fan:
Net Cost.................................. 10% 10% 55% 10% 55% 80%
No Impact................................. 56% 56% 0% 56% 0% 0%
Net Benefit............................... 34% 34% 45% 34% 45% 20%
Mobile Home Non-Weatherized, Condensing Gas
Furnace Fan:
Net Cost.................................. 5% 5% 37% 5% 37% 82%
No Impact................................. 68% 68% 29% 68% 29% 0%
Net Benefit............................... 27% 27% 33% 27% 33% 18%
Mobile Home Electric Furnace/Modular Blower
Fan:
Net Cost.................................. 7% 7% 26% 32% 32% 75%
No Impact................................. 71% 71% 38% 26% 26% 0%
Net Benefit............................... 22% 22% 37% 43% 43% 25%
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to total due to rounding.

First, DOE considered TSL 6, which would save an estimated total of
5.63 quads of energy, an amount DOE considers significant. TSL 6 has an
estimated NPV of consumer benefit of $6.51 billion using a 7-percent
discount rate, and $24.7 billion using a 3-percent discount rate.
The cumulative CO2 emissions reduction at TSL 6 is 255.2
million metric tons. The estimated monetary value of the CO2
emissions reductions ranges from $1.60 billion to $23.71 billion. The
other emissions reductions are 327.9 thousand tons of SO2,
126.4 thousand tons of NOX, 0.5 tons of Hg, 8.6 thousand
tons of N2O, and 1,028.0 thousand tons of CH4.
At TSL 6, the average LCC savings are positive for: (1) Non-
weatherized, non-condensing gas furnace fans; (2) non-weatherized,
condensing gas furnace fans; (3) weatherized non-condensing gas furnace
fans; (4) non-weatherized, non-condensing oil furnace fans; and (5)
non-weatherized electric furnace/modular blower fans. The LCC savings
are negative for: (1) Mobile home non-weatherized, non-condensing gas
furnace fans; (2) mobile home non-weatherized, condensing gas furnace
fans; and (3) mobile home electric furnace/modular blower fans. The
median payback period is lower than the median product lifetime (which
is 21.2 years for gas and electric furnace

[[Page 38201]]

fans) for all of the product classes except for: (1) Mobile home non-
weatherized, non-condensing gas furnace fans, and (2) mobile home non-
weatherized, condensing. 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 except for
weatherized non-condensing gas furnace fans.
At TSL 6, manufacturers may expect diminished profitability due to
increases in product costs, stranded assets, capital investments in
equipment and tooling, decreases in unit shipments, and expenditures
related to engineering and testing. The projected change in INPV ranges
from a decrease of $202.5 million to an increase of $72.8 million based
on DOE's manufacturer markup scenarios. The upper bound of $72.8
million is considered an optimistic scenario for manufacturers because
it assumes manufacturers can fully pass on substantial increases in
product costs and maintain existing mark ups. 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 57.9 percent if
impacts reach the lower bound of the range.
Accordingly, the Secretary 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
4.01 quads of energy, an amount DOE considers significant. TSL 5 has an
estimated NPV of consumer benefit of $10.1 billion using a 7-percent
discount rate, and $29.1 billion using a 3-percent discount rate.
The cumulative CO2 emissions reduction at TSL 5 is 181.5
million metric tons. The estimated monetary value of the CO2
emissions reductions ranges from $1.14 billion to $16.88 billion. The
other emissions reductions are 238.4 thousand tons of SO2,
81.8 thousand tons of NOX, 0.4 tons of Hg, 6.2 thousand tons
of N2O, and 697.7 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 mobile 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
$60.8 million to an increase of $48.0 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
17.4 percent in INPV for residential furnace fan manufacturers.
Accordingly, the Secretary 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
3.99 quads of energy, an amount DOE considers significant. TSL 4 has an
estimated NPV of consumer benefit of $10.0 billion using a 7-percent
discount rate, and $28.8 billion using a 3-percent discount rate.
The cumulative CO2 emissions reduction at TSL 4 is 180.6
million metric tons. The estimated monetary value of the CO2
emissions reductions ranges from $1.13 billion to $16.8 billion. The
other emissions reductions are 235.7 thousand tons of SO2,
84.0 thousand tons of NOX, 0.4 tons of Hg, 6.2 thousand tons
of N2O, and 695.0 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
$59.0 million to an increase of $48.2 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
16.9 percent in INPV for residential furnace fan manufacturers.
After considering the analysis and weighing the benefits and the
burdens, the Secretary 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 concluded that TSL 4 would
save a significant amount of energy and is technologically feasible and
economically justified. Therefore, DOE today is adopting the energy
conservation standards for residential furnace fans at TSL 4. Table
V.30 presents the energy conservation standards for residential furnace
fans.

Table V.30--Energy Conservation Standards for Residential Furnace Fans
------------------------------------------------------------------------
Product class Standard: FER * (W/1000 cfm)
------------------------------------------------------------------------
Non-Weatherized, Non-Condensing FER = 0.044 x QMax + 182
Gas Furnace Fan.
Non-Weatherized, Condensing Gas FER = 0.044 x QMax + 195
Furnace Fan.
Weatherized Non-Condensing Gas FER = 0.044 x QMax + 199
Furnace Fan.
Non-Weatherized, Non-Condensing FER = 0.071 x QMax + 382
Oil Furnace Fan.
Non-Weatherized Electric FER = 0.044 x QMax + 165
Furnace/Modular Blower Fan.
Mobile Home Non-Weatherized, FER = 0.071 x QMax + 222
Non-Condensing Gas Furnace Fan.
Mobile Home Non-Weatherized, FER = 0.071 x QMax + 240
Condensing Gas Furnace Fan.

[[Page 38202]]

Mobile Home Electric Furnace/ FER = 0.044 x QMax + 101
Modular Blower Fan.
Mobile Home Weatherized Non- Reserved
Condensing Gas Furnace Fan.
Mobile Home Non-Weatherized Non- Reserved
Condensing Oil Furnace Fan.
------------------------------------------------------------------------
* QMax is the airflow, in cfm, at the maximum airflow-control setting
measured using the final DOE test procedure. 79 FR 500, 524 (Jan. 3,
2014).

2. Summary of Benefits and Costs (Annualized) of Today's Standards
The benefits and costs of today's 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 2013$,
of the benefits from operating products that meet the 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.\77\ 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.
---------------------------------------------------------------------------

\77\ 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.31 shows the annualized values for today's standards for
residential furnace fans. The results under the primary estimate are as
follows. (All monetary values below are expressed in 2013$.) Using a 7-
percent discount rate for benefits and costs other than CO2
reduction (for which DOE used a 3-percent discount rate along with the
SCC series corresponding to a value of $40.5/ton in 2015), the cost of
the residential furnace fan standards in today's rule is $358 million
per year in increased equipment costs, while the benefits are $1,416
million per year in reduced equipment operating costs, $312 million in
CO2 reductions, and $5.61 million in reduced NOX
emissions. In this case, the net benefit amounts to $1,376 million per
year.
Using a 3-percent discount rate for all benefits and costs and the
SCC series corresponding to a value of $40.5/ton in 2015, Table V.31
shows the cost of the residential furnace fans standards in today's
rule is $355 million per year in increased equipment costs, while the
benefits are $2010 million per year in reduced operating costs, $312
million in CO2 reductions, and $6.36 million in reduced
NOX emissions. In this case, the net benefit amounts to
$1,973 million per year.

Table V.31--Annualized Benefits and Costs of Standards (TSL 4) for Residential Furnace Fans
----------------------------------------------------------------------------------------------------------------
Low net High net
Discount rate Primary benefits benefits
estimate * estimate estimate
----------------------------------------------------------------------------------------------------------------
million 2013$/year
----------------------------------------------------------------------------------------------------------------
Benefits:
Consumer Operating Cost Savings........... 7% 1416 1167 1718
3% 2010 1626 2467
CO[ihel2] Reduction Monetized Value ($12.0/ 5% 90 77 108
t case) **...............................
CO[ihel2] Reduction Monetized Value ($40.5/ 3% 312 268 377
t case) **...............................
CO2 Reduction Monetized Value ($62.4/t 2.5% 459 393 555
case) **.................................
CO2 Reduction Monetized Value ($119/t 3% 965 828 1166
case) **.................................
NOX Reduction Monetized Value (at $2,684/ 7% 5.61 4.80 6.82
ton) **.................................. 3% 6.36 5.35 7.86
-------------------------------------------------------------------
Total Benefits [dagger]................. 7% plus CO2 range 1,512 to 2,387 1,249 to 2,000 1,833 to 2,891
7% 1,734 1,439 2,102
3% plus CO2 range 2,106 to 2,981 1,708 to 2,459 2,583 to 3,641
3% 2,328 1,899 2,852
Costs:
Consumer Incremental Product Costs........ 7% 358 314 410
3% 355 304 419
Net Benefits:
-------------------------------------------------------------------
Total [dagger].......................... 7% plus CO2 range 1,154 to 2,029 935 to 1,685 1,423 to 2,481
7% 1,376 1,125 1,692

[[Page 38203]]

3% plus CO2 range 1,750 to 2,625 1,404 to 2,155 2,164 to 3,222
3% 1,973 1,595 2,433
----------------------------------------------------------------------------------------------------------------
* 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
2013 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 2013$, in 2015 under several scenarios. The first three
cases use the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively.
The fourth case represents the 95th percentile of the SCC distribution calculated using a 3% discount rate.
The SCC values increase over time. The value for NOX (in 2013$) 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 the SCC value
of $40.5/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 that today's 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 today's regulatory action is
an ``economically significant regulatory action'' under section 3(f) of
Executive Order 12866. Accordingly, section 6(a)(3) of the Executive
Order requires that DOE prepare a regulatory impact analysis (RIA) for
this rule and that the Office of Information and Regulatory Affairs
(OIRA) in the 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 today's final rule 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 a final regulatory flexibility analysis (FRFA) 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 FRFA for the products that are the subject
of this rulemaking.

[[Page 38204]]

1. Description and Estimated Number of Small Entities Regulated
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: https://www.sba.gov/sites/default/files/files/Size_Standards_Table.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 public databases (e.g.,
AHRI Directory,\78\ the SBA Database \79\), individual company Web
sites, and market research tools (e.g., Hoovers Web site \80\) 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.
---------------------------------------------------------------------------

\78\ See https://www.ahridirectory.org/ahriDirectory/pages/home.aspx.
\79\ See https://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm.
\80\ See Hoovers: https://www.hoovers.com./.
---------------------------------------------------------------------------

DOE initially identified 38 manufacturers of residential furnace
fan products sold in the U.S. DOE then determined that 23 were large
manufacturers or manufacturers that are foreign owned and operated. DOE
was able to determine that 15 domestic manufacturers meet the SBA's
definition of a ``small business'' and manufacture products covered by
this rulemaking.
Manufacturer Participation
Before issuing this Notice, 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.
Industry Structure
The 15 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 residential gas furnaces is almost completely
held by seven large manufacturers, and small manufacturers in total
account for only 1 percent of unit sales in the market. These seven
large manufacturers also control 97 percent of the market for central
air conditioners. The market for mobile home furnaces is primarily held
by one large manufacturer. In contrast, the market for domestic oil
furnaces is almost entirely comprised of small manufacturers.
Comparison Between Large and Small Entities
Today's 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 per
basic model and do not scale with sales volume. For each 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 standard in today's final rule for residential furnace
fans could cause small manufacturers to be at a disadvantage relative
to large manufacturers, DOE cannot certify that today's standards would
not have a significant impact on a significant number of small
businesses, and consequently, DOE has prepared this FRFA.
At TSL 4, the level adopted in today's document, DOE estimates
capital conversion costs of $0.14 million and product conversion costs
of $0.23 million over a five-year conversion period for a typical small
manufacturer. This is compared to capital conversion costs of $0.59 and
product conversion costs of $1.00 million over a five-year conversion
period 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. Table VI.1 and VI.2 show the capital and product
conversion costs for a typical small manufacturer versus those of a
typical large manufacturer. Tables VI.3 and VI.4 report the total
conversion costs as a percentage of annual R&D expense, annual revenue,
and EBIT for a typical small and large manufacturer, respectively. In
the following tables, TSL 4 represents the adopted standard.

[[Page 38205]]

Table VI.1--Comparison of Typical Small and Large Manufacturer's Capital
Conversion Costs
------------------------------------------------------------------------
Capital Capital
conversion conversion
costs for costs for
typical small typical large
manufacturer manufacturer
(in 2013$ (in 2013$
millions) millions)
------------------------------------------------------------------------
TSL 1................................... 0.08 0.35
TSL 2................................... 0.10 0.44
TSL 3................................... 0.11 0.46
TSL 4................................... 0.14 0.59
TSL 5................................... 0.14 0.62
TSL 6................................... 1.24 5.28
------------------------------------------------------------------------

Table VI.2:--Comparison of Typical Small and Large Manufacturer's
Product Conversion Costs
------------------------------------------------------------------------
Product Product
conversion conversion
costs for costs for
typical small typical large
manufacturer manufacturer
(in 2013$ (in 2013$
millions) millions)
------------------------------------------------------------------------
TSL 1................................... 0.17 0.74
TSL 2................................... 0.22 0.93
TSL 3................................... 0.23 0.99
TSL 4................................... 0.23 1.00
TSL 5................................... 0.25 1.06
TSL 6................................... 0.27 1.15
------------------------------------------------------------------------

Table VI.3--Impacts of Conversion Costs on a Small Manufacturer
----------------------------------------------------------------------------------------------------------------
Capital Product Total
conversion conversion conversion Total
cost as a cost as a cost as a conversion
percentage of percentage of percentage of cost as a
annual capital annual R&D annual percentage of
expenditures expense revenue annual EBIT
----------------------------------------------------------------------------------------------------------------
TSL 1........................................... 69% 185% 5% 72%
TSL 2........................................... 86% 232% 6% 90%
TSL 3........................................... 92% 249% 7% 96%
TSL 4........................................... 117% 250% 8% 105%
TSL 5........................................... 122% 266% 8% 111%
TSL 6........................................... 1048% 289% 31% 427%
----------------------------------------------------------------------------------------------------------------

Table VI.4--Impacts of Conversion Costs on a Large Manufacturer
----------------------------------------------------------------------------------------------------------------
Capital Product Total
conversion conversion conversion Total
cost as a cost as a cost as a conversion
percentage of percentage of percentage of cost as a
annual capital annual R&D annual percentage of
expenditures expense revenue annual EBIT
----------------------------------------------------------------------------------------------------------------
TSL 1........................................... 3% 8% 0% 3%
TSL 2........................................... 4% 10% 0% 4%
TSL 3........................................... 4% 11% 0% 4%
TSL 4........................................... 5% 11% 0% 5%
TSL 5........................................... 5% 11% 0% 5%
TSL 6........................................... 45% 12% 1% 18%
----------------------------------------------------------------------------------------------------------------

Based on the results in Table VI.1 and Table VI.2, DOE understands
that the potential conversions costs faced by small manufacturers may
be proportionally greater than those faced by larger manufacturers.
Small manufacturers have less engineering staff and lower R&D budgets.
They also have lower capital expenditures annually. As a result, the
conversion costs incurred by a small manufacturer would likely be a
larger percentage of its annual capital expenditures, R&D expenses,
revenue, and EBIT, than those for a large manufacturer.

[[Page 38206]]

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 adopted 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 technologically
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 less than 31 percent) than those
that would be achieved by the considered energy conservation standards.

C. Review Under the Paperwork Reduction Act

Manufacturers of furnace fans, or their third party
representatives, must certify to DOE that their products comply with
any applicable energy conservation standard. In certifying compliance,
manufacturers or their third-party representatives must test their
equipment according to the DOE test procedure for furnace fans,
including any amendments adopted for that test procedure. Manufacturers
or their third-party representatives must then submit certification
reports and compliance statements using DOE's electronic Web-based
tool, the Compliance and Certification Management System (CCMS),
regarding product characteristics and energy consumption information
regarding basic models of furnace fans distributed in commerce in the
U.S. CCMS uses product-specific templates that manufacturers are
required to use when submitting certification data to DOE. See https://www.regulations.doe.gov/ccms.
The collection-of-information requirement for furnace fan
certification is subject to review and approval by OMB under the
Paperwork Reduction Act (PRA). This requirement has been submitted to
OMB for approval. Public reporting burden for the certification is
estimated to average 30 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information. Note that the certification and
recordkeeping requirements for certain consumer products in 10 CFR part
430 have previously been approved by OMB and assigned OMB control
number 1910-1400; the certification requirement for furnace fans will
be included in this collection once approved by OMB. DOE will notify
the public of OMB approval through a Federal Register notice.
Public comment is sought regarding: whether this proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information shall
have practical utility; the accuracy of the burden estimate; ways to
enhance the quality, utility, and clarity of the information to be
collected; and ways to minimize the burden of the collection of
information, including through the use of automated collection
techniques or other forms of information technology. Send comments on
these or any other aspects of the collection of information to the DOE
program official listed in the ADDRESSES section above, and email to
Chad_S._Whiteman@omb.eop.gov.
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 this 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 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 rule. DOE's CX determination for this 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 it will follow in the
development of such regulations. 65 FR 13735. DOE has examined this
final rule and has determined that it would not have a substantial
direct effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. EPCA governs
and prescribes Federal preemption of State regulations as to energy
conservation for the products that are the subject of today's final
rule. States can petition DOE for exemption from such preemption to the
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) No
further action is required by Executive Order 13132.

F. Review Under Executive Order 12988

With respect to the review of existing regulations and the
promulgation of new regulations, section 3(a) of Executive Order 12988,
``Civil Justice Reform,'' 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

[[Page 38207]]

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 final 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 ``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 today's final rule, which adopts 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 final rule
could 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 final 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 this final rule and the
``Regulatory Impact Analysis'' section of the TSD for this final 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 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), today's final rule establishes 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 final 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 18, 1988), DOE has determined that this regulation 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 today's final rule under the OMB and
DOE guidelines and has concluded that it is consistent with applicable
policies in those guidelines.

K. Review Under Executive Order 13211

Executive Order 13211, ``Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use,'' 66 FR 28355
(May 22, 2001), requires Federal agencies to prepare and submit to 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 concluded that today's regulatory action, which sets forth
energy conservation standards for residential furnace fans, is not a
significant energy action because the

[[Page 38208]]

new 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 the final 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.

M. Congressional Notification

As required by 5 U.S.C. 801, DOE will report to Congress on the
promulgation of this rule prior to its effective date. The report will
state that it has been determined that the rule is a ``major rule'' as
defined by 5 U.S.C. 804(2).

VII. Approval of the Office of the Secretary

The Secretary of Energy has approved publication of this final
rule.

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 June 25, 2014.
David T. Danielson,
Assistant Secretary, Energy Efficiency and Renewable Energy.

For the reasons stated in the preamble, DOE amends 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.

Sec. 429.12 [Amended]

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

0
3. Section 429.58 is amended by:
0
a. Adding in paragraph (a)(2) introductory text ``within the scope of
appendix AA of subpart B of part 430'' after ``basic model of furnace
fan''; and
0
b. Adding paragraph (b).
The addition reads as follows:

Sec. 429.58 Furnace fans.

* * * * *
(b) Certification reports. (1) The requirements of Sec. 429.12 are
applicable to residential furnace fans; and
(2) Pursuant to Sec. 429.12(b)(13), 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 citation for part 430 continues to read as follows:

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

0
5. Section 430.2 is amended by adding definitions for ``small-duct
high-velocity (SDHV) electric furnace'' and ``small-duct high-velocity
(SDHV) modular blower'' in alphabetical order to read as follows:

Sec. 430.2 Definitions.

* * * * *
Small-duct high-velocity (SDHV) electric furnace means an electric
furnace that:
(1) Is designed for, and produces, at least 1.2 inches of external
static pressure when operated at the certified air volume rate of 220-
350 CFM per rated ton of cooling in the highest default cooling
airflow-control setting; and
(2) When applied in the field, uses high velocity room outlets
generally greater than 1,000 fpm that have less than 6.0 square inches
of free area.
Small-duct high-velocity (SDHV) modular blower means a modular
blower that:
(1) Is designed for, and produces, at least 1.2 inches of external
static pressure when operated at the certified air volume rate of 220-
350 CFM per rated ton of cooling in the highest default cooling
airflow-controls setting; and
(2) When applied in the field, uses high velocity room outlets
generally greater than 1,000 fpm that have less than 6.0 square inches
of free area.
* * * * *

0
6. Section 430.32 is amended by adding paragraph (y) to read as
follows:

[[Page 38209]]

Sec. 430.32 Energy and water conservation standards and their
effective dates.

* * * * *
(y) Residential furnace fans. Residential furnace fans incorporated
in the products listed in Table 1 of this paragraph and manufactured on
and after July 3, 2019, shall have a fan energy rating (FER) value that
meets or is less than the following values:

Table 1--Energy Conservation Standards for Covered Residential Furnace
Fans*
------------------------------------------------------------------------
Product class FER ** (Watts/cfm)
------------------------------------------------------------------------
Non-Weatherized, Non- FER = 0.044 x QMax + 182
Condensing Gas Furnace Fan
(NWG-NC).
Non-Weatherized, Condensing FER = 0.044 x QMax + 195
Gas Furnace Fan (NWG-C).
Weatherized Non-Condensing FER = 0.044 x QMax + 199
Gas Furnace Fan (WG-NC).
Non-Weatherized, Non- FER = 0.071 x QMax + 382
Condensing Oil Furnace Fan
(NWO-NC).
Non-Weatherized Electric FER = 0.044 x QMax + 165
Furnace/Modular Blower Fan
(NWEF/NWMB).
Mobile Home Non-Weatherized, FER = 0.071 x QMax + 222
Non-Condensing Gas Furnace
Fan (MH-NWG-NC).
Mobile Home Non-Weatherized, FER = 0.071 x QMax + 240
Condensing Gas Furnace Fan
(MH-NWG-C).
Mobile Home Electric Furnace/ FER = 0.044 x QMax + 101
Modular Blower Fan (MH-EF/
MB).
Mobile Home Non-Weatherized Reserved
Oil Furnace Fan (MH-NWO).
Mobile Home Weatherized Gas Reserved
Furnace Fan (MH-WG) **.
------------------------------------------------------------------------
* Furnace fans incorporated into hydronic air handlers, SDHV modular
blowers, SDHV electric furnaces, and CAC/HP indoor units are not
subject to the standards listed in this table.
** QMax is the airflow, in cfm, at the maximum airflow-control setting
measured using the final DOE test procedure at 10 CFR part 430,
subpart B, appendix AA.

Note: The following will not appear in the Code of Federal
Regulations.

[[Page 38210]]

[GRAPHIC] [TIFF OMITTED] TR03JY14.001

[[Page 38211]]

[GRAPHIC] [TIFF OMITTED] TR03JY14.002

[FR Doc. 2014-15387 Filed 7-2-14; 8:45 am]
BILLING CODE 6450-01-P

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