Energy Conservation Program: Energy Conservation Standards for Consumer Boilers, 55128-55217 [2023-16476]
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55128
Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
DEPARTMENT OF ENERGY
10 CFR Part 430
[EERE–2019–BT–STD–0036]
RIN 1904–AE82
Energy Conservation Program: Energy
Conservation Standards for Consumer
Boilers
Office of Energy Efficiency and
Renewable Energy, Department of
Energy.
ACTION: Notice of proposed rulemaking
and announcement of public meeting.
AGENCY:
The Energy Policy and
Conservation Act, as amended (EPCA),
prescribes energy conservation
standards for various consumer
products and certain commercial and
industrial equipment, including
consumer boilers. EPCA also requires
the U.S. Department of Energy (DOE or
the Department) to periodically
determine whether more-stringent
standards would be technologically
feasible and economically justified and
would result in significant energy
savings. In this notice of proposed
rulemaking (NOPR), DOE proposes
amended energy conservation standards
for consumer boilers, and also
announces a public meeting to receive
comment on these proposed standards
and associated analyses and results.
DATES:
Comments: DOE will accept
comments, data, and information
regarding this NOPR no later than
October 13, 2023.
Meeting: DOE will hold a public
meeting via webinar on Tuesday,
September 12, 2023 from 1:00 p.m. to
4:00 p.m. See section VII, ‘‘Public
Participation,’’ for webinar registration
information, participant instructions
and information about the capabilities
available to webinar participants.
Comments regarding the likely
competitive impact of the proposed
standard should be sent to the
Department of Justice contact listed in
the ADDRESSES section on or before
September 13, 2023.
ADDRESSES: Interested persons are
encouraged to submit comments using
the Federal eRulemaking Portal at
www.regulations.gov under docket
number EERE–2019–BT–STD–0036.
Follow the instructions for submitting
comments. Alternatively, interested
persons may submit comments,
identified by docket number EERE–
2019–BT–STD–0036 and/or RIN 1904–
AE82, by any of the following methods:
Email:
ConsumerBoilers2019STD0036@
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SUMMARY:
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ee.doe.gov. Include the docket number
EERE–2019–BT–STD–0036 and/or RIN
1904–AE82 in the subject line of the
message.
Postal Mail: Appliance and
Equipment Standards Program, U.S.
Department of Energy, Building
Technologies Office, Mailstop EE–5B,
1000 Independence Avenue SW,
Washington, DC 20585–0121. If
possible, please submit all items on a
compact disc (CD), in which case it is
not necessary to include printed copies.
Hand Delivery/Courier: Appliance
and Equipment Standards Program, U.S.
Department of Energy, Building
Technologies Office, 950 L’Enfant Plaza
SW, 6th Floor, Washington, DC 20024.
Telephone: (202) 287–1445. If possible,
please submit all items on a CD, in
which case it is not necessary to include
printed copies.
No telefacsimiles (faxes) will be
accepted. For detailed instructions on
submitting comments and additional
information on this process, see section
VII (Public Participation) of this
document.
Docket: The docket for this activity,
which includes Federal Register
notices, 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.
The docket web page can be found at
www.regulations.gov/docket/EERE2019-BT-STD-0036. The docket web
page contains instructions on how to
access all documents, including public
comments, in the docket. See section VII
(Public Participation) of this document
for information on how to submit
comments through
www.regulations.gov.
EPCA requires the Attorney General
to provide DOE a written determination
of whether the proposed standard is
likely to lessen competition. The U.S.
Department of Justice Antitrust Division
invites input from market participants
and other interested persons with views
on the likely competitive impact of the
proposed standard for consumer boilers.
Interested persons may contact the
Division at energy.standards@usdoj.gov
on or before the date specified in the
DATES section. Please indicate in the
‘‘Subject’’ line of your email the title
and Docket Number of this proposed
rulemaking.
FOR FURTHER INFORMATION CONTACT:
Ms. Julia Hegarty, U.S. Department of
Energy, Office of Energy Efficiency and
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Renewable Energy, Building
Technologies Office, EE–5B, 1000
Independence Avenue SW, Washington,
DC 20585–0121. Telephone: (240) 597–
6737. Email:
ApplianceStandardsQuestions@
ee.doe.gov.
Mr. Eric Stas, U.S. Department of
Energy, Office of the General Counsel,
GC–33, 1000 Independence Avenue SW,
Washington, DC 20585–0121.
Telephone: (202) 586–5827. Email:
Eric.Stas@hq.doe.gov.
For further information on how to
submit a comment, review other public
comments and the docket, or participate
in the public meeting webinar, contact
the Appliance and Equipment
Standards Program staff at (202) 287–
1445 or by email:
ApplianceStandardsQuestions@
ee.doe.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Proposed 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
Consumer Boilers
C. Deviation From Appendix A
III. General Discussion
A. General Comments
B. Scope of Coverage
C. Test Procedure
D. Boilers Not Requiring Electricity
E. Technological Feasibility
1. General
2. Maximum Technologically Feasible
Levels
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and
Consumers
b. Savings in Operating Costs Compared To
Increase in Price (LCC and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of
Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related
Comments
A. Market and Technology Assessment
1. Product Classes
a. Fossil Fuel-Fired Hot Water Boilers
b. Hydronic Heat Pump Boilers
2. Market Assessment
3. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
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C. Engineering Analysis
1. Efficiency Analysis
a. Baseline Efficiency
b. Higher Efficiency Levels
2. Cost Analysis
3. Manufacturer Markup and Shipping
Costs
4. Cost-Efficiency Results
D. Markups Analysis
E. Energy Use Analysis
1. Building Sample
2. Space Heating Energy Use
a. Heating Load Calculation
b. Impact of Return Water Temperature on
Efficiency
c. Impact of Jacket Losses on Energy Use
d. Impact of Excess Air Adjustments
3. Water Heating Use
F. Life-Cycle Cost and Payback Period
Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the NoNew-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model
and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Product and Capital Conversion Costs
d. Manufacturer Markup Scenarios
3. Manufacturer Interviews
a. The Replacement Market
4. Discussion of MIA Comments
K. Emissions Analysis
1. Air Quality Regulations Incorporated in
DOE’s Analysis
L. Monetizing Emissions Impacts
1. Monetization of Greenhouse Gas
Emissions
a. Social Cost of Carbon
b. Social Cost of Methane and Nitrous
Oxide
2. Monetization of Other Emissions
Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy
Savings
1. Economic Impacts on Individual
Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
1 All references to EPCA in this document refer
to the statute as amended through the Energy Act
of 2020, Public Law 116–260 (Dec. 27, 2020), which
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a. Industry Cash-Flow Analysis Results
b. Direct 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 Utility or Performance of
Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs
Considered for Consumer Boiler
Standards
2. Annualized Benefits and Costs of the
Proposed Standards
D. Reporting, Certification, and Sampling
Plan
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866
and 13563
B. Review Under the Regulatory Flexibility
Act
C. Review Under the Paperwork Reduction
Act of 1995
D. Review Under the National
Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates
Reform Act of 1995
H. Review Under the Treasury and General
Government Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General
Government Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality
Bulletin for Peer Review
VII. Public Participation
A. Participation in the Public Meeting
Webinar
B. Procedure for Submitting Prepared
General Statements for Distribution
C. Conduct of the Webinar
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Synopsis of the Proposed Rule
The Energy Policy and Conservation
Act, as amended (EPCA),1 Public Law
94–163 (codified at 42 U.S.C. 6291–
6317), authorizes DOE to regulate the
energy efficiency of a number of
consumer products and certain
industrial equipment. (42 U.S.C. 6291–
6317) Title III, Part B 2 of EPCA
established the Energy Conservation
Program for Consumer Products Other
Than Automobiles. (42 U.S.C. 6291–
6309) These products include consumer
reflect the last statutory amendments that impact
Parts A and A–1 of EPCA.
2 For editorial reasons, upon codification in the
U.S. Code, Part B was redesignated Part A.
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boilers, the subject of this rulemaking.
(42 U.S.C. 6292(a)(5)) 3
Pursuant to EPCA, any new or
amended energy conservation standard
must be designed to achieve the
maximum improvement in energy
efficiency that DOE determines is
technologically feasible and
economically justified. (42 U.S.C.
6295(o)(2)(A)) Furthermore, the new or
amended standard must result in a
significant conservation of energy. (42
U.S.C. 6295(o)(3)(B)) EPCA also
provides that not later than six years
after issuance of any final rule
establishing or amending a standard,
DOE must publish either a notice of
determination that standards for the
product do not need to be amended, or
a notice of proposed rulemaking
including new proposed energy
conservation standards (proceeding to a
final rule, as appropriate). (42 U.S.C.
6295(m)(1))
In accordance with these and other
statutory provisions discussed in this
document, DOE analyzed the benefits
and burdens of four trial standard levels
(TSLs) for consumer boilers. The TSLs
and their associated benefits and
burdens are discussed in detail in
sections V.A–C of this document. As
discussed in section V.C of this
document, DOE has tentatively
determined that TSL 3 represents the
maximum improvement in energy
efficiency that is technologically
feasible and economically justified. The
proposed standards at TSL 3, which are
expressed in minimum annual fuel
utilization efficiency (AFUE), standby
mode power consumption (PW,SB) and
off mode power consumption (PW,OFF),
are shown in Table I.1. These proposed
standards, if adopted, would apply to all
consumer boilers listed in Table I.1
manufactured in, or imported into, the
United States starting on the date five
years after the date of publication of the
final rule for this rulemaking.
Specifically, DOE is proposing morestringent AFUE standards for gas-fired
and oil-fired boilers while maintaining
the current standards for electric steam
and hot water boilers. Additionally,
DOE is proposing to maintain the design
requirements and exceptions to the
minimum AFUE requirements
established by statute and currently
codified at 10 CFR 430.32(e)(2). (See 42
U.S.C. 6295(f)(3)(A)–(C))
3 DOE notes that consumer boilers are defined as
a subcategory of covered consumer furnaces (see 42
U.S.C. 6291(23)).
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TABLE I.1—PROPOSED ENERGY CONSERVATION STANDARDS FOR CONSUMER BOILERS
AFUE
(%) *
Product class
PW,SB
(W) *
PW,OFF
(W) *
Design requirements *
Gas-fired Hot Water ...................
95
9
9
Gas-Fired Steam ........................
Oil-fired Hot Water ......................
82
88
8
11
8
11
Oil-fired Steam ............................
Electric Hot Water ......................
86
None
11
8
11
8
Electric Steam ............................
None
8
8
Constant-burning pilot not permitted. Automatic means for adjusting water temperature required (except for boilers equipped
with tankless domestic water heating coils).
Constant-burning pilot not permitted.
Automatic means for adjusting temperature required (except for
boilers equipped with tankless domestic water heating coils).
None.
Automatic means for adjusting temperature required (except for
boilers equipped with tankless domestic water heating coils).
None.
* A boiler that is manufactured to operate without any need for electricity or any electric connection, electric gauges, electric pumps, electric
wires, or electric devices is not required to meet the AFUE, PW,SB, PW,OFF, or design requirements, but must meet the requirements of 10 CFR
430.32(e)(2)(i) which include a minimum AFUE of 75 percent for gas-fired steam boilers and a minimum AFUE of 80 percent for all other boilers.
A. Benefits and Costs to Consumers
Table I.2 presents DOE’s evaluation of
the economic impacts of the proposed
standards on consumers of consumer
boilers, as measured by the average life-
cycle cost (LCC) savings and the simple
payback period (PBP).4 The average LCC
savings are positive for all product
classes, and the PBP is less than the
average lifetime of consumer boilers,
which is estimated to be 26.9 years for
gas-fired hot water boilers, 23.7 years for
gas-fired steam boilers, 25.6 years for
oil-fired hot water boilers, and 19.6
years for oil-fired steam boilers (see
section IV.F.6 of this document for
further details).
TABLE I.2—IMPACTS OF PROPOSED ENERGY CONSERVATION STANDARDS ON CONSUMERS OF CONSUMER BOILERS
Product class
Average LCC
savings
(2022$)
Simple payback period
(years)
Gas-fired Hot Water .................................................................................................................................................
Gas-fired Steam .......................................................................................................................................................
Oil-fired Hot Water ...................................................................................................................................................
Oil-fired Steam .........................................................................................................................................................
768
........................
666
310
2.7
........................
3.3
5.5
DOE’s analysis of the impacts of the
proposed standards on consumers is
described in section IV.F of this
document.
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B. Impact on Manufacturers 5
The industry net present value (INPV)
is the sum of the discounted cash flows
starting from the publication year (2023)
of the NOPR and continuing through the
30-year period following the expected
compliance date of the standards (2023–
2059). Using a real discount rate of 9.7
percent, DOE estimates that the INPV
for manufacturers of consumer boilers
in the case without amended standards
is $532.0 million. Under the proposed
standards, the change in INPV is
estimated to range from ¥11.7 percent
to ¥7.7 percent, which is
approximately ¥$62.2 million to
¥$40.7 million. In order to bring
products into compliance with amended
standards, it is estimated that the
4 The average LCC savings refer to consumers that
are affected by a standard and are measured relative
to the distribution of purchased boilers, and their
associated energy efficiency, in the no-newstandards case, which depicts the market in the
compliance year in the absence of new or amended
standards (see section IV.F.8 of this document). The
simple PBP, which is designed to compare specific
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industry would incur total conversion
costs of $98.0 million.
DOE’s analysis of the impacts of the
proposed standards on manufacturers is
described in section IV.J of this
document. The analytic results of the
manufacturer impact analysis (MIA) are
presented in section V.B.2 of this
document.
DOE’s analyses indicate that the
proposed energy conservation standards
for consumer boilers would save a
significant amount of energy. Relative to
the case without amended standards,
the lifetime energy savings for consumer
boilers purchased in the 30-year period
that begins in the anticipated year of
compliance with the amended standards
(2030–2059) amount to 0.7 quadrillion
British thermal units (Btu), or quads.6
This represents a savings of 2.3 percent
relative to the energy use of these
products in the case without amended
standards (referred to as the ‘‘no-newstandards case’’ or as the baseline).
The cumulative net present value
(NPV) of total consumer benefits of the
proposed standards for consumer
boilers ranges from $0.72 billion (at a 7percent discount rate) to $2.27 billion
(at a 3-percent discount rate). This NPV
expresses the estimated total value of
future operating-cost savings minus the
estimated increased product and
installation costs for consumer boilers
purchased in 2030–2059 relative to the
baseline.
In addition, the proposed standards
for consumer boilers are projected to
yield significant environmental benefits.
DOE estimates that the proposed
standards would result in cumulative
emission reductions (over the same
period as for energy savings) of 39
million metric tons (Mt) 7 of carbon
dioxide (CO2), 438 thousand tons of
efficiency levels, is measured relative to the
baseline product (see section IV.C of this
document).
5 All monetary values in this document are
expressed in 2022 dollars.
6 The quantity refers to full-fuel-cycle (FFC)
energy savings. FFC energy savings 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. For more information on the FFC metric,
see section IV.H.1 of this document.
7 A metric ton is equivalent to 1.1 short tons.
Results for emissions other than CO2 are presented
in short tons.
C. National Benefits and Costs
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methane (CH4), 0.17 thousand tons of
nitrous oxide (N2O), 105 thousand tons
of nitrogen oxides (NOX), and 2.7
thousand tons of sulfur dioxide (SO2),
and an increase of 0.001 tons of mercury
(Hg) due to slightly higher electricity
consumption.8
DOE estimates the value of climate
benefits from a reduction in greenhouse
gases (GHG) using four different
estimates of the social cost of CO2 (SC–
CO2), the social cost of methane (SC–
CH4), and the social cost of nitrous
oxide (SC–N2O). Together these
represent the social cost of GHG (SC–
GHG). DOE used interim SC–GHG
values developed by an Interagency
Working Group on the Social Cost of
Greenhouse Gases (IWG).9 The
derivation of these values is discussed
in section IV.L of this document. For
presentational purposes, the climate
benefits associated with the average SC–
GHG at a 3-percent discount rate over
the period of analysis are estimated to
be $2.0 billion. DOE does not have a
single central SC–GHG point estimate,
and it emphasizes the importance and
value of considering the benefits
calculated using all four sets of SC–GHG
estimates.
DOE estimated the monetary health
benefits of SO2 and NOX emissions
reductions using benefit per ton
estimates from the scientific literature,
as discussed in section IV.L of this
document. DOE estimated the present
value of the health benefits would be
$1.1 billion using a 7-percent discount
rate, and $3.3 billion using a 3-percent
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discount rate.10 DOE is currently only
monetizing (for SO2 and NOX) health
benefits from changes in fine particulate
matter (PM2.5) precursors (SO2 and NOX)
and for changes in an ozone precursor
(NOX), but will continue to assess the
ability to monetize other effects such as
health benefits from reductions in direct
PM2.5 emissions.
Table I.3 summarizes the monetized
benefits and costs expected to result
from the proposed standards for
consumer boilers. There are other
important unquantified effects,
including certain unquantified climate
benefits, unquantified public health
benefits from the reduction of toxic air
pollutants and other emissions,
unquantified energy security benefits,
and distributional effects, among others.
TABLE I.3—PRESENT VALUE OF MONETIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS
FOR CONSUMER BOILERS
[TSL 3]
Billion 2022$
3% discount rate
Consumer Operating Cost Savings .....................................................................................................................................................
Climate Benefits * .................................................................................................................................................................................
Health Benefits ** .................................................................................................................................................................................
Total Monetized Benefits † ..................................................................................................................................................................
Consumer Incremental Product Costs ‡ ..............................................................................................................................................
Net Monetized Benefits .......................................................................................................................................................................
Change in Producer Cashflow (INPV ‡‡) .............................................................................................................................................
3.1
2.0
3.3
8.5
0.8
7.6
(0.06)¥(0.04)
7% discount rate
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Consumer Operating Cost Savings .....................................................................................................................................................
Climate Benefits * (3% discount rate) ..................................................................................................................................................
Health Benefits ** .................................................................................................................................................................................
Total Monetized Benefits † ..................................................................................................................................................................
Consumer Incremental Product Costs ‡ ..............................................................................................................................................
Net Monetized Benefits .......................................................................................................................................................................
Change in Producer Cashflow (INPV ‡‡) .............................................................................................................................................
1.1
2.0
1.1
4.3
0.4
3.9
(0.06)¥(0.04)
Note: This table presents present value (in 2022$) of the costs and benefits associated with consumer boilers shipped in 2030–2059. These
results include benefits which accrue after 2059 from the products shipped in 2030–2059.
* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide
(SC–N2O) (model average at 2.5-percent, 3-percent, and 5-percent discount rates; 95th percentile at 3-percent discount rate) (see section IV.L of
this document). Together these represent the global SC–GHG. For presentational purposes of this table, the climate benefits associated with the
average SC–GHG at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates
presented in the Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order
13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as
health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details.
† Total and net benefits include those consumer, climate, and health benefits that can be quantified and monetized. For presentation purposes,
total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but
DOE does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated
using all four sets of SC–GHG estimates.
‡ Costs include incremental equipment costs as well as installation costs.
8 DOE calculated emissions reductions relative to
the no-new-standards case, which reflects key
assumptions in the Annual Energy Outlook 2023
(AEO 2023). AEO 2023 represents current Federal
and State legislation and final implementation of
regulations as of the time of its preparation. See
section IV.K of this document for further discussion
of AEO2023 assumptions that effect air pollutant
emissions.
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9 To monetize the benefits of reducing GHG
emissions this analysis uses the interim estimates
presented in the Technical Support Document:
Social Cost of Carbon, Methane, and Nitrous Oxide
Interim Estimates Under Executive Order 13990
published in February 2021 by the IWG. (‘‘February
2021 SC–GHG TSD’’). www.whitehouse.gov/wpcontent/uploads/2021/02/
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TechnicalSupportDocument_
SocialCostofCarbonMethaneNitrousOxide.pdf.
10 DOE estimates the economic value of these
emissions reductions resulting from the considered
trial standard levels (TSLs) for the purpose of
complying with the requirements of Executive
Order 12866.
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‡‡ Operating Cost Savings are calculated based on the life cycle costs analysis and national impact analysis as discussed in detail below. See
sections IV.F and IV.H of this document. DOE’s NIA includes all impacts (both costs and benefits) along the distribution chain beginning with the
increased costs to the manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE also
separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the detailed MIA, DOE
models manufacturers’ pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule’s expected impact on the INPV. The change in INPV is the present value of all changes in industry
cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. Change in INPV is calculated using the
industry weighted average cost of capital value of 9.7 percent that is estimated in the manufacturer impact analysis (see chapter 12 of the NOPR
TSD for a complete description of the industry weighted average cost of capital). For consumer boilers, those values are ¥$62 million and ¥$41
million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C of this document.
DOE is presenting the range of impacts to the INPV under two markup scenarios: the Preservation of Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings in this table, and the Preservation of Operating Profit
Markup scenario, where DOE assumed manufacturers would not be able to increase per-unit operating profit in proportion to increases in manufacturer production costs. DOE includes the range of estimated INPV in the above table, drawing on the MIA explained further in section IV.J, to
provide additional context for assessing the estimated impacts of this proposal to society, including potential changes in production and consumption, which is consistent with OMB’s Circular A–4 and E.O. 12866. If DOE were to include the INPV into the net benefit calculation for this
proposed rule, the net benefits would range from $7.54 billion to $7.56 billion at 3-percent discount rate and would range from $3.84 billion to
$3.86 billion at 7-percent discount rate. DOE seeks comment on this approach.
The benefits and costs of the proposed
standards can also be expressed in terms
of annualized values. The monetary
values for the total annualized net
benefits are: (1) the reduced consumer
operating costs, minus (2) the increase
in product purchase prices and
installation costs, plus (3) the monetized
value of climate and health benefits of
emission reductions, all annualized.11
The national operating cost savings
are domestic private U.S. consumer
monetary savings that occur as a result
of purchasing the covered products and
are measured for the lifetime of
consumer boilers shipped in 2030–2059.
The benefits associated with reduced
emissions achieved as a result of the
proposed standards are also calculated
based on the lifetime of consumer
boilers shipped in 2030–2059. Total
benefits for both the 3-percent and 7percent cases are presented using the
average GHG social costs with 3-percent
discount rate. Estimates of SC–GHG
values are presented for all four
discount rates in section IV.L.1 of this
document.
Table I.4 presents the total estimated
monetized benefits and costs associated
with the proposed standard, expressed
in terms of annualized values. The
results under the primary estimate are
as follows.
Using a 7-percent discount rate for
consumer benefits and costs and health
benefits from reduced NOX and SO2
emissions, and the 3-percent discount
rate case for climate benefits from
reduced GHG emissions, the estimated
monetized cost of the standards
proposed in this rule is $52 million per
year in increased equipment costs,
while the estimated annual benefits are
$139 million in reduced equipment
operating costs, $124 million in
monetized climate benefits, and $137
million in monetized health benefits. In
this case, the net monetized benefit
would amount to $348 million per year.
Using a 3-percent discount rate for all
benefits and costs, the estimated
monetized cost of the proposed
standards is $50 million per year in
increased equipment costs, while the
estimated annual monetized benefits are
$188 million in reduced operating costs,
$124 million in monetized climate
benefits, and $204 million in in
monetized air pollutant health benefits.
In this case, the net benefit would
amount to $466 million per year.
TABLE I.4—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR
CONSUMER BOILERS
[TSL 3]
Million 2022$/year
Primary
estimate
Low-netbenefits
estimate
High-netbenefits
estimate
3% discount rate
Consumer Operating Cost Savings .........................................................................................................
Climate Benefits * .....................................................................................................................................
Health Benefits ** .....................................................................................................................................
Total Monetized Benefits † ......................................................................................................................
Consumer Incremental Product Costs ‡ ..................................................................................................
Net Monetized Benefits ...........................................................................................................................
Change in Producer Cashflow (INPV ‡‡) .................................................................................................
188
124
204
516
50
466
(6)¥(4)
175
121
200
496
58
438
(6)¥(4)
233
144
237
613
38
575
(6)¥(4)
139
124
137
400
52
348
129
121
135
385
59
326
169
144
158
470
41
430
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7% discount rate
Consumer Operating Cost Savings .........................................................................................................
Climate Benefits * (3% discount rate) ......................................................................................................
Health Benefits ** .....................................................................................................................................
Total Monetized Benefits † ......................................................................................................................
Consumer Incremental Product Costs ‡ ..................................................................................................
Net Monetized Benefits ...........................................................................................................................
11 To convert the time-series of costs and benefits
into annualized values, DOE calculated a present
value in 2023, the year used for discounting the
NPV of total consumer costs and savings. For the
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benefits, DOE calculated a present value associated
with each year’s shipments in the year in which the
shipments occur (e.g., 2030), and then discounted
the present value from each year to 2023. Using the
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present value, DOE then calculated the fixed annual
payment over a 30-year period, starting in the
compliance year, that yields the same present value.
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55133
TABLE I.4—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR
CONSUMER BOILERS—Continued
[TSL 3]
Million 2022$/year
Primary
estimate
Change in Producer Cashflow (INPV ‡‡) .................................................................................................
(6)¥(4)
Low-netbenefits
estimate
(6)¥(4)
High-netbenefits
estimate
(6)¥(4)
Note: This table presents the present value (in 2022$) of the costs and benefits associated with consumer boilers shipped in 2030–2059.
These results include benefits which accrue after 2059 from the products shipped in 2030–2059. The Primary, Low-Net-Benefits, and High-NetBenefits Estimates utilize projections of energy prices from the AEO 2023 Reference case, Low-Economic-Growth case, and High-EconomicGrowth case, respectively. In addition, incremental equipment costs reflect a constant trend in the Primary Estimate, an increasing rate in the
Low-Net-Benefits Estimate, and a decreasing rate in the High-Net-Benefits Estimate. The methods used to derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational
purposes of this table, the climate benefits associated with the average SC–GHG at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support Document: Social Cost of Carbon, Methane,
and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as
health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details.
† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the
Department does not have a single central SC–GHG point estimate.
‡ Costs include incremental equipment costs as well as installation costs.
‡‡ Operating Cost Savings are calculated based on the life cycle costs analysis and national impact analysis as discussed in detail below. See
sections IV.F and IV.H of this document. DOE’s NIA includes all impacts (both costs and benefits) along the distribution chain beginning with the
increased costs to the manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE also
separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the detailed MIA, DOE
models manufacturers’ pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule’s expected impact on the INPV. The change in INPV is the present value of all changes in industry
cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized change in INPV is calculated using the industry weighted average cost of capital value of 9.7 percent that is estimated in the manufacturer impact analysis (see chapter 12 of the NOPR TSD for a complete description of the industry weighted average cost of capital). For consumer boilers, those values are
¥$6 million and ¥$4 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C
of this document. DOE is presenting the range of impacts to the INPV under two markup scenarios: the Preservation of Gross Margin scenario,
which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings in this table, and the Preservation of
Operating Profit Markup scenario, where DOE assumed manufacturers would not be able to increase per-unit operating profit in proportion to increases in manufacturer production costs. DOE includes the range of estimated annualized change in INPV in the above table, drawing on the
MIA explained further in section IV.J of this document, to provide additional context for assessing the estimated impacts of this proposal to society, including potential changes in production and consumption, which is consistent with OMB’s Circular A–4 and E.O. 12866. If DOE were to include the INPV into the annualized net benefit calculation for this proposed rule, the annualized net benefits would range from $460 million to
$462 million at 3-percent discount rate and would range from $342 million to $344 million at 7-percent discount rate. DOE seeks comment on
this approach.
ddrumheller on DSK120RN23PROD with PROPOSALS2
DOE’s analysis of the national impacts
of the proposed standards is described
in sections IV.H, IV.K and IV.L of this
document.
D. Conclusion
DOE has tentatively concluded that
the proposed standards represent the
maximum improvement in energy
efficiency that is technologically
feasible and economically justified, and
would result in the significant
conservation of energy. Specifically,
with regards to technological feasibility,
products achieving these standard levels
are already commercially available for
all product classes covered by this
proposal. As for economic justification,
DOE’s analysis shows that the benefits
of the proposed standard exceed, to a
great extent, the burdens of the
proposed standards.
Using a 7-percent discount rate for
consumer benefits and costs and NOX
and SO2 reduction benefits, and a 3percent discount rate case for GHG
social costs, the estimated monetized
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cost of the proposed standards for
consumer boilers is $52 million per year
from increased consumer boiler costs,
while the estimated annual monetized
benefits are $139 million in reduced
consumer boiler operating costs, $124
million in monetized climate benefits,
and $137 million in monetized air
pollutant health benefits. The net
monetized benefit amounts to $348
million per year.
The significance of energy savings
offered by a new or amended energy
conservation standard cannot be
determined without knowledge of the
specific circumstances surrounding a
given rulemaking.12 For example, some
covered products and equipment have
substantial energy consumption occur
during periods of peak energy demand.
The impacts of these products on the
energy infrastructure can be more
12 Procedures, Interpretations, and Policies for
Consideration in New or Revised Energy
Conservation Standards and Test Procedures for
Consumer Products and Commercial/Industrial
Equipment, 86 FR 70892, 70901 (Dec. 13, 2021).
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pronounced than products with
relatively constant demand.
Accordingly, DOE evaluates the
significance of energy savings on a caseby-case basis.
As previously mentioned, the
proposed standards are projected to
result in estimated national energy
savings of 0.7 quads full-fuel-cycle
(FFC), the equivalent of the primary
annual energy use of 6.5 million homes,
and NPV of total consumer benefits
from $0.72 billion (at a 7-percent
discount rate) to $2.27 billion (at a 3percent discount rate) over the 30-year
analysis period beginning with the
expected compliance year (2030–2059).
In addition, they are projected to reduce
CO2 emissions by 44 Mt. Based on these
findings, DOE has initially determined
the energy savings from the proposed
standard levels are ‘‘significant’’ within
the meaning of 42 U.S.C. 6295(o)(3)(B).
A more detailed discussion of the basis
for these tentative conclusions is
contained in the remainder of this
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document and the accompanying
technical support document (TSD).13
DOE also considered more-stringent
energy efficiency levels as potential
standards, and is still considering them
in this rulemaking. However, DOE has
tentatively concluded that the potential
burdens of the more-stringent energy
efficiency levels would outweigh the
projected benefits.
Based on consideration of the public
comments DOE receives in response to
this document and related information
collected and analyzed during the
course of this rulemaking effort, DOE
may adopt energy efficiency levels
presented in this document that are
either higher or lower than the proposed
standards, or some combination of
level(s) that incorporate the proposed
standards in part.
II. Introduction
The following section briefly
discusses the statutory authority
underlying this proposed rule, as well
as some of the relevant historical
background related to the establishment
of standards for consumer boilers.
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A. Authority
EPCA, Public Law 94–163 (codified at
42 U.S.C. 6291–6317) authorizes DOE to
regulate the energy efficiency of a
number of consumer products and
certain industrial equipment. Title III,
Part B of EPCA established the Energy
Conservation Program for Consumer
Products Other Than Automobiles. (42
U.S.C. 6291–6309) These products
include consumer boilers, the subject of
this document. (42 U.S.C. 6292(a)(5))
EPCA prescribed energy conservation
standards for these products (42 U.S.C.
6295(f)(3)), and the statute directed DOE
to conduct future rulemakings to
determine whether to amend these
standards. (42 U.S.C. 6295(f)(4)(C))
EPCA further provides that, not later
than six years after the issuance of any
final rule establishing or amending a
standard, DOE must publish either a
notice of determination that standards
for the product do not need to be
amended, or a NOPR including new
proposed energy conservation standards
(proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(1))
Under EPCA, the energy conservation
program consists essentially of four
parts: (1) testing, (2) labeling, (3) Federal
energy conservation standards, and (4)
certification and enforcement
procedures. Relevant provisions of
EPCA specifically include definitions
13 The TSD is available in the docket for this
rulemaking at: www.regulations.gov/docket/EERE2019-BT-STD-0036.
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(42 U.S.C. 6291), test procedures (42
U.S.C. 6293), labeling provisions (42
U.S.C. 6294), energy conservation
standards (42 U.S.C. 6295), and the
authority to require information and
reports from manufacturers (42 U.S.C.
6296).
Federal energy efficiency
requirements for covered products
established under EPCA generally
supersede State laws and regulations
concerning energy conservation testing,
labeling, and standards. (42 U.S.C.
6297(a)–(c)) DOE may, however, grant
waivers of Federal preemption in
limited circumstances for particular
State laws or regulations, in accordance
with the procedures and other
provisions set forth under EPCA. (See
42 U.S.C. 6297(d))
Subject to certain criteria and
conditions, DOE is required to develop
test procedures to measure the energy
efficiency, energy use, or estimated
annual operating cost of each covered
product. (42 U.S.C. 6295(o)(3)(A) and
6295(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 42 U.S.C. 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
consumer boilers appear at title 10 of
the Code of Federal Regulations (CFR)
part 430, subpart B, appendix EE.14
DOE must follow specific statutory
criteria for prescribing new or amended
standards for covered products,
including consumer boilers. EPCA
requires that any new or amended
energy conservation standard for a
covered product must be designed to
achieve the maximum improvement in
energy efficiency that the Secretary of
Energy determines is technologically
feasible and economically justified. (42
U.S.C. 6295(o)(2)(A) and (o)(3)(B)) 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 consumer boilers, if no test
procedure has been established for the
product, or (2) if DOE determines by
14 On March 13, 2023, DOE published a final rule
in the Federal Register amending the test procedure
for consumer boilers and moving this test procedure
to a new appendix EE effective on April 12, 2023.
88 FR 15510.
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rule that the standard is not
technologically feasible or economically
justified. (42 U.S.C. 6295(o)(3)(A)–(B))
In deciding whether a proposed
standard is economically justified, 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
statutory factors:
(1) The economic impact of the standard
on manufacturer 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 of,
initial charges for, 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))
Further, EPCA 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. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA also contains what is known as
an ‘‘anti-backsliding’’ provision, which
prevents the Secretary from prescribing
any amended standard that either
increases the maximum allowable
energy use or decreases the minimum
required energy efficiency of a covered
product. (42 U.S.C. 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 in 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))
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Additionally, EPCA specifies
requirements when promulgating an
energy conservation standard for a
covered product that has two or more
subcategories. DOE must specify a
different standard level for a type or
class of 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
the feature and other factors DOE deems
appropriate. Id. Any rule prescribing
such a standard must include an
explanation of the basis on which such
higher or lower level was established.
(42 U.S.C. 6295(q)(2))
Finally, pursuant to the amendments
contained in the Energy Independence
and Security Act of 2007 (EISA 2007),
Pub. L. 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.
55135
6295(gg)(3)(A)–(B)) DOE’s current test
procedures for consumer boilers address
standby mode and off mode energy use
in separate metrics (PW,SB and PW,OFF,
respectively). In this proposed
rulemaking, DOE intends to consider
these metrics in addition to the active
mode metric, AFUE.
B. Background
1. Current Standards
In a final rule published in the
Federal Register on January 15, 2016
(January 2016 Final Rule), DOE
prescribed the current energy
conservation standards for consumer
boilers manufactured on and after
January 15, 2021. 81 FR 2320, 2416–
2417. These standards are set forth in
DOE’s regulations at 10 CFR
430.32(e)(2)(iii) and are repeated in
Table II.1.
TABLE II.1—FEDERAL ENERGY CONSERVATION STANDARDS FOR CONSUMER BOILERS *
AFUE
(percent) **
Product class
PW,SB
(watts) †
PW,OFF
(watts) †
Design requirements
Gas-fired Hot Water ...................
84
9
9
Gas-fired Steam .........................
Oil-fired Hot Water ......................
82
86
8
11
8
11
Oil-fired Steam ............................
Electric Hot Water ......................
85
None
11
8
11
8
Electric Steam ............................
None
8
8
Constant-burning pilot not permitted. Automatic means for adjusting water temperature required (except for boilers equipped
with tankless domestic water heating coils).
Constant-burning pilot not permitted.
Automatic means for adjusting temperature required (except for
boilers equipped with tankless domestic water heating coils).
None.
Automatic means for adjusting temperature required (except for
boilers equipped with tankless domestic water heating coils).
None.
* A boiler that is manufactured to operate without any need for electricity or any electric connection, electric gauges, electric pumps, electric
wires, or electric devices is not required to meet the AFUE or design requirements. Instead, such boilers must meet a minimum AFUE of 80 percent (for all classes except gas-fired steam), and 75 percent for gas-fired steam.
** AFUE stands for Annual Fuel Utilization Efficiency, as determined in 10 CFR 430.23(n)(2).
† PW,SB and PW,OFF stand for standby mode power consumption and off mode power consumption, respectively.
ddrumheller on DSK120RN23PROD with PROPOSALS2
2. History of Standards Rulemaking for
Consumer Boilers
DOE initiated this rulemaking
pursuant to its six-year-lookback
authority under 42 U.S.C. 6295(m)(1).
On March 25, 2021, DOE published in
the Federal Register a request for
information (RFI) that initiated an early
assessment review to determine whether
any new or amended standards would
satisfy the relevant requirements of
EPCA for a new or amended energy
conservation standard for consumer
boilers (March 2021 RFI). 86 FR 15804.
Specifically, through the March 2021
RFI, DOE sought data and information
that could enable the agency to
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determine whether DOE should propose
a ‘‘no new standard’’ determination
because a more-stringent standard: (1)
would not result in a significant savings
of energy; (2) is not technologically
feasible; (3) is not economically
justified; or (4) any combination of
foregoing. Id. Additionally, DOE granted
a 30-day comment extension for the
March 2021 RFI (for a total of a 60-day
comment period) in a notice published
in the Federal Register on April 9, 2021.
86 FR 18478, 18479.
Subsequently, on May 4, 2022, DOE
published in the Federal Register a
preliminary analysis and TSD for
purposes of evaluating the need for
amended energy conservation standards
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for consumer boilers (May 2022
Preliminary Analysis). 87 FR 26304. The
May 2022 Preliminary Analysis and
TSD discussed the analytical
framework, models, and tools used to
evaluate potential standards, and the
results of the preliminary analyses
performed. Id. DOE held a public
meeting webinar on June 16, 2022, to
receive comments on its May 2022
Preliminary Analysis for consumer
boilers.
DOE received comments in response
to the May 2022 Preliminary Analysis
from the interested parties listed in
Table II.2.
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TABLE II.2—MAY 2022 PRELIMINARY ANALYSIS WRITTEN COMMENTS *
Comment No.
in the docket
Commenter(s)
Abbreviation
American Gas Association, American Public Gas Association, National Propane
Gas Association.
Air-Conditioning, Heating, and Refrigeration Institute ...............................................
AGA, APGA, and
NPGA.
AHRI .......................
40, 42
Bradford White Corporation .......................................................................................
Crown Boiler Company ..............................................................................................
Appliance Standards Awareness Project, American Council for an Energy-Efficient
Economy, Consumer Federation of America, National Consumer Law Center,
Natural Resources Defense Council.
Northwest Energy Efficiency Alliance ........................................................................
BWC .......................
Crown .....................
Joint Advocates ......
39
30
35
NEEA ......................
36
New York State Energy Research and Development Authority ...............................
PB Heat, LLC .............................................................................................................
Rheem Manufacturing Company ...............................................................................
U.S. Boiler Company, Inc ..........................................................................................
Weil-McLain Technologies .........................................................................................
NYSERDA ..............
PB Heat ..................
Rheem ....................
U.S. Boiler ..............
WMT .......................
33
34
37
31
32
38
Commenter type
Utility Trade Associations.
Manufacturer Trade
Association.
Manufacturer.
Manufacturer.
Efficiency Advocacy
Organizations.
Efficiency Advocacy
Organization.
State Agency.
Manufacturer.
Manufacturer.
Manufacturer.
Manufacturer.
* DOE received one additional comment to this docket that was not accessible and is not discussed further.
ddrumheller on DSK120RN23PROD with PROPOSALS2
A parenthetical reference at the end of
a comment quotation or paraphrase
provides the location of the item in the
public record.15 To the extent that
interested parties have provided written
comments that are substantively
consistent with any oral comments
provided during the June 16, 2022
Preliminary Analysis public meeting
webinar, DOE cites the written
comments throughout this document.
C. Deviation From Appendix A
In accordance with section 3(a) of 10
CFR part 430, subpart C, appendix A
(appendix A), DOE notes that it deviated
from the provision at section 6(a)(2) in
appendix A regarding the pre-NOPR
stages for an energy conservation
standards rulemaking (specifically, the
publication of a framework document).
As initially discussed in the May 2022
Preliminary Analysis, DOE opted to
deviate from this step by publishing a
preliminary analysis without a
framework document. A framework
document is intended to introduce and
summarize the various analyses DOE
conducts during the rulemaking process
and requests initial feedback from
interested parties. As noted in the May
2022 Preliminary Analysis, prior to that
document, DOE published an RFI in the
Federal Register in which DOE
identified and sought comment on the
analyses conducted in support of the
most recent energy conservation
standards rulemakings for boilers. 87 FR
26304, 26307 (May 4, 2022).
15 The parenthetical reference provides a
reference for information located in the docket of
DOE’s rulemaking to develop energy conservation
standards for consumer boilers. (Docket No. EERE–
2019–BT–STD–0036, which is maintained at
www.regulations.gov). The references are arranged
as follows: (commenter name, comment docket ID
number, page of that document).
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In accordance with section 3(a) of
appendix A, DOE notes that it is
deviating from the provision in
appendix A specifying that there will
not be less than 75 days for public
comment on the NOPR (section 6(f)(2) of
appendix A). The public comment
period on this NOPR will be 60 days.
DOE is opting to deviate from this step
because the May 2022 Preliminary
Analysis already allowed stakeholders
an opportunity to comment on the
analytical methods and subsequent
preliminary results. Additionally, DOE
extended the comment period for the
March 2021 RFI by 30 days for a total
of a 60-day comment period. 86 FR
18478, 18479 (April 9, 2021). This
NOPR relies on the same overall
approach, but has updated the analyses
to incorporate stakeholder feedback in
response to the preliminary results.
Consequently, DOE has concluded that
that a comment period of 60 days is
appropriate and will provide interested
parties a meaningful opportunity to
comment on the proposed rule.
DOE notes that it is not deviating from
the provisions in section 8(d)(1) of
appendix A, which state that a test
procedure final rule should be
published at least 180 days prior to the
close of a comment period of a NOPR
proposing amended standards for the
products within the scope of the test
procedure final rule. Specifically,
section 8(d)(1) pertains to test procedure
amendments that impact measured
energy use or efficiency. Most recently,
DOE published a test procedure final
rule in the Federal Register on March
13, 2023. 88 FR 15510. In this final rule,
DOE concluded that the updates to the
test procedure have minimal impact on
AFUE ratings and that manufacturers
will be able to rely on data generated
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under the previous version of that test
procedure. Thus, an analysis of
potential amended energy conservation
standards for consumer boilers can be
carried out using current performance
data, so the 180-day requirement does
not apply.
III. General Discussion
DOE developed this proposal after
considering oral and written comments,
data, and information from interested
parties that represent a variety of
interests. The following discussion
addresses issues raised by these
commenters.
A. General Comments
This section summarizes general
comments received from interested
parties regarding rulemaking timing and
process.
AGA, APGA, and NPGA requested
that DOE host a workshop to walk
through the Department’s analytical
approach for stakeholders and the
public in general, because these
commenters suggested that the TSDs
and associated spreadsheets are
complex and appear not to be consistent
across product categories. (AGA, APGA,
NPGA, No. 38 at p. 4)
In response, DOE notes that the
Department posts its TSDs and
spreadsheet analyses to the rulemaking
docket found at regulations.gov in order
to provide transparency into the
methodology used to arrive at the
results presented in this NOPR. As
stated in the DATES section of this
proposed rule, DOE will host a public
meeting via webinar which will include
an overview of DOE’s methodology and
provide an opportunity for stakeholders
to provide additional comments or pose
questions on this topic.
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Crown and U.S. Boiler stated that a
60-day comment period was insufficient
to review the May 2022 Preliminary
Analysis, given that several calculations
and underlying assumptions have
changed since the previous rulemaking.
(Crown, No. 30 at p. 2; U.S. Boiler, No.
31 at p. 1)
As explained in the May 2022
Preliminary Analysis, DOE opted to
provide a 60-day comment period
because the Department had already
requested comment in the March 2021
RFI on its energy conservation standards
analyses. DOE incorporated then most
recent data inputs but largely relied on
many of the same analytical
assumptions and approaches used in the
previous rulemaking, such that the
agency determined that a 60-day
comment period in conjunction with the
prior comment period for the March
2021 RFI provided sufficient time for
interested parties to review the
preliminary analysis and develop
comments. 87 FR 26304, 26307 (May 4,
2022). Further, DOE notes that it is
providing an additional 60-day
comment period for this NOPR, which
again relies on the same analytical
structure as the May 2022 Preliminary
Analysis.
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B. Scope of Coverage
Consumer boilers are appliances that
transfer heat using combustion gases or
electricity to water to provide hot water
or steam for space heating.
Consumer boilers are defined in EPCA
as a type of furnace. Specifically, the
term ‘‘furnace’’ is defined as a product
which utilizes only single-phase electric
current, or single-phase electric current
or direct current in conjunction with
natural gas, propane, or home heating
oil, and which—
Is designed to be the principal heating
source for the living space of a
residence;
Is not contained within the same
cabinet with a central air conditioner
whose rated cooling capacity is above
65,000 Btu per hour (Btu/h);
Is an electric central furnace, electric
boiler, forced-air central furnace, gravity
central furnace, or low pressure steam
or hot water boiler; and
Has a heat input rate of less than
300,000 Btu/h for electric boilers and
low pressure steam or hot water boilers
and less than 225,000 Btu/h for forcedair central furnaces, gravity central
furnace, and electric central furnaces.
(42 U.S.C. 6291(23))
DOE has codified definitions for the
terms ‘‘electric boiler’’ and ‘‘low
pressure steam or hot water boiler’’ in
its regulations as follows:
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Electric boiler means an electrically
powered furnace designed to supply
low pressure steam or hot water for
space heating application. A low
pressure steam boiler operates at or
below 15 pounds per square inch gauge
(psig) steam pressure; a hot water boiler
operates at or below 160 psig water
pressure and 250 degrees Fahrenheit
(°F) water temperature.
Low pressure steam or hot water
boiler means an electric, gas, or oilburning furnace designed to supply low
pressure steam or hot water for space
heating application. A low pressure
steam boiler operates at or below 15 psig
steam pressure; a hot water boiler
operates at or below 160 psig water
pressure and 250 °F water temperature.
10 CFR 430.2.
In the May 2022 Preliminary
Analysis, DOE requested comment on
hydronic heat pumps as technology
options for consumer boilers. (See the
Executive Summary of the preliminary
analysis TSD). In response, the
Department received multiple
comments regarding the classification of
hydronic heat pump boilers. Hydronic
heat pumps, commonly air-to-water heat
pumps, are systems that use the
refrigeration cycle to heat or chill water
for domestic hot water or space
conditioning use.
Crown and U.S. Boiler stated that heat
pumps should not be classified as
boilers due to their inability to generate
water temperatures high enough to
satisfy the design heating load of the
vast majority of the residential hot water
heating systems in the United States.
(Crown, No. 30 at p. 3; U.S. Boiler, No.
31 at p. 3) BWC also disagreed with
DOE’s interpretation in the May 2022
Preliminary Analysis that air-to-water
and water-to-water heat pumps (heat
pump products) should be considered
as consumer boilers, stating that heat
pump products have pronounced
differences that separate them from
boilers. BWC also claimed that DOE has
listed the two products separately on
their website, as well as in DOE’s
Compliance Certification Management
System (CCMS) database. (BWC, No. 39
at p. 1) AHRI similarly commented that
heat pumps should not be included
under the current regulatory definitions
for boilers and boiler product classes, as
the products cannot reach the same
water temperature as conventional
boilers and cannot provide sufficient
heating year-round without assistance.
AHRI recommended DOE update the
current definition of a ‘‘boiler’’ to
include the ability to provide the
required heat on the coldest day of the
year. AHRI further recommended that
given the difference in the form, fit, and
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function of heat pumps and
conventional boilers, DOE should
establish a separate definition and
product class for these heat pump
products. (AHRI, No. 40 at p. 3)
In contrast, Rheem, NYSERDA, the
Joint Advocates, and NEEA all
suggested that heat pump boilers are
capable of meeting home heating design
loads and should be considered as
consumer boilers. (Rheem, No. 37 at p.
3; NYSERDA, No. 33 at p. 2; Joint
Advocates, No. 35 at pp. 1–2; NEEA, No.
36 at pp. 1–2) Rheem also stated that
while heat pumps may not reach the
same maximum temperatures as
conventional products, heat pumps can
provide adequate space heating in many
applications. (Rheem, No. 37 at p. 2)
In the March 2023 TP Final Rule,
which was the most recent rulemaking
amending the consumer boiler test
procedure, DOE addressed similar
comments suggesting hydronic air-towater heat pump boilers and water-towater heat pump boilers should be
excluded from the ‘‘boiler’’ definitions
because they cannot provide the same
maximum water temperature as nonheat pump hydronic systems.
Specifically, in the March 2023 TP Final
Rule, DOE noted that neither the EPCA
definition nor DOE’s definitions at 10
CFR 430.2 for consumer boilers provide
a minimum water temperature
requirement and, thus, do not exclude
hydronic heat pump boilers from being
considered as consumer boilers. DOE
also noted in the March 2023 TP Final
Rule that hydronic heat pump boilers
are marketed as providing the principal
heating source for a residence. 88 FR
15510, 15515–15516 (March 13, 2023).
In response to the comments received
on the May 2022 Preliminary Analysis,
DOE again reviewed the market for
hydronic heat pumps. Based on its
review of the hydronic heat pumps
currently on the market, DOE agrees
with Rheem, NYSERDA, the Joint
Advocates, and NEEA that hydronic
heat pumps can provide enough space
heating to serve home design loads in
many applications. These products
utilize only single-phase electric current
or direct current in conjunction with
natural gas, propane, or home heating
oil, can be designed to be the principal
heating source for the living space of a
residence, are not contained within the
same cabinet with a central air
conditioner whose rated cooling
capacity is above 65,000 Btu/h, meet the
definition of an ‘‘electric boiler,’’ and
have a heat input rate of less than
300,000 Btu/h (i.e., the requirement for
electric boilers). As such, hydronic heat
pumps which are designed to be the
principal heating source of the living
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space of a residence meet the criteria of
‘‘furnace’’ as defined in EPCA at 42
U.S.C. 6291(23). Further, the
Department notes that these products
also meet DOE’s codified regulatory
definition for ‘‘low pressure steam or
hot water boiler.’’ Therefore, DOE
considers hydronic heat pumps to be
within the scope of coverage for
consumer boilers. However, as
discussed in section III.C of this
document, there is no currentlyapplicable test procedure for hydronic
heat pump consumer boilers, and as a
result, DOE has not considered these
products further in this NOPR.
In this NOPR, DOE has considered
products which meet the definitions for
‘‘electric boiler’’ and ‘‘low pressure
steam or hot water boiler’’ to be
consumer boilers within the scope of
this rulemaking, with the exception of
hydronic heat pump boilers, for which
there is currently no applicable test
procedure to determine compliance
with standards.
See section IV.A.1 of this document
for discussion of the product classes
analyzed in this NOPR.
C. Test Procedure
EPCA sets forth generally applicable
criteria and procedures for DOE’s
adoption and amendment of test
procedures. (42 U.S.C. 6293)
Manufacturers of covered products must
use these test procedures to quantify the
efficiency of their product, to certify to
DOE that their product complies with
energy conservation standards, and
when making efficiency-related
representations to the public. (42 U.S.C.
6293(c) and 42 U.S.C. 6295(s)) EPCA
states that the AFUE is the efficiency
descriptor for furnaces and boilers (See
42 U.S.C. 6291(20) and (22)); however,
as discussed in section II.A of this
document, DOE is required to also
account for standby mode and off mode
energy consumption. Accordingly, for
the current consumer boiler energy
conservation standards, AFUE is the
active mode efficiency metric, while
PW,SB and PW,OFF are the metrics for
standby mode and off mode electrical
energy consumption, respectively (see
10 CFR 430.32(e)(2)(iii)). All three of
these metrics are measured by the DOE
test procedure for consumer boilers.
On March 13, 2023, DOE published a
final rule in the Federal Register
amending the test procedure for
consumer boilers (March 2023 TP Final
Rule). 88 FR 15510. The amended test
procedure became effective on April 12,
2023.
Prior to April 12, 2023, the DOE test
procedure for determining the AFUE,
PW,SB, and PW,OFF of consumer boilers
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was located at appendix N to subpart B
of 10 CFR part 430 (appendix N) and
referenced American Society of Heating,
Refrigerating and Air-Conditioning
Engineers (ASHRAE) Standard 103–
1993, ‘‘Method of Testing for Annual
Fuel Utilization Efficiency of
Residential Central Furnaces and
Boilers’’ 16 and International
Electrotechnical Commission (IEC)
62301 (Edition 2.0), ‘‘Household
electrical appliances—Measurement of
standby power.’’ AFUE is an annualized
fuel efficiency metric that fully accounts
for fuel consumption in active, standby,
and off modes but does not include
auxiliary electrical energy consumption.
PW,SB and PW,OFF are measures of the
standby mode and off mode power
consumption, respectively, in watts.
In the March 2023 TP final rule, DOE
updated appendix N to remove the
provisions applicable only to consumer
boilers and to rename the appendix
‘‘Uniform Test Method for Measuring
the Energy Consumption of Furnaces.’’
Correspondingly, the final rule
established a new test procedure
specific to consumer boilers in a new
appendix EE to subpart B of 10 CFR part
430 (appendix EE). On and after
September 11, 2023, manufacturers will
be required to use the amended test
procedure (though manufacturers may
opt to do so early (i.e., any time after
April 12, 2023)), per the March 2023 TP
Final Rule, to determine ratings for
consumer boilers. The amended test
procedure located at appendix EE
consists of all provisions that were
previously included in appendix N
relevant to consumer boilers, with the
following modifications:
Incorporating by reference the current
revision to the applicable industry
standard, American National Standards
Institute (ANSI)/ASHRAE Standard
103–2017, ‘‘Methods of Testing for
Annual Fuel Utilization Efficiency of
Residential Central Furnaces and
Boilers;’’
Incorporating by reference the current
revision of American Society for Testing
and Materials (ASTM) Standard D2156–
09 (Reapproved 2018), ‘‘Standard Test
Method for Smoke Density in Flue
Gases from Burning Distillate Fuels;’’
Incorporating by reference ANSI/
ASHRAE Standard 41.6–2014,
‘‘Standard Method for Humidity
Measurement;’’
16 American Society for Testing and Materials
(ASTM) Standard D2159–09 (Reapproved 2013),
‘‘Standard test methods and procedures for Smoke
Density in Flue Gases From Burning Distillate
Fuels,’’ (ASTM D2156–09 (R2013)) is also
referenced by the appendix EE test procedure for
setting up oil-fired burners.
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Updating the definitions to reflect the
changes in ANSI/ASHRAE 103–2017 as
compared to ANSI/ASHRAE 103–1993;
Removing the definition of ‘‘outdoor
furnace or boiler’’ from 10 CFR 430.2;
Making certain corrections to improve
the accuracy, repeatability, and
reproducibility of calculations within
the test procedure.
88 FR 15510, 15512–15513 (March 13,
2023).
DOE determined that the amendments
in the March 2023 TP Final Rule would
minimally impact the measured
efficiency of certain consumer boilers,
and retesting and re-rating would not be
required. 88 FR 15510, 15514 (March
13, 2023). Therefore, DOE expects that
the energy efficiency and energy
consumption ratings currently achieved
are still representative of ratings that
would be achieved under the revised
test method. As a result, DOE evaluated
potential amended energy conservation
standards for consumer boilers using
current market data.
As discussed in section III.B of this
document, DOE has become aware of
hydronic air-to-water and water-towater heat pumps, which DOE has
determined meet the definitional
criteria to be classified as consumer
boilers. However, the AFUE metric
described in ASHRAE 103–2017 (which
is incorporated by reference into
appendix EE) calculates the efficiency of
an electric boiler as 100 percent minus
jacket loss,17 which provides a
representative measure of efficiency for
electric boilers using electric resistance
technology, for which an efficiency
value of 100 percent (the ratio of heat
output to energy input) is the maximum
upper limit that technically could be
achieved. DOE concluded that the
AFUE metric would not provide a
representative or meaningful measure of
efficiency for a boiler with a heat pump
supplying the heat input, because heat
pump efficiency (in terms of heat output
to energy input) typically exceeds 100
percent, and the AFUE metric does not
allow for ratings greater than 100
percent for electric boilers. 88 FR 15510,
15515 (March 13, 2023). Similarly, the
ASHRAE 103–2017 test procedure
assumes a maximum value of 100
percent for gas-fired and oil-fired boilers
when calculating the steady-state
efficiency and heating seasonal
efficiency, such that the methodology
would not result in representative AFUE
17 The term ‘‘jacket loss’’ is used by industry to
mean the transfer of heat from the outer surface (i.e.,
jacket) of a boiler to the ambient air surrounding the
boiler.
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values for gas-fired or oil-fired
absorption heat pump boilers.
Rheem, NYSERDA, the Joint
Advocates, and NEEA all urged DOE to
develop a test procedure for heat pump
consumer boilers. (Rheem, No. 37 at p.
3; NYSERDA, No. 33 at p. 2; Joint
Advocates, No. 35 at p. 2; NEEA, No. 36
at p. 2)
DOE will consider heat pump boilers
when re-evaluating the test procedure
for consumer boilers in a future
rulemaking. As noted in section III.B of
this document, due to the lack of a
Federal test procedure at this time
which adequately addresses AFUE for
heat pump boilers, DOE has initially
determined not to analyze heat pump
boilers in this standards rulemaking.
However, the standby mode and off
mode power consumption test
procedures in appendix EE remain
applicable to heat pump boilers; hence,
these metrics are required for heat pump
boilers. Similarly, the statutory design
requirements at 10 CFR
430.32(e)(2)(iii)(A) apply to these
products.
D. Boilers Not Requiring Electricity
On July 28, 2008, DOE published a
final rule technical amendment in the
Federal Register to codify the
requirements that would be applicable
to consumer boilers as established in the
Energy Independence and Security Act
of 2007. 73 FR 43611. That final rule
codified, as per the statute, that a boiler
that is manufactured to operate without
any need for electricity or any electric
connection, electric gauges, electric
pumps, electric wires, or electric
devices shall not be required to meet the
current minimum AFUE standards or
design requirements for consumer
boilers. Id. at 73 FR 43613.
As a result of this statutory exception,
the regulations require that boilers
manufactured to operate without any
need for electricity or any electric
connection, electric gauges, electric
pumps, electric wires, or electric
devices must still meet the minimum
AFUE requirements in 10 CFR
430.32(e)(2)(i)—namely, a minimum
AFUE of 80 percent (for all classes
except gas-fired steam boilers), and 75
percent for gas-fired steam boilers.
In subsequent final rules, including
the January 2016 final rule, DOE
maintained this exception for boilers
not requiring electricity as required by
EPCA; however, the codified language
had a technical error wherein the
exception inadvertently only applied to
boilers manufactured on or after
September 1, 2012, and before January
15, 2021 (see 10 CFR 430.32(e)(2)(v),
which only references 10 CFR
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430.32(e)(2)(ii)). The provisions at 10
CFR 430.32(e)(2)(v) apply also to boilers
manufactured on or after January 15,
2021 (which must meet the
requirements at 10 CFR
430.32(e)(2)(iii)).
In this NOPR, DOE proposes to make
technical amendments to the standards
for consumer boilers to clarify that the
aforementioned exceptions continue to
apply.
the maximum technologically feasible
(‘‘max-tech’’) improvements in energy
efficiency for consumer boilers, 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.1.b of this document and in
chapter 5 of the NOPR TSD.
E. Technological Feasibility
2. Maximum Technologically Feasible
Levels
1. Determination of Savings
For each TSL, DOE projected energy
savings from application of the TSL to
consumer boilers purchased in the 30year period that begins in the year of
compliance with the proposed
standards (2030–2059).18 The savings
are measured over the entire lifetime of
consumer boilers purchased in the
previous 30-year period. DOE quantified
the energy savings attributable to each
TSL as the difference in energy
consumption between each standards
case and the no-new-standards case.
The no-new-standards case represents a
projection of energy consumption that
reflects how the market for a product
would likely evolve in the absence of
new or amended energy conservation
standards.
DOE used its national impact analysis
(NIA) spreadsheet model to estimate
national energy savings (NES) from
potential amended or new standards for
consumer boilers. The NIA spreadsheet
model (described in section IV.H of this
document) calculates energy savings in
terms of 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 primary energy
savings, which is the savings in the
energy that is used to generate and
transmit the site electricity. For natural
gas, the primary energy savings are
considered to be equal to the site energy
savings. DOE also calculates NES in
terms of FFC energy savings. The 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 conservation standards.19 DOE’s
approach is based on the calculation of
an FFC multiplier for each of the energy
When DOE proposes to adopt an
amended 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
18 Each TSL is composed of specific efficiency
levels for each product class. The TSLs considered
for this NOPR are described in section V.A of this
document. DOE conducted a sensitivity analysis
that considers impacts for products shipped in a 9year period.
19 The FFC metric is discussed in DOE’s
statement of policy and notice of policy
amendment. 76 FR 51281 (August 18, 2011), as
amended at 77 FR 49701 (August 17, 2012).
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. Sections
6(b)(3)(i) and 7(b)(1) of appendix A.
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; (3) adverse impacts on
health or safety, and (4) unique-pathway
proprietary technologies. Sections
6(b)(3)(ii)–(v) and 7(b)(2)–(5) of
appendix A. Section IV.B of this
document discusses the results of the
screening analysis for consumer boilers,
particularly the designs DOE
considered, those it screened out, and
those that are the basis for the potential
standards considered in this
rulemaking. For further details on the
screening analysis for this rulemaking,
see chapter 4 of the NOPR TSD.
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F. Energy Savings
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types used by covered products or
equipment. For more information on
FFC energy savings, see section IV.H.2
of this document.
2. Significance of Savings
To adopt any new or amended
standards for a covered product, DOE
must determine that such action would
result in significant energy savings. (42
U.S.C. 6295(o)(3)(B))
The significance of energy savings
offered by a new or amended energy
conservation standard cannot be
determined without knowledge of the
specific circumstances surrounding a
given rulemaking.20 For example, some
covered products and equipment have
most of their energy consumption occur
during periods of peak energy demand.
The impacts of these products on the
energy infrastructure can be more
pronounced than products with
relatively constant demand.
Accordingly, DOE evaluates the
significance of energy savings on a caseby-case basis, taking into account the
significance of cumulative FFC national
energy savings, the cumulative FFC
emissions reductions, and the need to
confront the global climate crisis, among
other factors. DOE has initially
determined the energy savings from the
proposed standard levels are
‘‘significant’’ within the meaning of 42
U.S.C. 6295(o)(3)(B).
G. Economic Justification
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1. Specific Criteria
As noted previously, EPCA provides
seven factors to be evaluated in
determining whether a potential energy
conservation standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)–
(VII)) The following sections discuss
how DOE has addressed each of those
seven factors in this proposed
rulemaking.
a. Economic Impact on Manufacturers
and Consumers
In determining the impacts of a
potential amended standard on
manufacturers, DOE conducts an MIA,
as discussed in section IV.J of this
document. DOE first uses an annual
cash-flow approach to determine the
quantitative impacts. This step includes
both a short-term assessment—based on
the cost and capital requirements during
the period between when a regulation is
issued and when entities must comply
20 The numeric threshold for determining the
significance of energy savings, established in a final
rule published in the Federal Register on February
14, 2020 (85 FR 8626, 8670), was subsequently
eliminated in a final rule published in the Federal
Register on December 13, 2021 (86 FR 70892,
70906), which went into effect on January 12, 2022.
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with the regulation—and a long-term
assessment over a 30-year period. The
industry-wide impacts analyzed
include: (1) INPV, which values the
industry on the basis of expected future
cash flows, (2) cash flows by year, (3)
changes in revenue and income, and (4)
other measures of impact, as
appropriate. Second, DOE analyzes and
reports the impacts on different types of
manufacturers, including impacts on
small manufacturers. Third, DOE
considers the impact of standards on
domestic manufacturer employment and
manufacturing capacity, as well as the
potential for standards to result in plant
closures and loss of capital investment.
Finally, DOE takes into account
cumulative impacts of various DOE
regulations and other regulatory
requirements on manufacturers.
For individual consumers, measures
of economic impact include the changes
in LCC and 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 consumer costs and
benefits expected to result from
particular standards. DOE also evaluates
the impacts of potential standards on
identifiable subgroups of consumers
that may be affected disproportionately
by a standard.
(including installation) of a moreefficient product through lower
operating costs. DOE calculates the PBP
by dividing the change in purchase cost
due to a more-stringent standard by the
change in annual operating cost for the
year that standards are assumed to take
effect.
For its LCC and PBP analysis, DOE
assumes that consumers will purchase
the covered products in the first year of
compliance with new or amended
standards. The LCC savings for the
considered efficiency levels are
calculated relative to the case that
reflects projected market trends in the
absence of new or amended standards.
DOE’s LCC and PBP analysis is
discussed in further detail in section
IV.F of this document.
b. Savings in Operating Costs Compared
To Increase in Price (LCC and PBP)
EPCA requires DOE to consider the
savings in operating costs throughout
the estimated average life of the covered
product in the type (or class) compared
to any increase in the price of, or in the
initial charges for, or maintenance
expenses of, the covered product that
are likely to result from a 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 its
installation) and the operating expense
(including energy, maintenance, and
repair expenditures) discounted over
the lifetime of the product. The LCC
analysis requires a variety of inputs,
such as product prices, product energy
consumption, energy prices,
maintenance and repair costs, product
lifetime, and discount rates appropriate
for consumers. 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.
The PBP is the estimated amount of
time (in years) it takes consumers to
recover the increased purchase cost
d. Lessening of Utility or Performance of
Products
In establishing product classes and in
evaluating design options and the
impact of potential standard levels, DOE
evaluates potential standards that would
not lessen the utility or performance of
the considered products. (42 U.S.C.
6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards
proposed in this document would not
reduce the utility or performance of the
products under consideration in this
rulemaking.
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c. Energy Savings
Although significant conservation of
energy is a separate statutory
requirement for adopting an energy
conservation standard, EPCA requires
DOE, in determining the economic
justification of a standard, to consider
the total projected energy savings that
are expected to result directly from the
standard. (42 U.S.C. 6295(o)(2)(B)(i)(III))
As discussed in section III.F.1 of this
document, DOE uses the NIA
spreadsheet models to project national
energy savings.
e. Impact of Any Lessening of
Competition
EPCA directs DOE to consider the
impact of any lessening of competition,
as determined in writing by the
Attorney General, that is likely to result
from a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V)) It also directs the
Attorney General to determine the
impact, if any, of any lessening of
competition likely to result from a
proposed standard and to transmit such
determination to the Secretary 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)(ii)) DOE will
transmit a copy of this proposed rule to
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the Attorney General with a request that
the Department of Justice (DOJ) provide
its determination on this issue. DOE
will publish and respond to the
Attorney General’s determination in the
final rule. DOE invites comment from
the public regarding the competitive
impacts that are likely to result from
this proposed rule. In addition,
stakeholders may also provide
comments separately to DOJ regarding
these potential impacts. See the
ADDRESSES section for information to
send comments to DOJ.
ddrumheller on DSK120RN23PROD with PROPOSALS2
f. Need for National Energy
Conservation
DOE also considers the need for
national energy and water conservation
in determining whether a new or
amended standard is economically
justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI))
The energy savings from the proposed
standards are likely to provide
improvements to the security and
reliability of the Nation’s energy system.
Reductions in the demand for electricity
also may result in reduced costs for
maintaining the reliability of the
Nation’s electricity system. DOE
conducts a utility impact analysis to
estimate how standards may affect the
Nation’s needed power generation
capacity, as discussed in section IV.M of
this document.
DOE maintains that environmental
and public health benefits associated
with the more efficient use of energy are
important to take into account when
considering the need for national energy
conservation. The proposed standards
are likely to result in environmental
benefits in the form of reduced
emissions of air pollutants and GHGs
associated with energy production and
use. DOE conducts an emissions
analysis to estimate how potential
standards may affect these emissions, as
discussed in section IV.K of this
document; the estimated emissions
impacts are reported in section V.B.6 of
this document. DOE also estimates the
economic value of emissions reductions
resulting from the considered TSLs, as
discussed in section IV.L of this
document.
g. Other Factors
In determining whether an energy
conservation standard is economically
justified, DOE may consider any other
factors that the Secretary deems to be
relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII))
To the extent DOE identifies any
relevant information regarding
economic justification that does not fit
into the other categories described
previously, DOE could consider such
information under ‘‘other factors.’’
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2. Rebuttable Presumption
As set forth in 42 U.S.C.
6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy
conservation standard is economically
justified if the additional cost to the
consumer of a product that meets the
standard is less than three times the
value of the first year’s energy savings
resulting from the standard, as
calculated under the applicable DOE
test procedure. DOE’s LCC and PBP
analyses generate values used to
calculate the effects that proposed
energy conservation standards would
have on the payback period for
consumers. These analyses include, but
are not limited to, the 3-year payback
period contemplated under the
rebuttable-presumption test. In addition,
DOE routinely conducts an economic
analysis that considers the full range of
impacts to consumers, manufacturers,
the Nation, and the environment, as
required under 42 U.S.C.
6295(o)(2)(B)(i). The results of this
analysis serve as the basis for DOE’s
evaluation of the economic justification
for a potential standard level (thereby
supporting or rebutting the results of
any preliminary determination of
economic justification). The rebuttable
presumption payback calculation is
discussed in section IV.F.9 and results
reported in section V.B.1.c of this
document.
IV. Methodology and Discussion of
Related Comments
This section addresses the analyses
DOE has performed for this rulemaking
with regard to consumer boilers.
Separate subsections address each
component of DOE’s analyses.
DOE used several analytical tools to
estimate the impact of the standards
proposed in this document. The first
tool is a spreadsheet that calculates the
LCC savings and PBP of potential
amended or new energy conservation
standards. The national impacts
analysis uses a second spreadsheet set
that provides shipments projections and
calculates national energy savings and
net present value of total consumer
costs and savings expected to result
from potential energy conservation
standards. DOE uses the third
spreadsheet tool, the Government
Regulatory Impact Model (GRIM), to
assess manufacturer impacts of potential
standards. These three spreadsheet tools
are available on the DOE website for this
proposed rulemaking:
www1.eere.energy.gov/buildings/
appliance_standards/standards.aspx?
productid=45&action=viewcurrent.
Additionally, DOE used output from the
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latest version of the Energy Information
Administration’s (EIA’s) Annual Energy
Outlook (AEO), a widely known energy
projection for the United States, for the
emissions and utility impact analyses.
A. Market and Technology Assessment
DOE develops information in the
market and technology assessment 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 proposed
rulemaking include: (1) a determination
of the scope of the rulemaking and
product classes, (2) manufacturers and
industry structure, (3) existing
efficiency programs, (4) shipments
information, (5) market and industry
trends; and (6) technologies or design
options that could improve the energy
efficiency of consumer boilers. The key
findings of DOE’s market assessment are
summarized in the following sections.
See chapter 3 of the NOPR TSD for
further discussion of the market and
technology assessment.
1. Product Classes
When evaluating and establishing
energy conservation standards, DOE
may establish separate standards for a
group of covered products (i.e., establish
a separate product class) if DOE
determines that separate standards are
justified based on the type of energy
used, or if DOE determines that a
product’s capacity or other
performance-related feature justifies a
different standard. (42 U.S.C. 6295(q)) In
making a determination whether a
performance-related feature justifies a
different standard, DOE must consider
such factors as the utility of the feature
to the consumer and other factors DOE
determines are appropriate. (Id.)
The current product classes are
divided by the type of energy used (i.e.,
gas, oil, or electricity) and by the heat
transfer medium (i.e., steam or hot
water) as shown in Table IV.1. (See 10
CFR 430.32(e)(2)) The current product
classes were originally established by
EISA 2007 and are codified at 10 CFR
430.32(e)(2)(iii)(A).
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TABLE IV.1—CONSUMER BOILER
PRODUCT CLASSES
Fuel type
Gas ............................
Oil ..............................
Electric ......................
Heat transfer medium
Steam.
Hot Water.
Steam.
Hot Water.
Steam.
Hot Water.
In the May 2022 Preliminary
Analysis, DOE maintained these
product classes, and the Department
solicited feedback on whether any
additional product classes would be
necessary for consumer boilers,
including a potential consideration for
hydronic heat pump boilers. (See the
Executive Summary of the preliminary
analysis TSD). Multiple stakeholders
provided feedback on potential
additional product classes for fossil
fuel-fired hot water boilers and
hydronic heat pump boilers, as
discussed in the subsections that follow.
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a. Fossil Fuel-Fired Hot Water Boilers 21
On December 29, 2021, DOE
published in the Federal Register a final
interpretive rule for consumer furnaces,
commercial water heaters, and similarly
situated products or equipment (the
December 2021 Interpretive Rule),
which explained DOE’s return to its
historic position that, among other
things, non-condensing technology and
associated venting of the flue gases is
not a performance-related ‘‘feature’’ that
provides a distinct consumer utility
under EPCA.22 86 FR 73947.
In the May 2022 Preliminary
Analysis, DOE addressed several
comments on the March 2021 RFI from
stakeholders requesting that the
Department consider non-condensing
technology and associated venting to be
a performance-related feature, (see
chapter 2 of the preliminary TSD), and
DOE maintained its position that noncondensing technology does not
constitute a performance-related
‘‘feature,’’ consistent with the December
2021 Interpretive Rule. 87 FR 26304,
26308 (May 4, 2022). In response to the
May 2022 Preliminary Analysis,
commenters provided follow-up
feedback with more information
regarding how condensing versus non21 As
discussed in chapter 3 of the NOPR TSD,
due to the high temperature of steam, condensing
operation is not utilized in steam boilers, and all
steam boilers on the market are non-condensing.
Therefore, the discussion in this section is only
applicable to hot water boilers.
22 For more information, see
www.regulations.gov/docket/EERE-2018-BT-STD0018 (Last accessed Jan. 3, 2023).
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condensing technology would affect the
applicable venting categories.
As discussed in chapter 3 of the
NOPR TSD, manufacturers generally
provide specific venting instructions
based on the characteristics of the
heating appliance. The National Fire
Protection Association (NFPA) and
ANSI maintain NFPA 54/ANSI Z223.1,
‘‘National Fuel Gas Code,’’ which
assigns four venting categories to gasfired appliances. Category I venting is
for nonpositive vent static pressures 23
and limited flue gas condensate 24
production in the vent; Category II
venting is for nonpositive vent static
pressures and excessive condensate
production in the vent; Category III
venting is for positive vent static
pressures and limited condensate
production in the vent, and Category IV
venting is for positive vent static
pressures and excessive condensate
production in the vent. Non-condensing
boilers can use Category I venting,
which is compatible with natural draft
vent systems that use chimney venting,
but condensing boilers require category
IV venting, which is not compatible
with natural draft vent systems.
(Category II venting is not common for
consumer boilers, and Category III
venting can be used for non-condensing
boilers but is also not compatible with
natural draft vent systems.)
Crown and U.S. Boiler stated that the
ability to vent residential boilers using
Category I venting is a feature that must
be preserved due to boilers being a
primarily replacement market in older
urban areas with limited exterior wall
space suitable for a vent terminal, and
they recommended that there should be
a product class for Category I boilers.
Crown stated that the elimination of
Category I venting would result in the
need for extensive renovations to some
existing structures if the chimney can
no longer be used, the potential for
boilers to be used long after they are a
safe option, the potential use of less safe
heating equipment such as electric
space heaters, or the possibility of poor
venting reconfigurations that could lead
to safety issues. Crown and U.S. Boiler
stated that these ramifications cannot be
addressed in the standards cost-benefit
analysis. Crown and U.S. Boiler pointed
to the preliminary TSD, which
23 Static pressure is the pressure created by a fluid
at rest relative to the measurement instrument. Here
non-positive static pressure refers to the flue gases
having a pressure lower than atmospheric pressure
so no assistance is needed for the flue gases to
escape through the vent system.
24 Condensate refers to the moisture that
condenses inside venting systems when the flue gas
is cooled to below the dew point and liquid begins
to condense on the walls of the vent system.
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discussed that both the United Kingdom
and European Union have exceptions to
their condensing boiler standards that
allow for installation of non-condensing
boilers in difficult installation
circumstances. (Crown, No. 30 at pp. 2–
3; U.S. Boiler, No. 31 at p. 2)
WMT stated that it believes that EPCA
(42 U.S.C. 6295(o)(4)) prohibits the
elimination of non-condensing hot
water boilers, and non-condensing
operation constitutes a product feature
per EPCA that warrants a separate
product class under 42 U.S.C.
6295(q)(1), as stated by DOE in the
January 2021 Interpretative Rule (86 FR
4776). (WMT, No. 32 at pp. 1–2) WMT
suggested that non-condensing boilers
in Category I venting should be a
separate product class in order to
recognize that these products operate at
180 °F return water temperatures, vent
through Category I venting, and may be
installed in insufficiently-insulated
homes. WMT asserted that these homes
also do not have the ability to increase
heat emitter surface area, and, thus, the
various efficiency levels analyzed in the
preliminary analysis could not be
achieved by this hypothetical new
product class. (WMT, No. 32 at p. 7)
PB Heat advocated for a separate
product class for non-condensing
boilers, claiming that this action would
secure cost-effective products for
consumers, in terms of product lifespan
and maintenance, as well as
maintaining the consumer boiler
replacement market. (PB Heat, No. 34 at
p. 2)
In contrast, NYSERDA stated that
condensing and non-condensing boilers
should remain in the same product class
because condensing operation is not a
performance-related feature. NYSERDA
indicated that challenging installations
represent a small proportion of the
market. NYSERDA provided data
showing that almost 40 percent of all
furnaces and boilers in New York
achieve a condensing level of
performance,25 and commented that
DOE’s estimate that fewer than 5
percent of installations could be labeled
as challenging is well-supported and
reflective of the significant gain of
market share that condensing products
have achieved over the last twenty
years. (NYSERDA, No. 33 at p. 3)
The Joint Advocates likewise
supported DOE’s decision to evaluate
condensing and non-condensing boilers
within a single product class (as
25 NYSERDA provided information from its 2019
Residential Building Stock Assessment, found
online at www.nyserda.ny.gov/About/Publications/
Building-Stock-and-Potential-Studies/ResidentialBuilding-Stock-Assessment (Last accessed Jan. 3,
2023).
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discussed in chapter 2 of the
preliminary TSD). The Joint Advocates
stated that condensing technology
provides the same utility, uses the same
fuel source, and does not constitute a
‘‘performance related feature’’ that
would warrant a separate product class
from non-condensing technology. (Joint
Advocates, No. 35 at p. 1) NEEA also
supported DOE’s decision to evaluate
condensing and non-condensing boilers
within a single product class, as both
products utilize the same primary fuel
source, neither provides unique
consumer utility, and keeping them in
the same class prevents non-condensing
boiler manufacturers from obtaining a
competitive, regulatory advantage over
condensing boiler manufacturers (i.e.,
by having less-stringent requirements).
(NEEA, No. 36 at p. 1)
With respect to commenters’
statements that non-condensing
technology and associated venting is a
‘‘feature’’ that DOE’s standards cannot
make unavailable, DOE concluded in
the December 2021 final interpretive
rule that incorporation of noncondensing technology and associated
venting is not a performance-related
‘‘feature’’ for the purpose of the EPCA
prohibition at 42 U.S.C. 6295(o)(4). 86
FR 73955 73947, 73955 (Dec. 29. 2021).
In support of that conclusion, DOE
explained that given EPCA’s focus on an
appliance’s major function(s), it is
reasonable to assume that the consumer
would be aware of performance-related
features and would recognize such
features as providing additional benefit
in the appliance’s performance of such
major function. Id. For example, some
boilers have Wi-Fi connectivity features
that allow the consumer to remotely
monitor and control their boiler.26 In
contrast to these features, an aspect of
the appliance that does not provide any
additional benefit to the consumer
during operation would not be a
performance-related feature that
Congress would expect DOE to preserve
at the expense of energy savings. With
respect to boilers, some examples are
heat exchanger designs or materials,
burner designs, and ignition system
designs. While all of these components
are necessary parts of a boiler, they are
not performance-related features that
provide other additional benefit to the
consumer during operation. Noncondensing technology and associated
venting falls squarely into this category.
26 For example, see: https://www.viessmannus.com/content/dam/public-brands/us/flyers/
Vitodens_200_W_B2HE_06_2021.pdf/_jcr_content/
renditions/original./Vitodens_200_W_B2HE_06_
2021.pdf and https://ntiboilers.com/wp-content/
uploads/2020/09/FTVN_Series-Handout_2020_
Web.pdf.
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Further, energy conservation standards
work by removing the less-efficient
technologies and designs from the
market. For example, DOE set standards
for furnace fans in 2014 that effectively
eliminated permanent split capacitor
motors from several product classes in
favor of brushless permanent magnet
motors, which are more efficient. 79 FR
38130. As a second example, the
amended standards for residential
clothes washers established by the May
31, 2012, rule effectively eliminated the
use of electromechanical-style user
interface controls from the market, in
favor of fully electronic user interface
controls—which enable more efficient
energy and water performance. 77 FR
32307. As a third example, DOE
published a final rule on June 17, 2013,
adopting energy conservation standards
for microwave oven standby mode and
off mode. These standards effectively
eliminated the use of linear power
supplies from microwave oven control
boards, in favor of switch-mode power
supplies, which exhibit significantly
lower standby mode and off mode
power consumption. 78 FR 36316. It
would completely frustrate the energysavings purposes of EPCA if DOE were
to adopt an overly-broad reading of
‘‘features’’ that preserves less-efficient
technologies without determining that
boilers using those less-efficient
technologies offer consumers an
additional benefit during normal
operation that other boilers do not offer.
For these reasons, DOE disagrees with
commenters that eliminating noncondensing boiler technology and
associated venting from the market
would violate EPCA’s ‘‘unavailability’’
provision as that technology does not
provide unique utility to consumers that
is not substantially the same as that
provided by condensing boilers.
Moreover, such a finding would
preserve a less efficient technology with
no unique consumer utility at the
expense of a significant savings of
energy and consumer benefit.
Accordingly, for the purpose of the
analysis conducted for this rulemaking,
DOE did not analyze separate
equipment classes for non-condensing
and condensing boilers in this final rule.
In addition, while DOE agrees with
NYSERDA that the number of
challenging installations represent a
decreasing proportion of the market
because newer constructions can be
designed around Category IV venting
considerations, DOE also agrees with
manufacturers that those few consumers
with challenging installations could
incur significant costs. But DOE does
not agree with the assertion by Crown
and U.S. Boiler that non-condensing
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technology and associated venting must
be preserved because the costs of these
challenging installations cannot be
accounted for in DOE’s economic
analysis. First, as stated previously,
non-condensing technology and
associated venting is not a performancerelated feature because, among other
things, it does not provide additional
benefit in the appliance’s performance
of its major function. Using existing
venting can reduce installation costs,
but that does not provide the consumer
with any additional benefits during
operation of the boiler. Further, EPCA
specifically directs DOE to consider
installation and operating costs as part
of the Department’s determination of
economic justification. (See 42 U.S.C.
6295(o)(2)(B)(i)(II)) As a result, there is
a clear distinction in EPCA between the
purposes of the product class provision
in 42 U.S.C. 6295(q)—preserve
performance-related features in the
market—and the economic justification
requirement in 42 U.S.C. 6295(o)(2)(B)—
determine whether the benefits, e.g.,
reduced fuel costs for an appliance, of
a proposed standard exceed the
burdens, e.g., increased installation cost.
And, DOE has accounted for the costs of
altering or replacing an existing venting
system with a venting system that will
accommodate a condensing furnace as
part of the installation costs in the LCC
analysis (see section IV.F.2 of this
document and chapter 8 of the NOPR
TSD).
With respect to Crown and U.S.
Boiler’s concerns regarding safety issues
caused by condensing boilers, DOE is
not aware of, nor have the commenters
provided, any data showing that noncondensing boilers are a safer option
than condensing boilers. DOE notes that
condensing boilers are currently widely
available on the market and have been
available for decades, and in certain
locations have experienced widespread
adoption (even having achieved greater
market share than non-condensing
boilers in some areas). Given the track
record of condensing boilers being
installed and operated safely, DOE finds
that installers are capable of safely
installing and venting condensing
boilers, even in circumstances that
would require the venting system to be
upgraded.
Additionally, in response to WMT,
DOE expects that condensing boilers
and non-condensing boilers alike would
be capable of operating with return
water temperatures of 180 °F. Thus, the
return water temperature provided by
the product would not be reason to
differentiate product classes. DOE
understands that condensing boilers,
when operating at these temperatures,
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b. Hydronic Heat Pump Boilers
In the May 2022 Preliminary
Analysis, DOE specifically sought
information regarding whether there are
any performance-related features of heat
pump boilers which would justify a
separate product class. DOE also
requested information on the expected
market for such products (see the
Executive Summary of the preliminary
analysis TSD).
Rheem suggested that DOE should
include heat pump boilers in the
existing product class structure, but if
that cannot be accomplished, a separate
product class may be warranted, with
changes to the regulatory definition for
consumer boilers. (Rheem, No. 37 at
p. 2)
Crown and U.S. Boiler stated that heat
pump boilers are unable to generate
water temperatures high enough to
satisfy the design heating load of the
vast majority of the residential hot water
heating systems in the United States,
and, therefore, if heat pump boilers are
considered to be consumer boilers, they
should be placed in their own products
class. (Crown, No. 30 at p. 3; U.S. Boiler,
No. 31 at p. 3) BWC commented that
heat pump boilers are not able to
provide the same utility as conventional
consumer boilers, especially during
extreme environmental conditions, and,
therefore, should be placed in a separate
class than conventional consumer
boilers. (BWC, No. 39 at p. 1)
As discussed in section III.C of this
document, the DOE test procedure for
consumer boilers would not currently
provide test results that are
representative of the energy use or
energy efficiency of an air-to-water or
water-to-water heat pump boiler, and
without an appropriate test procedure
for these products at this time, DOE did
not analyze heat pump boilers in this
NOPR.
non-regulatory initiatives for improving
product efficiency, and trends in
product characteristics and retail
markets. The Department used data
sources such as its own Compliance
Certification Database (CCD),27
supplemented by information in
California Energy Commission’s
Modernized Appliance Efficiency
Database System (MAEDbS),28 AHRI’s
Directory of Certified Product
Performance,29 and the U.S.
Environmental Protection Agency’s
ENERGY STAR product finder.30 DOE
specifically sought comment in the May
2022 Preliminary Analysis on whether
manufacturer model counts from
publicly-available databases accurately
reflect manufacturer market shares on a
model-weighted or sales-weighted basis
in order to inform the LCC analysis by
providing insights into the typical
consumer or installation scenarios (see
the Executive Summary of the consumer
boilers preliminary TSD).
WMT stated that certification
databases do not indicate shipments
and, thus, reflect the distribution of
neither input capacities nor efficiencies.
(WMT, No. 32 at pp. 7–8) WMT
commented that the boilers market is
increasingly transitioning towards
higher efficiencies, and this is occurring
in specific areas and regions where
higher-efficiency consumer boilers have
the most financial benefit and the
application allows for it. The
commenter stated that areas with lower
adoption rates are based less on need for
financial benefit than the inability to
adapt the building to lower water
circulation temperatures required for
high-efficiency products; in other
words, regions where local building
codes or policies result in increased
installation costs or even prohibit
condensing appliance installations have
the least transition towards higher
efficiencies. WMT commented that this
would disproportionally affect certain
consumer subgroups. (WMT, No. 32 at
p. 11)
Similarly, Rheem did not recommend
using model counts from publicly-
2. Market Assessment
In the market assessment, DOE
obtains information on the present and
past industry structure and market
characteristics in order to inform
multiple other analyses. In preparing
the May 2022 Preliminary Analysis,
DOE reviewed available public
literature to develop an understanding
of the consumer boiler industry in the
United States, including assessing
manufacturer market share and
characteristics, existing regulatory and
27 DOE’s CCD can be found online at:
www.regulations.doe.gov/certification-data/
#q=Product_Group_s%3A* (Last accessed Jan. 3,
2023).
28 MAEDbS can be found online at:
cacertappliances.energy.ca.gov/Pages/
ApplianceSearch.aspx (Last accessed Jan. 3, 2023).
29 AHRI’s Directory of Certified Product
Performance can be found online at:
www.ahridirectory.org/Search/
SearchHome?ReturnUrl=%2f (Last accessed March
1, 2023).
30 EPA’s ENERGY STAR product finder can be
found online at: www.energystar.gov/products/
products_list (Last accessed Jan. 3, 2023).
ddrumheller on DSK120RN23PROD with PROPOSALS2
would have minimal condensation
occurring in the heat exchanger, which
does result in non-condensing
efficiency. This effect is accounted for
in the energy use analysis (see section
IV.E of this document).
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available databases to reflect market
shares. (Rheem, No. 37 at p. 2)
AHRI also disagreed with the
Department’s use of manufacturer
model counts from publicly-available
databases to reflect manufacturer market
shares on a model-weighted or salesweighted basis, claiming that these
databases do not accurately represent
market share and misrepresent the
market. (AHRI, No. 40 at p. 3) In a
follow-up submission, AHRI provided
information to DOE containing a market
share analysis for gas-fired hot water
boilers. AHRI stated that its contractor
survey, completed in July 2022, was
conducted in conjunction with the Air
Conditioning Contractors of America
(ACCA) and the Plumbing, Heating, and
Cooling Contractors Association
(PHCC), and that it gathered feedback
from over 140 experienced contractors.
(AHRI, No. 42 at p. 1)
DOE notes that the data provided by
AHRI contained insights into
manufacturer shipments, installation
types, consumer boiler lifetimes, and
other parameters which DOE has
incorporated, as applicable, into its
market assessment and considered for
the downstream analyses (e.g., LCC and
PBP, shipments).
3. Technology Options
In the preliminary market analysis
and technology assessment, DOE
identified 13 technology options that
would be expected to improve the
efficiency (in terms of the three
regulated metrics: AFUE, PW,SB, and
PW,OFF) of consumer boilers, as
measured by the DOE test procedure:
Technology options to improve AFUE:
heat exchanger improvements,
modulating operation, vent dampers,
direct vent, pulse combustion, premix
burners, burner derating, low-pressure
air-atomized oil burners, delayed-action
oil pump solenoid valves, and
electronic ignition.
Technology option to improve PW,SB
and PW,OFF: control relays for models
with brushless permanent magnet
(BPM) motors, transformer
improvements, and switching mode
power supplies.
Additionally, based on an extensive
review of publicly available literature,
DOE listed technologies that could
potentially improve the overall
efficiency of consumer boilers but
would not result in improvements to
AFUE, PW,SB, or PW,OFF. These were,
namely: micro combined heat and
power systems, improved motor
efficiency, positive shut-off valves for
oil burner nozzles, renewable natural
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gas,31 and heat pump technology. See
chapter 3 of the preliminary TSD for
details. After developing the
preliminary list of technology options,
DOE requested feedback on this list. The
Department also sought information
regarding the adoption of low-loss
transformers and switching mode power
supplies in consumer boilers to meet the
existing PW,SB and PW,OFF standards.
BWC disagreed with some of the
design characteristics which were
presented in Table 3.3.2 of the
preliminary TSD, stating that noncondensing copper heat exchangers can
be either Category I or II venting, not
just Category II venting. BWC also stated
that condensing operation can begin in
venting at around the 85-percent AFUE
level, as opposed to the 88-percent
AFUE threshold described in the
preliminary TSD. BWC recommended
that DOE perform a more up-to-date
teardown analysis to address these
discrepancies. (BWC, No. 39 at p. 2) In
response, DOE believes that BWC may
have misinterpreted the information
provided in this table. Table 3.3.2 of the
preliminary TSD simply provides brief
descriptions of the terms that are used
to characterize consumer boiler designs,
and these terms are grouped together in
accordance with the corresponding
design parameter. DOE stated in Table
3.3.2 that copper heat exchangers are
used in some non-condensing models,
not that these heat exchangers are
limited to Category II venting.
Rheem stated that renewable natural
gas likely has little effect on efficiency
compared to traditional natural gas, and,
therefore, the commenter recommended
that this technology option should be
removed from the analysis. (Rheem, No.
37 at p. 2) DOE agrees that renewable
natural gas would not result in
improvements to AFUE, PW,SB, or
PW,OFF, and, thus, this fuel has not been
considered as a technology option in
this NOPR.
AHRI stated that it does not have data
on any current technologies that can be
used to reach a more-stringent standard,
but further stated that consumer boilers
are typically installed within the
thermal envelope of the building and
any energy lost from the consumer
boiler results in useful heat provided to
the building. (AHRI, No. 40 at pp. 3–4)
In response, DOE notes that a consumer
boiler’s primary purpose is to deliver
heat to the hot water or steam in the
home heating loop. DOE understands
the comment from AHRI to mean that
any technologies which limit the loss of
31 Renewable natural gas is methane (natural gas)
that is produced via the breakdown of biological
material, then treated to remove contaminants.
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heat from the consumer boiler to its
immediate surroundings (i.e., heat that
does not go into the hot water or steam)
should not be considered as improving
the efficiency of the consumer boiler
because the heat is ultimately delivered
to the building even if it is not through
the hot water or steam. The previous
appendix N test procedure and the new
appendix EE test procedure both
account for this by assigning a value of
0 to the jacket loss factor (a value which
quantifies heat lost directly to the
consumer boiler’s surroundings through
its jacket) if the boiler is nonweatherized, as it is assumed to be
located within the conditioned space of
the building.32 At the time of this
analysis, DOE did not identify any
commercially available weatherized
consumer boilers. The technology
options identified as improving AFUE
are consistent with this understanding.
DOE requests information on the
market share of weatherized consumer
boilers and the typical jacket losses of
such products.
BWC strongly discouraged DOE from
evaluating more-stringent standby mode
and off mode power consumption (PW,SB
and PW,OFF) standards. BWC commented
that, based on its own testing, it has not
seen a significant decrease in energy
used in standby mode through the use
of larger, low-loss transformers. BWC
also stated that DOE’s methodology of
examining a few discrete components
and their energy consumption instead of
the overall power consumption of the
consumer boiler was of concern to BWC
because it fails to account for the power
consumed by a consumer boiler’s entire
electrical system (including all ancillary
components), and it recommended not
to pursue more-stringent power
consumption standards. (BWC, No. 39 at
p. 2)
In response, DOE has considered this
information about the implementation
of low-loss transformers and has
tentatively determined that it remains
uncertain whether this technology
option can be used to further reduce
standby mode and off mode energy
consumption. In the January 2016 Final
Rule, DOE had determined that low-loss
transformers and switching mode power
supplies would be necessary to achieve
the PW,SB and PW,OFF standards that
were promulgated in that rule (which
were set at the maximum
32 In defining the AFUE metric, EPCA states that
this descriptor is based on the assumption that all
weatherized warm air furnaces or boilers are
located out-of-doors, and boilers which are not
weatherized are located within the heated space.
(42 U.S.C. 6291(20)(A)–(C)) The jacket loss is,
therefore, assigned a value of 0 for any boilers that
are non-weatherized.
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technologically feasible levels at the
time). 81 FR 2320, 2407–2408 (Jan. 15,
2016). As discussed in chapter 5 of the
NOPR TSD, transformer improvements
(i.e., low loss transformers) and
switching mode power supplies would
have uncertain potential to further
improve standby mode and off mode
power consumption because these were
considered to be the maximum
technologically feasible designs in the
January 2016 Final Rule which
established the current standards. Thus,
low-loss transformers and switching
mode power supplies were not
considered as potential design options
for consumer boilers in this NOPR. In
this NOPR, DOE tentatively determined
that control relays are the only viable
technology option remaining which can
lead to discernible improvements to
PW,SB and PW,OFF. However, as discussed
in section IV.B of this document, control
relays were screened out from further
consideration, leaving no design options
currently identified to improve these
metrics. As a result, this NOPR did not
further assess potential amended PW,SB
and PW,OFF standards, and only
amended AFUE standards are proposed.
See chapters 3 and 4 of the NOPR TSD
for further details of the technology
assessment leading to this tentative
conclusion not to further analyze
amended standby mode and off mode
energy consumption standards at this
time.
DOE received multiple comments in
response to the May 2022 Preliminary
Analysis regarding heat pumps as
technology options for consumer
boilers. NYSERDA, the Joint Advocates,
and NEEA recommended that heat
pumps be considered as technology
options once a test procedure for these
products is established, suggesting that
heat pump boilers would define the
maximum technologically feasible
efficiency for consumer boilers.
(NYSERDA, No. 33 at p. 2; Joint
Advocates, No. 35 at pp. 1–2; NEEA, No.
36 at pp. 1–2)
Additionally, NYSERDA stated that
New York’s ambitious climate objectives
will require retrofitting the heating
systems of existing homes to reduce
GHGs, and given the prevalence of
hydronic systems in the New York
market, providing consumers choices
for low-emission hydronic heating
solutions will be important. (NYSERDA,
No. 33 at p. 2)
The Joint Advocates commented that
hydronic heating is used in 8 percent of
homes overall in the United States,
including 28 percent of homes in the
Northeastern region, and heat pump
boilers will assist that proportion’s rise
to higher efficiencies as State policies
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shift forward. The Joint Advocates
stated that gas absorption heat pumps
can replace standard gas space heating
appliances in cold climates, operating at
much higher theoretical AFUE values.
(Joint Advocates, No. 35 at pp. 1–2)
NEEA recommended that DOE should
evaluate electric and gas heat pump
technology, as well as dual-fuel heat
pump boilers and gas absorption heat
pump boilers, for consumer boilers as
potential ‘‘max-tech’’ efficiency levels.
NEEA stated that these products provide
the same product utility as conventional
consumer boilers and that these
products are commercially available.
(NEEA, No. 36 at pp. 1–2)
WMT, on the other hand, stated that
it is not aware of viable heat pump
boilers in the market which can operate
consistently and reliably at circulating
water temperatures sufficient for heating
needs across the Nation. (WMT, No. 32
at p. 8) AHRI commented that it did not
have data regarding current technologies
that can be used to meet more-stringent
standards or the adoption of electric
heat pump or gas heat pump technology
in the consumer boiler market. (AHRI,
No. 40 at pp. 3–4)
As discussed in section IV.A.1.b of
this document, DOE has tentatively
determined that heat pump technology
would not yield improvements in AFUE
per the new appendix EE test procedure,
and that further development of the test
procedure would be necessary in order
to address these novel products.
Therefore, DOE has not included heat
pump technologies in its list of
technology options for this NOPR. The
Department appreciates the feedback
and information provided by
stakeholders on this topic and will
continue to evaluate heat pump boilers
in a future rulemaking.
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B. Screening Analysis
DOE uses the following five 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 commercially viable, existing
prototypes will not be considered further.
(2) Practicability to manufacture, install,
and service. If it is determined that mass
production of a technology in commercial
products and reliable installation and
servicing of the technology could not be
achieved on the scale necessary to serve the
relevant market at the time of the projected
compliance date of the standard, then that
technology will not be considered further.
(3) Impacts on product utility. If a
technology is determined to have a
significant adverse impact on the utility of
the product to subgroups of consumers, or
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results 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) Safety of technologies. If it is
determined that a technology would have
significant adverse impacts on health or
safety, it will not be considered further.
(5) Unique-pathway proprietary
technologies. If a technology has proprietary
protection and represents a unique pathway
to achieving a given efficiency level, it will
not be considered further, due to the
potential for monopolistic concerns.
10 CFR part 430, subpart C, appendix
A, sections 6(b)(3) and 7(b).
In summary, if DOE determines that a
technology, or a combination of
technologies, fails to meet one or more
of the listed five criteria, it will be
excluded from further consideration in
the engineering analysis. The reasons
for eliminating any technology are
discussed in the following sections.
The subsequent discussion includes
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.
In response to the May 2022
Preliminary Analysis, several
commenters raised concerns regarding
the consideration of an 85-percent
AFUE efficiency level for gas-fired hot
water boilers, stating that this particular
efficiency could have issues with
installation and repair, reliability, and
safety. These commenters assert that
this issue should have bearing on DOE’s
consideration of technology options for
this rulemaking.
AGA, APGA, and NPGA stated that if
DOE were to propose 85-percent AFUE
as a standard, it would be too close to
condensing operation to be safely
implemented with existing Category I
venting systems, and that forcing the
consumer to upgrade to condensing
technology would place undue burden
and expense on the consumer. AGA,
APGA, and NPGA stated that
manufacturers would not produce
consumer boilers that are prone to
failure, instead opting to make
condensing boilers, thereby limiting the
choice of and increasing the burden on
the consumer. (AGA, APGA and NPGA,
No. 38 at p. 3) Rheem similarly
expressed concern that the 85-percent
efficiency level is too close to
condensing operation to be used safely
without reliability issues and costly
upgrades. (Rheem, No. 37 at p. 4)
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Reiterating its comments from the
previous standards rulemaking, Crown
provided data from the U.S. Consumer
Product Safety Commission (CPSC) on
failure modes that led or contributed to
carbon monoxide incidents associated
with modern furnaces and boilers
between the years 2002–2009 and
concluded that, as the AFUE increases,
the likelihood that one of these failure
modes would cause a carbon monoxide
incident also increases. Crown stated
that this is due the flue gases being less
buoyant at higher efficiencies, and, thus,
being less able to overcome the effects
of depressurization, partial blockage,
back-drafting, or an improperly
designed vent system; additionally,
cooler flue gases are more likely to
cause damage to the vent system if
something else also goes wrong (e.g.,
Crown provided the example of trace
halogen aspiration into the consumer
boiler). (Crown, No. 30 at pp. 3–5) U.S.
Boiler provided the same comments as
Crown. (U.S. Boiler, No. 31 at pp. 3–5)
Crown stated that setting a standard
for gas-fired hot water boilers at 85percent AFUE would completely ignore
the safety and reliability concerns that
can result from the installation of a
consumer boiler operating at this
efficiency level into a Category I
chimney. Crown provided graphical
data charting flue gas CO2 concentration
and net flue gas temperature that
suggested that the steady-state efficiency
at which a consumer boiler could
operate while maintaining a Category I
designation would be between 82.7–
84.1-percent AFUE. Crown made the
observation that, since AFUE will never
exceed steady-state efficiency, the
current standard at 84-percent AFUE,
for all practical purposes, is already at
this limit. Crown argued that while
there are consumer boilers on the
market at 85-percent AFUE, not all of
them are certified to ANSI Z21.13, ‘‘GasFired Low Pressure Steam And Hot
Water Boilers,’’ and are, therefore, not
officially Category I venting. Crown also
stated that these 85-percent AFUE
consumer boilers have modifications
such as power gas burners and operate
in conditions different than laboratory
conditions where AFUE was
determined, creating uncertainty on
whether they would be safe in all field
conditions. Crown commented that
while there are explicit instructions on
how to install consumer boilers,
manufacturers have little control on
whether these instructions are followed,
and an AFUE minimum of 85 percent
introduces more of a safety risk to the
consumer; therefore, a standard at this
level would force all manufacturers to
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either prescribe vent requirements more
stringent than those currently in the
National Fuel Gas Code and/or give up
any remaining extra safety margin they
have built into their products for
suboptimal vent systems, all for an
incremental energy savings benefit
likely amounting to a rounding error.
(Crown, No. 30 at pp. 3–5) U.S. Boiler
provided the same comments. (U.S.
Boiler, No. 31 at pp. 3–5)
In response, DOE understands that
Crown, U.S. Boiler, APA, APGA, and
NPGA are concerned about the safety of
installing gas-fired hot water boilers
with incremental heat exchanger
improvements (leading to an AFUE of
85 percent) within current Category I
venting systems. However, as a
technology option, an increase in heat
exchanger effectiveness alone does not
pose a safety risk for consumers or
service technicians. To this point, in the
January 2016 Final Rule, the
Department recognized that certain
efficiency levels could pose health or
safety concerns under certain conditions
if they are not installed properly in
accordance with manufacturer
specifications. However, these concerns
can be resolved with proper product
installations and venting system design;
this is evidenced by the significant
shipments of products that are currently
commercially available at these
efficiency levels, as well as the lack of
restrictions on the installation location
of these units in installation manuals. In
addition, DOE noted that products
achieving these efficiency levels have
been on the market since at least 2002,
which demonstrates their reliability,
safety, and consumer acceptance. In
some circumstances, if the potential for
condensate is high, different vent
materials (such as a high grade stainless
steel vent) may be required to withstand
the condensate. High efficiency
condensing boilers typically use PVC/
CPVC venting since the exhaust gases
are cool enough. Given the significant
product availability and the amount of
time products at these efficiency levels
have been available on the market, DOE
continues to believe that products at
these efficiency levels are safe and
reliable when installed correctly. 81 FR
2320, 2344–2345 (Jan. 15, 2016).
Further, DOE examined the most
recent report from the CPSC regarding
carbon monoxide incidents related to
the use of consumer products, which
presented data from 2018 (CPSC 2018
Report).33 This report discusses that
33 M.V. Hnatov, ‘‘Non-Fire Carbon Monoxide
Deaths Associated with the Use of Consumer
Products; 2018 Annual Estimates,’’ U.S. Consumer
Product Safety Commission, September 2021.
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information collected on the carbon
monoxide incidents often describes
conditions of compromised vent
systems, flue passageways, and
chimneys for furnaces, boilers, and
other heating systems. CPSC 2018
Report at p. 9. Specifically, the CPSC
2018 Report states that ‘‘[a]ccording to
the information available, some
products had vents that became
detached or were installed/maintained
improperly. Vents were also sometimes
blocked by soot caused by inefficient
combustion, which, in turn, may have
been caused by several factors, such as
leaky or clogged burners, an over-firing
condition, or inadequate combustion
air. Other furnace-related conditions
included compromised heat exchangers
or filter doors/covers that were removed
or not sealed. Some products were old
and apparently not well maintained.
Other incidents mentioned a backdraft
condition, large amounts of debris in the
chimney, and the use of a product that
was later prohibited by the utility
company and designated not to be
turned on until repaired.’’ Id. Based on
this information, DOE has tentatively
determined that it is the potential for
older or improperly maintained venting
and burner systems to be inadequate
which may pose a safety risk, and not
the higher-efficiency consumer boiler
itself. In other words, high efficiency
boilers available on the market today are
just as safe as baseline boilers when
they are installed and maintained
properly. If either high-efficiency or
low-efficiency boilers are not installed
and maintained properly, then some
potential for safety concerns may exist
as outlined by the CPSC report. But DOE
has not found, nor have commenters
presented, evidence that more stringent
standards for boilers would result in a
reduction of boiler safety. In the LCC
analysis, DOE accounts for the costs
associated with correctly installing
boilers (including modifications to vent
system when appropriate), as well as
preventative maintenance and any
necessary repairs over the lifetime of a
product. As a result, DOE has not
screened out heat exchanger
improvements as a technology option
from this NOPR analysis.
PB Heat stated that the current
minimum efficiency levels are close to
the condensing range, and increasing
them any further will reduce
applications where Category I consumer
boilers can be installed and, therefore,
Available online at www.cpsc.gov/s3fs-public/NonFire-Carbon-Monoxide-Deaths-Associated-with-theUse-of-Consumer-Products-2018-AnnualEstimates.pdf?VersionId=
IN1CTo8Njoxta0CmddOUl2t.tmQ.iEEb (Last
accessed Jan. 3, 2023).
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reduce consumer utility and access to
affordable heating. (PB Heating, No. 34
at p. 1)
As stated in section IV.A.1.a of this
document, in this rulemaking, DOE is
not considering venting configurations
to constitute a consumer or product
utility, consistent with the conclusions
of the December 2021 Interpretive Rule.
DOE acknowledges that certain types of
homes may require substantial
investment to upgrade the venting if
transitioning from a Category I vent
system to a Category IV vent system,
and the Department aims to accurately
capture these costs to the consumer in
the LCC and PBP analyses.
Additionally, DOE has considered a
low-income consumer subgroup in
order to assess the LCC impacts on
access to affordable heating in
particular. The details of these analyses
are discussed in sections IV.F and IV.I
of this document, respectively.
1. Screened-Out Technologies
Rheem suggested that hydrogen
technology (including hydrogen and
hydrogen blends) should be screened
out from the technology options in this
rulemaking due to technological
feasibility. (Rheem, No. 37 at p. 3)
In response, DOE notes that in
commenting on the March 2021 RFI,
Rheem had recommended that the
Department consider new fuel sources,
including hydrogen-blended gas and
renewable natural gas, while stating that
industry groups are currently evaluating
the safe and efficient use of hydrogenblended fuels (with up to 15-percent
hydrogen) in gas-fired appliances.
(Rheem, No. 10 at p. 5) Consequently,
DOE included hydrogen-ready boilers 34
in the technology assessment of the May
2022 Preliminary Analysis (see chapter
3 of the preliminary TSD). DOE
evaluated hydrogen-ready boilers and
differences in burner systems that
would be able to accommodate a
transition to hydrogen blend gas and has
tentatively determined that hydrogenready burner designs do not appear to
contribute to gains in AFUE. As a result
of these findings, DOE did not consider
hydrogen-ready burners in this NOPR as
a technology option to improve
consumer boiler AFUE, and, thus, this
technology was not even included in the
NOPR screening analysis. In addition,
DOE notes that hydrogen-ready boilers
do not appear to be commerciallyavailable technologies in the United
States, and have not yet been
34 ‘‘Hydrogen-ready’’ boilers are appliances that
have the ability to burn both natural gas and
hydrogen (i.e., either a blend of the two fuels or a
complete switch between fuels).
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demonstrated to be commercially-viable
and mass-produced, as per screening
criteria number 2; therefore, even if
hydrogen-ready burners were to provide
an efficiency benefit to consumer
boilers, this technology would have
likely been screened out during this
proposed rulemaking on the basis of
practicability to manufacture, install,
and service.
DOE requests further information on
the potential future adoption of
hydrogen-ready consumer boilers in the
technologies out in the May 2022
Preliminary Analysis for the reasons
explained in that document (see chapter
4 of the preliminary analysis TSD), but
the Department did not receive any
additional feedback from stakeholders
on these determinations. Table IV.2
presents the criteria that were the basis
for screening out each of these
technologies from further consideration
in the NOPR analysis. Further details
can be found in chapter 4 of the NOPR
TSD.
United States and any data
demonstrating potential impacts of
these burner systems on AFUE.
After consideration of each
technology option analyzed in the
technology assessment, DOE has
screened out the following technologies
in this NOPR analysis: condensing
operation in oil-fired hot water boilers,
pulse combustion, burner derating, lowpressure air-atomized oil burners, and
control relays for models with BPM
motors. DOE screened these
TABLE IV.2—SCREENED-OUT TECHNOLOGIES FOR CONSUMER BOILERS
EPCA criterion (X = basis for screening out)
Technology option
Technological
feasibility
Practicability to
manufacture,
install, and
service
Adverse
impacts on
utility or
availability
Adverse
impacts on
health and
safety
Uniquepathway
proprietary
technologies
Condensing operation in oil-fired hot water boilers ...........
Pulse combustion ...............................................................
Burner derating ..................................................................
Low-pressure air-atomized oil burners ..............................
Control relays for BPM motors ..........................................
........................
........................
........................
........................
........................
X
..........................
..........................
X
..........................
........................
........................
X
........................
X
........................
X
........................
........................
........................
........................
........................
........................
........................
........................
DOE requests comment on the
tentative determination that condensing
operation in oil-fired hot water boilers,
pulse combustion, burner derating, lowpressure air-atomized oil burners, and
control relays for models with BPM
motors should be screened out from
further analysis.
2. Remaining Technologies
Through a review of each technology,
DOE tentatively concludes that all of the
other identified technologies met all five
screening criteria to be examined further
as design options to improve AFUE in
DOE’s NOPR analysis. In summary, DOE
did not screen out the following
technology options presented in Table
IV.3.
TABLE IV.3—RETAINED TECHNOLOGIES FOR CONSUMER BOILERS
Technology
Type
Design Option
Fans/Venting ...................................
Heat Exchanger Improvements ......
Burner .............................................
Ignition .............................................
Inducer fans.*
Vent dampers.
Direct venting/power venting.
Condensing heat exchanger (for gas hot water boilers only)
Improved geometry and increased heat exchanger surface area.
Baffles.
Modulating operation/modulating Aquastats.
Premix burners.
Delayed-action oil pump solenoid valves.
Electronic ignition (for oil-fired boilers)
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* In chapter 3 of the May 2022 Preliminary Analysis TSD, inducer fans were described as mechanical draft systems and grouped with heat exchanger improvements, as use of induced draft can allow for use of more restrictive heat exchanger designs that improve heat transfer.
DOE has initially determined that
these technology options are
technologically feasible because they are
being used or have previously been used
in commercially-available products or
working prototypes. DOE also finds that
all of the remaining technology options
to improve AFUE meet the other
screening criteria (i.e., practicable to
manufacture, install, and service and do
not result in adverse impacts on
consumer utility, product availability,
health, or safety, unique-pathway
proprietary technologies).
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By screening out control relays for
models with BPM motors, DOE has
tentatively determined that there remain
no other technology options which
could viably improve standby mode and
off mode power consumption. As a
result of this screening analysis, DOE
has tentatively determined that it is not
technologically feasible at this time to
increase the stringency of the standby
mode and off mode power consumption
standards for consumer boilers.
For additional details, see chapter 4 of
the NOPR TSD.
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C. Engineering Analysis
The purpose of the engineering
analysis is to establish the relationship
between the efficiency and cost of
consumer boilers. There are two
elements to consider in the engineering
analysis: the selection of efficiency
levels to analyze (i.e., the ‘‘efficiency
analysis’’) and the determination of
product cost at each efficiency level
(i.e., the ‘‘cost analysis’’). In determining
the performance of higher-efficiency
products, DOE considers technologies
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and design option combinations not
eliminated by the screening analysis.
For each product class, DOE estimates
the baseline cost, as well as the
incremental cost for the product at
efficiency levels above the baseline. The
output of the engineering analysis is a
set of cost-efficiency ‘‘curves’’ that are
used in downstream analyses (i.e., the
LCC and PBP analyses and the NIA).
As discussed in the previous section
of this document, DOE has tentatively
determined that it is not technologically
feasible at this time to increase the
stringency of the standby mode and off
mode power consumption standards for
consumer boilers because all of the
potential technology options have either
uncertain impact on PW,SB and PW,OFF or
have been removed from further
consideration in the screening analysis.
Thus, the engineering analysis of this
NOPR assesses improvements in AFUE
only.
AHRI supported the Department’s
preliminary decision not to analyze a
more-stringent standard for standby and
off mode power consumption, stating
that there is limited benefit to setting a
more-stringent standard. (AHRI, No. 40
at p. 4) Rheem also supported DOE’s
tentative determination not to analyze
more-stringent standby mode and off
mode standards. Rheem requested
clarification as to whether DOE can
simultaneously increase the minimum
AFUE if that results in an increase in
electrical energy consumption and a
corresponding increase in standby mode
and off mode energy use, even if the
combined change results in a net
decrease in energy use. (Rheem, No. 37
at pp. 3–4)
In response to the question from
Rheem, EPCA states that the Secretary
may not prescribe any amended
standard which increases the maximum
allowable energy use or decreases the
minimum required energy efficiency of
a covered product (which includes
consumer boilers). (42 U.S.C. 6295(o)(1))
This statutory ‘‘anti-backsliding’’
provision would prohibit DOE from
increasing the standby mode and off
mode energy consumption standards.
The comment from Rheem appears to
suggest that standards should consider a
combined metric of both active mode,
standby mode, and off mode energy
consumption. EPCA requires integration
of standby mode and off mode energy
consumption ‘‘into the overall energy
efficiency, energy consumption, or other
energy descriptor for each covered
product, with one exception being if
such an integrated test procedure is
technically infeasible for a particular
covered product, in which case the
Secretary shall prescribe a separate
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standby mode and off mode energy use
test procedure for the covered product,
if technically feasible. (42 U.S.C.
6295(gg)(2)(A)) In a final rule published
in the Federal Register on October 20,
2010, DOE determined that an
integrated metric is not technically
feasible because the measurement of
standby mode and off mode energy
consumption is much smaller than the
active mode fuel consumption reflected
in AFUE, making the standby mode and
off mode energy consumption infeasible
to regulate as part of a combined metric.
75 FR 64621, 64622–64627.
From its own test data and
manufacturer interviews, DOE has
tentatively determined that increases to
the AFUE of a boiler would not result
in increases to the standby mode and off
mode power consumption in such a way
that it would be impossible to comply
with the existing standby mode and off
mode power consumption standards.
Additionally, as discussed in section
III.C of this document, DOE’s test
method for consumer boilers assigns a
value of 100-percent AFUE to any
electric boiler which is non-weatherized
(see section 11.1 of ASHRAE 103–2017,
which is incorporated by reference into
appendix EE). DOE has not identified
any electric boilers that are weatherized
or intended for installation outdoors,
and has tentatively determined that
electric boilers would typically be nonweatherized and installed indoors. As
such, the AFUE for these products
would already be at the maximum
possible value per the test procedure.
Thus, DOE did not further analyze
electric hot water or electric steam
boilers in the engineering analysis, and
AFUE-based standards for these product
classes are not proposed in this NOPR.
The following subsections outline the
methodology used when conducting the
efficiency analysis and cost analysis.
1. Efficiency Analysis
DOE typically uses one of two
approaches to develop energy efficiency
levels for the engineering analysis: (1)
relying on observed efficiency levels in
the market (i.e., the efficiency-level
approach), or (2) determining the
incremental efficiency improvements
associated with incorporating specific
design options to a baseline model (i.e.,
the design-option approach). Using the
efficiency-level approach, the efficiency
levels established for the analysis are
determined based on the market
distribution of existing products (in
other words, based on the range of
efficiencies and efficiency level
‘‘clusters’’ that already exist on the
market). Using the design option
approach, the efficiency levels
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established for the analysis are
determined through detailed
engineering calculations and/or
computer simulations of the efficiency
improvements from implementing
specific design options that have been
identified in the technology assessment.
DOE may also rely on a combination of
these two approaches. For example, the
efficiency-level approach (based on
actual products on the market) may be
extended using the design option
approach to ‘‘gap fill’’ levels (to bridge
large gaps between other identified
efficiency levels) and/or to extrapolate
to the max-tech level (particularly in
cases where the max-tech level exceeds
the maximum efficiency level currently
available on the market).
In this proposed rulemaking, DOE has
relied on the efficiency-level approach.
This approach ensures that the
efficiency levels considered in the
engineering analysis are attainable using
technologies which are commercially
available and viable for consumer
boilers, and DOE considered this
approach reasonable because all of the
technology options to improve AFUE
that passed the screening analysis have
been observed in commerciallyavailable products. Additionally, as
discussed later, since the consumer
boiler industry is relatively mature, it
exhibits a design option pathway to
improved AFUE efficiency
demonstrated by models on the market.
As such, DOE was able to conduct
teardown analyses on consumer boilers
which meet each efficiency level, and
ascertain a list of representative design
options which manufacturers are most
likely to employ in order to achieve
these efficiencies. The selection of these
efficiency levels from market data is
discussed in the following sections.
a. Baseline Efficiency
For each product class, DOE generally
selects a baseline model as a reference
point for each class, and measures
changes resulting from potential energy
conservation standards against the
baseline. The baseline model in each
product class represents the
characteristics of a product typical of
that class (e.g., capacity, physical size).
Generally, a baseline model is one that
just meets current energy conservation
standards, or, if no standards are in
place, the baseline is typically the most
common or least efficient unit on the
market. For consumer boilers, there
currently exist minimum AFUE
standards for gas-fired and oil-fired
products at 10 CFR 430.32(e)(2)(iii)(A),
which were used to define the baseline
efficiency levels for these product
classes. Additionally, baseline models
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must meet the design requirements at 10
CFR 430.32(e)(2)(iii)(A) and the standby
mode and off mode power consumption
standards at 10 CFR 430.32(e)(2)(iii)(B).
b. Higher Efficiency Levels
As part of DOE’s analysis, the
maximum available efficiency level is
the highest efficiency unit currently
available on the market. DOE also
defines a ‘‘max-tech’’ efficiency level to
represent the maximum possible
efficiency for a given product. For this
analysis, because the consumer boiler
industry is relatively mature and there
is a clear design option pathway to
improved AFUE efficiency
demonstrated by models on the market,
DOE has tentatively determined that the
maximum available efficiency level is
representative of the max-tech efficiency
level for gas-fired and oil-fired boilers,
and that any additional design options
that could theoretically be used to
further improve efficiency have been
screened out. The max-tech efficiency
levels analyzed in the May 2022
Preliminary Analysis are provided in
Table IV.4.
TABLE IV.4—MAX-TECH AFUE EFFICIENCY LEVELS FOR CONSUMER
BOILERS
AFUE
(%)
Product class
ddrumheller on DSK120RN23PROD with PROPOSALS2
Gas-fired hot water .............................
Gas-fired steam ..................................
Oil-fired hot water ...............................
Oil-fired steam ....................................
96
83
88
86
In the May 2022 Preliminary
Analysis, DOE also considered the range
of input capacities of models certified at
these efficiencies to ensure that the
max-tech efficiencies analyzed would
not inadvertently correspond to a
lessening of product availability to meet
the full range of household heating
needs (see chapter 5 of the preliminary
analysis TSD). These assessments were
made based on the database of
consumer boilers constructed as part of
the market assessment, discussed in
section IV.A.2 of this document.
In response to the May 2022
Preliminary Analysis, AHRI noted that
NFPA–31, ‘‘Standard for the Installation
of Oil-Burning Equipment’’ (NFPA–
31),35 provides guidance for the relining
of chimneys based on steady-state
efficiency, and within these guidelines
35 NFPA–31 Appendix E states that metal
chimney liners may be needed to reduce transient
low draft during startup, as well as protect masonry
from acidic condensate damage. The required size
of the liner is specified based on the steady state
efficiency of the boiler, which is shown in NFPA–
31 Appendix E tables E.5.4(a) and E.5.4(b).
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are restrictions on higher-efficiency oil
boilers that AHRI stated may have an
impact on consumers. AHRI commented
that, according to NFPA–31, a 6-inch
diameter by 35-foot long metal chimney
liner can be used for an 86-percent
‘‘steady-state efficiency’’ boiler having
an input between 119,000 and 280,000
Btu/h, but this input range becomes
140,000 to 210,000 Btu/h if the ‘‘steadystate efficiency’’ is 88-percent. As a
result, AHRI recommended that DOE
should treat 86.0-percent AFUE as maxtech for oil-fired hot water boilers.
(AHRI, No. 40 at p. 4)
In response, DOE reviewed the 2020
edition of NFPA–31 36 and notes that
Tables E.5.4(a) through E.5.4(e) of that
standard present the chimney metal
liner specifications that are appropriate
for various firing rates (in terms of
gallons of oil per hour), and DOE
understands that AHRI has converted
these values of oil firing rates into Btu/
h input rates. AHRI’s comment indicates
that, for a 6-inch diameter by 35-foot
long chimney liner, a steady-state
efficiency 37 greater than 86-percent
could result in a smaller range of input
capacities allowable. Upon further
inspection of Table E.5.4(a) of NFPA–
31, DOE notes that AHRI’s calculation is
based on a lateral run of 10 feet.
Adjusting to a shorter horizontal vent
run of 4 feet,38 for example, would
allow households to meet their heating
needs using a boiler with a higher
efficiency. Table E.5.4(a) of NFPA–31
indicates that a firing rate of 1.75
gallons per hour (approximately 245,000
Btu/h) is acceptable at the high end of
firing rates for steady-state efficiencies
of 88 percent, which DOE estimates
would correspond to AFUEs of 87–88
percent. This would suggest that the
narrowing of the acceptable input
capacity range is not significant enough
to mean that a large fraction of homes
would not be able to find a replacement
boiler to meet their heating needs if the
standard were set at 88-percent AFUE.
Therefore, upon re-evaluating the
input capacity ranges available for the
maximum available AFUEs on the
market, DOE has initially concluded
that the max-tech levels from the May
2022 Preliminary Analysis are still
applicable, and these levels were
analyzed as max-tech in this NOPR.
36 Found online at link.nfpa.org/free-access/
publications/31/2020 (Last accessed Jan. 3, 2023).
37 Section E.8.3 of NFPA–31 suggests that the
steady-state efficiency of a hydronic boiler can be
estimated by adding 1 percentage point to the rated
AFUE of the boiler.
38 As discussed in appendix 8D of the NOPR TSD,
most oil-fired boilers do not have a horizontal vent
option, so the horizontal run would be limited for
vertical venting.
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Between the baseline efficiency level
and max-tech efficiency level, DOE
analyzed several other intermediate
higher efficiency levels. In the May 2022
Preliminary Analysis, DOE sought
comment on whether the AFUE
efficiency levels identified at the
preliminary stage were appropriate for
each product class (see the Executive
Summary of the preliminary TSD).
As discussed in section IV.B of this
document, DOE received multiple
comments regarding the 85-percent
AFUE efficiency level which was
analyzed for gas-fired hot water boilers
in the May 2022 Preliminary Analysis.
For the reasons explained in that
section, the Department has tentatively
determined that the concerns raised by
stakeholders reflect potential downsides
to these products regarding the
installation, maintenance, and repair
costs—and not a risk directly associated
with incrementally more-efficient heat
exchanger technologies. Hence, DOE has
retained the 85-percent AFUE efficiency
level in this NOPR analysis after
observing that a substantial number of
models on the market are certified at
this level. This observation is further
corroborated by AHRI’s 2021 shipment
data for consumer boilers, which
indicate that boilers rated between 85.0percent and 85.9-percent AFUE are the
second-highest frequency of noncondensing model shipments, behind
only baseline models (see AHRI, No. 42
at p. 2).
Crown provided a detailed analysis of
how venting category requirements
correlate to the flue gas temperature and
percent of CO2 in the flue gas, and
described the approximate relationship
between these parameters and the
steady-state combustion efficiency of a
consumer boiler. Reiterating comments
provided in the previous rulemaking,
Crown stated that there is a limit to the
steady-state efficiency that is achievable
while maintaining Category I venting
status. (Crown, No. 30 at pp. 3–5) U.S.
Boiler provided the same comments as
Crown. (U.S. Boiler, No. 31 at pp. 3–5)
DOE agrees with the assessment
provided by Crown and U.S. Boiler and
notes that, in the engineering analysis,
design options to improve efficiency
include technologies which would
move the consumer boiler out of
Category I venting status.
In response to the May 2022
Preliminary Analysis, Rheem suggested
consideration of an additional efficiency
level for gas-fired hot water boilers at
90-percent AFUE to capture a segment
of the market certified by ENERGY
STAR (at the minimum level under that
program) with existing products on the
market. (Rheem, No. 37 at p. 4)
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ddrumheller on DSK120RN23PROD with PROPOSALS2
In response, DOE notes that EPA’s
ENERGY STAR Product Specification
for Boilers, Version 3.0 (effective
October 1, 2014) (ENERGY STAR
Product Specification V3.0) requires a
minimum performance of 90-percent
AFUE for gas-fired boilers and 87percent AFUE for oil-fired boilers.39
While the 87-percent AFUE efficiency
level was already considered for oilfired hot water boilers, the May 2022
Preliminary Analysis did not assess a
90-percent AFUE efficiency level for
gas-fired hot water boilers. Therefore, in
this NOPR analysis, DOE has added an
efficiency level corresponding to the
ENERGY STAR Product Specification
V3.0 for gas-fired hot water boilers.
Additional teardown analyses were
conducted to assess the design options
representative of this efficiency level,
and further details are described in
chapter 5 of the NOPR TSD.
The efficiency levels analyzed in this
NOPR are shown subsequently in Table
IV.5 through Table IV.8.
2. Cost Analysis
The cost analysis portion of the
engineering analysis is conducted using
one or a combination of cost
approaches. The selection of cost
approach depends on a suite of factors,
including the availability and reliability
of public information, characteristics of
the regulated product, and the
availability and timeliness of
purchasing the product on the market.
The cost approaches are summarized as
follows:
• Physical teardowns: Under this
approach, DOE physically dismantles a
commercially-available product,
component-by-component, to develop a
detailed bill of materials (BOM) for the
product.
• Catalog teardowns: In lieu of
physically deconstructing a product,
DOE identifies each component using
parts diagrams (available from
manufacturer websites or appliance
repair websites, for example) to develop
the bill of materials for the product.
• Price surveys: If neither a physical
nor catalog teardown is feasible (for
example, for tightly integrated products
such as fluorescent lamps, which are
infeasible to disassemble and for which
parts diagrams are unavailable) or costprohibitive and otherwise impractical
(e.g. large commercial boilers), DOE
conducts price surveys using publiclyavailable pricing data published on
major online retailer websites and/or by
39 ENERGY STAR Product Specification for
Boilers, Version 3.0 can be found online at
www.energystar.gov/sites/default/files/specs/
Boilers%20Program%20Requirements%20
Version%203%200.pdf (Last accessed Jan. 3, 2023).
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soliciting prices from distributors and
other commercial channels.
In the present case, DOE conducted
the analysis using physical and catalog
teardowns to generate BOMs for models
meeting the efficiency levels selected in
the efficiency analysis. While the BOM
generated for each model describe the
product’s construction in detail (i.e.,
including each fabrication and assembly
operation, types of parts that are
purchased versus built in-house, types
of equipment needed to manufacture the
product, and manufacturing process
parameters), any additional higher-cost
features that were included in the
consumer boiler design but do not have
any impact on AFUE were not factored
into the engineering analysis. Wherever
possible, DOE compared models from
similar product lines at different
efficiencies in order to clearly identify
the design option pathway to higher
efficiency levels. Through these
teardown analyses, DOE has found that
the pathway for improving AFUE is
relatively homogeneous across all boiler
product classes and efficiency levels—
consisting mainly of heat exchanger
improvements.
The BOM provides the basis for the
manufacturer production cost (MPC)
estimates. DOE sought comment on the
MPC estimates presented in the May
2022 Preliminary Analysis (see the
Executive Summary of the preliminary
TSD).
Crown and U.S. Boiler commented
that manufacturing, installation, and
operating costs used for DOE’s
preliminary analysis are likely obsolete
due to recent sharp increases in prices
(reflecting inflation and supply chain
issues). Crown stated that if DOE were
to raise the standards for gas-fired hot
water boilers to a condensing efficiency
level, it would result in significant
increases in MPCs for gas steam and oilfired cast-iron boilers even if the
standards for those product classes
remain unchanged due to the large,
fixed costs for cast-iron foundries.
Crown indicated that if standards for
gas-fired hot water boilers were raised to
a condensing efficiency level, the fixed
costs of the foundries could no longer be
shared between gas-fired hot water
boilers and noncondensing gas steam
and/or oil-fired boilers due to their
significant differences in design. Such a
scenario could render some foundries
no longer financially viable. (Crown,
No. 30 at pp. 5–6; U.S. Boiler, No. 31
at pp. 5–6) Similarly, WMT indicated
that sectional cast-iron heat exchangers
are nearly identical across product
classes, so the potential elimination of
non-condensing cast-iron gas-fired hot
water boilers would significantly change
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the cost structure for other product
classes. (WMT, No. 32 at p. 2)
In response, DOE’s cost analysis
accounts for the recent increases in
material and part prices caused by
inflation and supply chain challenges;
specifically, prices from September
2022 were used for purchased parts and
non-metals, and a five-year average up
to September 2022 was used to account
for raw metal prices (this average being
a method to account for rapid
fluctuations which typically average out
in the future). For this NOPR and with
regards to the potential changes in
manufacturing cost due to cast-iron
foundry impacts, DOE did not directly
account for the pricing interaction
across product classes described by
Crown and U.S. Boiler for cast-iron
boilers in the industry MPC estimates.
DOE notes that many consumer boiler
original equipment manufacturers
(OEMs) have already transitioned to
using foundries owned by companies
unrelated to the particular consumer
boiler OEM (i.e., ‘‘third-party
foundries’’) for their consumer boiler
castings. Of the 10 consumer boiler
OEMs that offer gas-fired steam, oil-fired
hot water, or oil-fired steam cast-iron
boilers, research indicates that only two
OEMs currently own domestic foundries
(i.e., vertically integrated OEMs) that
supply consumer boiler castings for the
U.S. market. This would suggest that
current component price estimates
already reflect a transition in foundry
operation. Although DOE did not
directly account for the pricing
interaction across product classes in the
engineering analysis, DOE estimates the
potential fixed foundry overhead and
depreciation costs associated with
producing gas-fired hot water boiler
heat exchangers that may need to be
reallocated to gas-fired steam, oil-fired
hot water, and oil-fired steam
production costs under a condensing
standard and analyzes the potential
impacts of a condensing standard on
OEMs that operate their own foundries
in section V.B.2.d of this document,
‘‘Impacts on Subgroups of
Manufacturers.’’
DOE requests comment on whether an
increase in MPCs for gas-fired steam,
oil-fired hot water, and oil-fired steam
boilers would result from an amended
standard requiring condensing
technology for gas-fired hot water
boilers and, if so, how much of an
increase would occur. DOE also requests
comment on whether the potential
increase in cast-iron boiler MPCs would
only be applicable to consumer boiler
manufacturers that operate their own
foundries.
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BWC requested that DOE re-evaluate
the assumptions in Table 5.6.4 of the
preliminary TSD (‘‘Factory Parameter
Assumptions’’), which it argued
appeared to be grossly overstated given
the overall size of the boiler industry.
(BWC, No. 39 at p. 3)
In addition to seeking public
comment on the MPC estimates from the
May 2022 Preliminary Analysis, DOE
consultants discussed the results of the
preliminary cost analysis with
manufacturers in confidential
interviews in order to solicit direct
feedback on the MPCs. DOE
incorporated a substantial amount of the
qualitative and quantitative feedback
obtained from manufacturers to refine
the assumptions used in the cost
modeling for this NOPR, as suggested by
BWC. These updates are detailed in
chapter 5 of the NOPR TSD, and include
revisions to the factory parameter
assumptions.
ddrumheller on DSK120RN23PROD with PROPOSALS2
3. Manufacturer Markup and Shipping
Costs
To account for manufacturers’ nonproduction costs and profit margin, DOE
applies a multiplier (the manufacturer
markup) to the MPC. The resulting
manufacturer selling price (MSP) is the
price at which the manufacturer
distributes a unit into commerce. DOE
developed an average manufacturer
markup by examining the annual
Securities and Exchange Commission
(SEC) 10–K reports 40 filed by publiclytraded manufacturers primarily engaged
in heating, ventilation, and air
conditioning (HVAC) manufacturing
and whose combined product range
includes consumer boilers. See chapter
12 of the NOPR TSD or section IV.J.2.d
of this document for additional detail on
the manufacturer markup.
Shipping costs account for the
additional non-production cost for
manufacturers to distribute their
products to the first buyer in the
distribution chain. In the May 2022
Preliminary Analysis, DOE estimated
shipping costs based on how many units
can fit in a typical trailer, considering
the extra space necessary for shipping
and loading inefficiencies for mixed
truckload configurations with other
equipment. In general, DOE found that
shipping costs would not vary
appreciably by efficiency level, except
for gas-fired hot water boilers. For this
product class, models with condensing
heat exchangers would have more
lightweight and compact designs,
40 U.S. Securities and Exchange Commission,
Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system. Available at www.sec.gov/edgar/
search/ (Last accessed Jan. 3, 2023).
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allowing for more products to
potentially be loaded onto a trailer such
that the shipping cost would decrease
for condensing efficiency levels (see
chapter 5 of the preliminary analysis
TSD).
WMT commented that shipping costs
have increased dramatically (in some
cases nearly doubling or tripling the
costs of shipping from pre-pandemic
levels), and this would affect costs for
components to ship to consumer boiler
manufacturers, as well as the costs for
consumer boilers to be shipped to
customers. WMT stated that such
shipping cost impacts should be
included in DOE’s analysis. (WMT, No.
32 at p. 9)
In response, DOE notes that the MPC
estimates discussed in section IV.C.2 of
this document account for the costs for
components to ship to consumer boiler
manufacturers. In general, through its
review of publicly-available component
cost data and confidential interviews
with consumer boiler manufacturers,
the Department has observed an
increase in purchased component
prices, which is reflected in the increase
in MPCs in this NOPR analysis
compared to the May 2022 Preliminary
Analysis.
For outgoing shipping costs, DOE
monitors trailer prices on a regular basis
to ensure that these costs reflect the
most recent freight shipping rates to
transport products. DOE did observe a
substantial increase in prices
immediately following the COVID–19
pandemic and subsequent supply chain
crisis,41 and these increases were
reflected in the shipping cost estimates
in the May 2022 Preliminary Analysis.
Many of the shipping costs estimated in
this NOPR are comparable to the
preliminary estimates in the May 2022
Preliminary Analysis; however, DOE
did revise its approach for this NOPR.
Instead of using a coast-to-coast distance
estimate, which was used in the May
2022 Preliminary Analysis, DOE relied
on a Midwest-to-coast distance estimate
after careful review of the geographic
locations of consumer boiler
manufacturing sites. Therefore, although
DOE included the most up-to-date
trailer prices, this change in the
shipping distance estimate caused the
shipping costs for most product classes
to be lower in this NOPR compared to
the May 2022 Preliminary Analysis.
Crown and U.S. Boiler commented
that condensing boilers are often
41 U.S. Bureau of Labor Statistics Producer Price
Index (PPI) commodity data for transportation
services indicate a sharp rise in long-distance motor
carrying prices since 2020. See online at
data.bls.gov/timeseries/wpu301202&output_
view=pct_12mths (Last accessed Jan. 3, 2023).
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imported fully assembled from Europe
or Asia, and when they are not, the
‘‘heat engine’’ (heat exchanger and
burner system) almost always is, with
final assembly occurring in the United
States. Crown indicated that the longer
supply chain for condensing boilers
would negate any savings in shipping
costs due to the reduced size and weight
of condensing boilers. (Crown, No. 30 at
p. 6; U.S. Boiler, No. 31 at p. 6)
In response, DOE once again notes
that as mentioned, inbound freight costs
are included in the MPCs as a portion
of the cost for purchased parts. In this
analysis, based on further manufacturer
feedback during interviews, DOE
estimated MPCs associated with final
assembly occurring in the United States.
While developing the MPCs for
consumer boilers in this NOPR, DOE
incorporated recent manufacturer
feedback to arrive at the most recent
estimates for heat exchangers and
burners purchased from overseas. Based
on the results of the engineering
analysis, DOE agrees with Crown and
U.S. Boiler that the MPC plus shipping
costs for condensing boilers will in total
be higher than the MPC plus shipping
costs for non-condensing boilers.
4. Cost-Efficiency Results
The results of the engineering analysis
are reported as cost-efficiency data (or
‘‘curves’’) in the form of AFUE versus
MPC and MSP (in 2022 dollars). DOE
developed four curves representing the
four consumer boiler product classes
which are being analyzed in this NOPR.
Manufacturing costs can vary with the
input rating of the consumer boiler, and
for each product class, one
representative input capacity was
chosen as the basis for analysis to
represent the entire class: 100,000 Btu/
h for gas-fired boilers and 140,000 Btu/
h for oil-fired boilers. This allowed DOE
to develop one curve to represent the
cost of implementing engineering design
changes for each product class. The
methodology for developing the curves
started with determining the MPCs for
baseline products. Above the baseline,
DOE determined the design options
which would comprise the most costeffective pathway to higher efficiency
levels using teardown data at each level.
See chapter 5 of the NOPR TSD for
additional detail on the engineering
analysis. The resulting cost-efficiency
curves are shown in Table IV.5, through
Table IV.8.
DOE requests comment on the costefficiency results in this engineering
analysis. DOE also seeks input on the
design options that would be
implemented to achieve the selected
efficiency levels.
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TABLE IV.5—COST-EFFICIENCY CURVE FOR GAS-FIRED HOT WATER BOILERS
AFUE
(%)
Efficiency level
EL 0 (baseline) ..........................
EL 1 ...........................................
84
85
EL 2 (ENERGY STAR V3.0) .....
90
EL 3 ...........................................
95
EL 4 (max-tech) .........................
96
MPC
(2022$)
Design options
Non-condensing heat exchanger; Natural or induced draft ........
EL0 + Increased heat exchanger surface area; Natural or induced draft.
Cast-aluminum or stainless-steel condensing heat exchanger;
Premix modulating burner.
Stainless-steel condensing heat exchanger; Premix modulating
burner.
EL3 + Increased heat exchanger surface area with improvements in geometry.
MSP
(2022$)
Shipping
cost
(2022$)
581.22
645.20
819.52
909.73
30.32
30.32
991.66
1,398.24
18.53
1,020.12
1,438.37
18.53
1,471.07
2,074.21
18.53
TABLE IV.6—COST-EFFICIENCY CURVE FOR GAS-FIRED STEAM BOILERS
AFUE
(%)
Efficiency level
EL 0 (baseline) ..........................
82
EL 1 (max-tech) .........................
83
MPC
(2022$)
Design options
Cast-iron non-condensing heat exchanger; Natural or induced
draft.
EL0 + Increased heat exchanger surface area; Natural or induced draft.
MSP
(2022$)
Shipping
cost
(2022$)
781.76
1,102.28
38.59
865.05
1,219.72
38.59
TABLE IV.7—COST-EFFICIENCY CURVE FOR OIL-FIRED HOT WATER BOILERS
AFUE
(%)
Efficiency level
EL 0 (baseline) ..........................
EL 1 (ENERGY STAR V3.0) .....
EL 2 (max-tech) .........................
86
87
88
Design options
Cast-iron non-condensing heat exchanger; Power oil burner .....
EL0 + Increased heat exchanger surface area ...........................
EL1 + Increased heat exchanger surface area ...........................
MPC
(2022$)
MSP
(2022$)
1,198.85
1,244.66
1,289.64
1,690.38
1,754.97
1,818.39
Shipping
cost
(2022$)
48.60
48.60
48.60
TABLE IV.8—COST-EFFICIENCY CURVE FOR OIL-FIRED STEAM BOILERS
Efficiency level
EL 0 (baseline) ..........................
EL 1 (max-tech) .........................
AFUE
(%)
85%
86%
Design options
Cast-iron non-condensing heat exchanger; Power oil burner .....
EL0 + Increased heat exchanger surface area; Baffles ..............
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D. Markups Analysis
The markups analysis develops
appropriate markups (e.g., retailer
markups, distributor markups,
contractor markups) in the distribution
chain and sales taxes to convert the
MSP estimates derived in the
engineering analysis to consumer prices,
which are then used in the LCC and PBP
analysis. At each step in the distribution
channel, companies mark up the price
of the product to cover business costs
and profit margin.
For consumer boilers, the main
parties in the distribution chain are: (1)
manufacturers, (2) wholesalers or
distributors, (3) retailers, (4) plumbing
contractors, (5) builders, (6)
manufactured home manufacturers, and
(7) manufactured home dealers/retailers.
See chapter 6 and appendix 6A of the
NOPR TSD for a more detailed
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discussion about parties in the
distribution chain.
For this NOPR, DOE characterized
how consumer boiler products pass
from the manufacturer to residential and
commercial consumers 42 by gathering
data from several sources, including
consultant reports (available in
appendix 6A) and a 2022 BRG report,43
to determine the distribution channels
and fraction of shipments going through
each distribution channel. The
distribution channels for replacement or
new owners of consumer boilers in
42 Based on available data, DOE estimates that 10
percent of hot water gas-fired boilers, 9 percent of
steam gas-fired boilers, 13 percent of hot water oilfired boilers, and 13 percent of steam oil-fired
boilers will be shipped to commercial applications
in 2030.
43 BRG Building Solutions, The North American
Heating & Cooling Product Markets (2022 Edition)
(Available at: www.brgbuildingsolutions.com/
reports-insights) (Last accessed Jan. 3, 2023).
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MPC
(2022$)
MSP
(2022$)
1,182.48
1,287.50
1,667.30
1,815.38
Shipping
cost
(2022$)
62.79
62.79
residential applications (not including
mobile homes) are characterized as
follows: 44
Manufacturer → Wholesaler →
Plumbing Contractor → Consumer
Manufacturer → Retailer → Consumer
Manufacturer → Retailer → Plumbing
Contractor → Consumer
For mobile home replacement or new
owner applications, there is one
additional distribution channel as
follows: 45
44 Based on available data, DOE estimates that for
both gas-fired and oil-fired boilers, 95 percent goes
through the wholesaler-contractor distribution
channel, 5 percent goes directly from retailers to
consumers, and 5 percent goes through retailers to
contractors and to consumers.
45 Based on available data, DOE estimates that for
both gas-fired and oil-fired boilers, 80 percent goes
through the wholesaler-contractor distribution
channel, 5 percent goes directly from retailers to
consumers, 5 percent goes through retailers to
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Manufacturer → Mobile Home Dealer/
Retail Outlet → Consumer
Mainly for consumer boilers in
commercial applications (for both
replacement and new construction
markets), DOE considers an additional
distribution channel as follows:
Manufacturer → Wholesaler →
Consumer (National Account)
The new construction distribution
channel can include an additional link
in the chain—the builder. The
distribution channels for consumer
boilers in new construction 46 in
residential applications (not including
mobile homes) are characterized as
follows: 47
Manufacturer → Wholesaler →
Plumbing Contractor → Builder →
Consumer
Manufacturer → Wholesaler → Builder
→ Consumer
Manufacturer → Wholesaler (National
Account) → Consumer
For new construction, all mobile
home boilers are sold as part of mobile
homes in a specific distribution chain
characterized as follows:
Manufacturer → Mobile Home
Manufacturer → Mobile Home
Dealer → Consumer
DOE developed baseline and
incremental markups for each actor in
the distribution chain. Baseline
markups are applied to the price of
products with baseline efficiency, while
incremental markups are applied to the
difference in price between baseline and
higher-efficiency models (the
incremental cost increase). The
incremental markup is typically less
than the baseline markup and is
designed to maintain similar per-unit
operating profit before and after new or
amended standards.48
contractors and to consumers, and 10 percent goes
through specialty retailers or dealers.
46 Based on available data, DOE estimates that 18
percent of hot water gas-fired boilers, 4 percent of
steam gas-fired boilers, 8 percent of hot water oilfired boilers, and 1 percent of steam oil-fired boilers
will be shipped to new construction applications in
2030.
47 DOE believes that many builders are large
enough to have a master plumber and not hire a
separate contractor, and assigned 45 percent of
consumer boiler shipments in new construction to
this channel. DOE estimates that in the new
construction market, 90 percent of the residential
(not including mobile homes) and 80 percent of
commercial applications go through a builder and
that the rest go through the national account
distribution channel.
48 Because the projected price of standardscompliant products is typically higher than the
price of baseline products, using the same markup
for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While
such an outcome is possible, DOE maintains that,
in markets that are reasonably competitive, it is
unlikely that standards would lead to a sustainable
increase in profitability in the long run.
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To estimate average baseline and
incremental markups, DOE relied on
several sources, including: (1) form 10–
K from the U.S. Securities and Exchange
Commission (SEC) for Home Depot,
Lowe’s, Wal-Mart, and Costco (for
retailers); (2) U.S. Census Bureau 2017
Annual Retail Trade Report for
miscellaneous store retailers (North
American Industry Classification
System (NAICS) 453) (for online
retailers),49 (3) U.S. Census Bureau 2017
Economic Census data 50 on the
residential and commercial building
construction industry (for builder,
plumbing contractor, mobile home
manufacturer, mobile home retailer/
dealer); and (4) the U.S. Census Bureau
2017 Annual Wholesale Trade Report
data 51 (for wholesalers). DOE assumes
that the markups for national account is
half of the value of wholesaler markups.
In addition, DOE used the 2005 Air
Conditioning Contractors of America’s
(ACCA) Financial Analysis on the
Heating, Ventilation, Air-Conditioning,
and Refrigeration (HVACR) contracting
industry 52 to disaggregate the
mechanical contractor markups into
replacement and new construction
markets for consumer boilers used in
commercial applications.
In addition to the markups, DOE
obtained State and local taxes from data
provided by the Sales Tax
Clearinghouse.53 These data represent
weighted-average taxes that include
county and city rates. DOE derived
shipment-weighted average tax values
for each State considered in the
analysis.
BWC stated that it is not aware of any
boiler manufacturer that is selling direct
49 U.S. Census Bureau, 2017 Annual Retail Trade
Report (AWTR) (Available at: www.census.gov/
programs-surveys/arts.html) (Last accessed January
3, 2023). Note that the 2017 Annual Retail Trade
Report is the latest version of the report that
includes detailed operating expenses data.
50 U.S. Census Bureau, 2017 Economic Census
Data (Available at: www.census.gov/programssurveys/economic-census.html) (Last accessed Jan.
3, 2023). Note that the 2017 Economic Census Data
is the latest version of this data.
51 U.S. Census Bureau, 2017 Annual Wholesale
Trade Report (AWTR) (Available at:
www.census.gov/wholesale/) (Last
accessed Jan. 3, 2023). Note that the 2017 AWTR
Census Data is the latest version of this data.
52 Air Conditioning Contractors of America
(ACCA), Financial Analysis for the HVACR
Contracting Industry (2005) (Available at:
www.acca.org/store#/storefront) (Last accessed Jan.
3, 2023). Note that the 2005 Financial Analysis for
the HVACR Contracting Industry is the latest
version of the report and is only used to
disaggregate the mechanical contractor markups
into replacement and new construction markets.
53 Sales Tax Clearinghouse Inc., State Sales Tax
Rates Along with Combined Average City and
County Rates (Jan. 4, 2022) (Available at:
www.thestc.com/STrates.stm) (Last accessed May 3,
2023).
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to consumers, for both new construction
and replacement, and that it is possible
that some boilers are being sold from a
manufacturer to a mechanical contractor
followed by the consumer. BWC stated
that it does not see boilers being sold
from a manufacturer to a wholesaler and
then to a builder and consumer, as a
contractor would still need to be
involved for the installation. (BWC, No.
39 at p. 3) Based on available data
sources, DOE estimated that the
majority of the contractors obtain boilers
from wholesaler or retailer stores. DOE
acknowledges that contractors are
needed for installations, and for the new
construction distribution channel
without contractors, the assumption is
that the builders have in-house
contractors.
Rheem noted that not only do the
percentages in Table 6.2.3 of the
preliminary analysis TSD not add up to
100, but the manufacturer markup is
also inconsistent throughout the
analysis, with different values in the
comment request and Tables 6.9.1,
6.9.2, and 6.9.3. (Rheem, No. 37 at p. 4)
DOE acknowledges that the percentages
in Table 6.2.3 and manufacturer markup
values in Tables 6.9.1, 6.9.2, and 6.9.3
of the preliminary analysis TSD were
incorrectly reported and they have been
fixed in the NOPR TSD. The actual
values applied in the analysis remain
the same between the preliminary and
NOPR analysis.
AGA, APGA, and NPGA stated that
DOE should put greater weight on ex
post and market-based evidence of
markups to project a more realistic
range of likely effects of a standard on
prices, including the possibility that
prices may fall. (AGA, APGA, and
NPGA, No. 38 at p. 4) In response, DOE
is not aware of any non-proprietary data
that would allow estimation of changes
in actual markups on consumer boilers.
Regarding the effect of standards on
prices, one study in 2013 that compared
predicted and observed prices for nine
products found that costs after
standards, after adjusting for inflation,
were less than what DOE estimated.54 In
the case of consumer boilers, DOE
compared retail prices before and after
the 2021 standards took effect and
found that on average, actual consumer
boiler retail prices were below what
DOE estimated after adjusting for
inflation. (See appendix 6A of the NOPR
TSD for further details) Such
comparisons are problematic, however,
because a number of factors can cause
54 Steven Nadel and Andrew deLaski, Appliance
Standards: Comparing Predicted and Observed
Prices (July 30, 2013) ACEEE and ASAP (Available
at: www.aceee.org/research-report/e13d) (Last
accessed Jan. 3, 2023).
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prices to change, in addition to new
efficiency standards. To serve the goal
of DOE’s analysis to specifically
estimate the cost to consumers of new
or amended energy conservation
standards, DOE’s method of estimating
incremental costs relative to a baseline
product is more likely to yield relevant
results.
Chapter 6 of the NOPR TSD provides
details on DOE’s development of
markups for consumer boilers.
E. Energy Use Analysis
The purpose of the energy use
analysis is to determine the annual
energy consumption of consumer
boilers at different efficiencies in
representative U.S. single-family homes,
multi-family residences, mobile homes,
and commercial buildings, and to assess
the energy savings potential of increased
consumer boiler efficiency. The energy
use analysis estimates the range of
energy use of consumer boilers in the
field (i.e., as they are actually used by
consumers). The energy use analysis
provides the basis for other analyses
DOE performed, particularly
assessments of the energy savings and
the savings in consumer operating costs
that could result from adoption of
amended or new standards.
DOE estimated the annual energy
consumption of consumer boilers at
specific energy efficiency levels across a
range of climate zones, building
characteristics, and applications. The
annual energy consumption includes
the natural gas, liquid petroleum gas
(LPG), fuel oil, and electricity used by
the consumer boilers. DOE’s assessment
of annual energy consumption is
calculated for all households or
buildings using a consumer boiler
intended for space heating. In addition,
DOE also included the annual energy
consumption for a fraction of consumer
boilers that are used to provide hot
water in addition to space heating. DOE
does not account for other potential
boiler uses such as snow melt systems,
pool or spa heating, or steam or hot
water production for industrial or
commercial processes, since currently
DOE does not have any information
about the market share and energy use
of such systems to include it in its
analysis.
The energy used by a consumer boiler
when installed will vary by household
or building characteristics, usage, and
region. For this proposed rulemaking,
the energy use for consumer boilers is
estimated by identifying the various
households or buildings in RECS and
CBECS dataset that utilize consumer
boilers covered by this proposed rule.
Next, DOE used the same datasets to
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identify the space and water heating
load for each of the buildings within the
sample, which was used to determine
the size of the commercial water heating
equipment needed to meet the space
and water heating need of the
households or buildings being analyzed.
The determination of the boiler capacity
of a sampled household or building is
based on heating load sizing
calculations from industry reference
manuals such as Manual J coupled with
the above building characteristics and
climate data. Households or buildings
with higher heating requirements need
larger capacity boilers per this sizing
calculation. These households or
buildings are then rank ordered to
match available industry and market
research shipment data by boiler
capacity, so that the analysis has an
informed distribution of boiler
capacities that matches industry
shipment data and larger capacity
boilers are preferentially assigned to
households or buildings with higher
heating loads.
In order for energy use of the
equipment to be determined, DOE
calculated the time the boiler is spent in
active mode (providing space heating or
hot water to meet the load of the
building) and in standby mode
(electrical components are on but the
boiler is not actively heating water).
Starting from this energy consumption
estimate, the heating load is further
refined based on building characteristic
data also included in RECS and CBECS,
such as the building square footage,
building vintage, foundation type,
number of floors, and outdoor
temperature (i.e., climate for a given
region of the country). Certain building
shell characteristics (e.g., insulation) are
inferred based on the building’s age and
building shell indices from AEO 2023
dataset. The efficiency of the existing
boiler for each household or buildings is
estimated based on informed
assumptions about the reported boiler
age and historical efficiency
distributions. The energy use is further
adjusted by informed assumptions to
reflect the impact of the return water
temperature, which is discussed below
in more detail below, as well as more
minor effects such as jacket losses.
Chapter 7, appendix 7A, and
appendix 7B presents further detail
regarding the boiler sizing methodology
and estimation of energy consumption.
DOE requests comment on DOE’s
space heating and water heating energy
use methodology. DOE would also
appreciate feedback, information, and
data on these additional system types
and processes that use consumer boilers
(such as snow melt systems, pool or spa
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55155
heating, or steam or hot water
production for industrial or commercial
processes).
Chapter 7 of the NOPR TSD provides
details on DOE’s energy use analysis for
consumer boilers.
1. Building Sample
To determine the field energy use of
consumer boilers used in homes, DOE
established a sample of households
using consumer boilers from EIA’s 2015
Residential Energy Consumption Survey
(RECS 2015),55 which is the most recent
such survey that is currently fully
available. The RECS data provide
information on the vintage of the home,
as well as space heating and water
heating energy use in each household.
DOE used the household samples not
only to determine boiler annual energy
consumption, but also as the basis for
conducting the LCC and PBP analyses.
DOE projected household weights and
household characteristics in 2030, the
anticipated first year of compliance with
any amended or new energy
conservation standards for consumer
boilers. To characterize future new
homes, DOE used a subset of homes in
RECS 2015 that were built after 1990.
To determine the field energy use of
consumer boilers used in commercial
buildings, DOE established a sample of
buildings using consumer boilers from
EIA’s 2018 Commercial Building Energy
Consumption Survey (CBECS 2018),
which is the most recent such survey
that is currently fully available. See
appendix 7A of the NOPR TSD for
details about the CBECS 2018 sample.
In commenting on the May 2022
preliminary analysis, WMT expressed
concern about the level of accuracy in
RECS 2015 data due to the substantial
update to the end-use modeling and
calibration methods described by EIA as
having been implemented in this
dataset. WMT noted that EIA removed
unusually small or large outliers from
the dataset, and that the variation in the
data should be quantified to determine
whether the data is actually
representative of home sizes in the
United States. WMT also commented
that RECS estimates the energy used by
boilers but does not include a reference
to the actual energy use data used to
validate these models, and, thus, this
data may not accurately estimate the
55 Energy Information Administration (EIA), 2015
Residential Energy Consumption Survey (RECS)
(Available at: www.eia.gov/consumption/
residential) (Last accessed Jan. 3, 2023). Note that
RECS 2020 building characteristics have been
released in preliminary form by EIA; however, the
full release of RECS 2020 data was still not
published when the analysis was conducted
(expected to be published on June 2023).
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impact of proposed minimum efficiency
levels relative to the base case energy
consumption. WMT concluded that any
LCC analysis based upon RECS must
include the documented variation in the
RECS dataset, as identified by EIA.
(WMT, No. 32 at pp. 9–10)
In response, DOE notes that EIA
administers the RECS to a nationally
representative sample of U.S. housing
units. For RECS 2015, specially trained
interviewers collected energy
characteristics on the housing unit,
usage patterns, and household
demographics. This information is
combined with data from energy
suppliers to these homes to estimate
energy costs and usage for heating,
cooling, appliances, and other end uses.
The RECS survey data, including energy
use, is an integral ingredient of EIA’s
Annual Energy Outlook (AEO) and
Monthly Energy Review (MER). EIA’s
methodology for RECS 2015 is described
in multiple reports.56 As described in
these reports, RECS 2015 represents a
substantial update to the end-use
modeling and calibration methods. For
example, in the 2015 RECS, the end-use
models follow an engineering approach,
and the calibration—which follows a
minimum variance estimation
approach—is based on the relative
uncertainties of and correlations
between the end uses being estimated.
Instead of estimating unknown
parameters and interpreting their
solution values as in statistical
modeling, engineering models improve
upon statistical models by drawing on
existing studies. Also, engineering
models lead to more realistic variations
across modeled housing units. In
addition, calibration procedures in
RECS 2015 use minimum variance
estimation, which better incorporates
household characteristics data
uncertainty and recognizes correlations
between end uses. DOE notes that
households that use natural gas,
propane, or fuel oil predominately use
these fuels for space heating and water
heating. In the case of space heating, it
is heavily seasonal, while water heating
remains more constant throughout the
year.
DOE determined the 95-percent
confidence level for the average energy
use values used in its analysis for
consumer boilers to be plus or minus
7.2 percent, using EIA’s methodology
for calculating sampling error.57 DOE
also compared the RECS 2015 energy
56 See www.eia.gov/consumption/residential/
data/2015/index.php?view=methodology (Last
accessed Jan. 3, 2023).
57 See www.eia.gov/consumption/residential/
data/2015/pdf/microdata_v3.pdf (Last accessed Jan.
3, 2023).
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consumption estimates for boilers to
previous RECS energy consumption
estimates and other available studies for
consumer boilers, and the Department
found that energy consumption values
estimated in 2015 are similar (or within
in the RECS 2015 sampling error) of
those other sources, after being adjusted
for heating degree-day differences,
building shell changes in the stock, and
average boiler efficiency in the stock.
This analysis included comparing
homes using consumer boilers by home
sizes and type in the different studies,
including larger sample sized studies at
the national level such as the 2021
American Community Survey (ACS),58
the 2021 American Housing Survey
(AHS),59 the 2022 American Home
Comfort Study,60 as well as regional
studies such as the 2016–2017
Residential Building Stock Assessment
(RBSA) for the northwest region (Idaho,
Montana, Oregon, and Washington),61
the 2019 Residential Building Stock
Assessment for the State of New York,62
the Massachusetts Residential Baseline
Study,63 and the 2019 California
Residential Appliance Saturation Study
(RASS).64 In conclusion, DOE finds that
RECS 2015 matches other studies’
energy use estimates for boilers and is
a reliable source for DOE to use to create
a representative national sample
reflecting variations in real world
energy use. See appendix 7A and 7B of
the NOPR TSD for more details.
AHRI and Rheem expressed concern
with the Department using allegedly
outdated data for the analysis, and these
58 U.S. Census Bureau, 2021 American
Community Survey (Available at: www.census.gov/
programs-surveys/acs) (Last accessed Jan. 3, 2023).
59 Department of Housing and Urban
Development (HUD) and U.S. Census Bureau, 2021
American Housing Survey (Available at:
www.census.gov/programs-surveys/ahs.html) (Last
accessed Jan. 3, 2023).
60 Decision Analyst, 2022 American Home
Comfort Study (Available at:
www.decisionanalyst.com/syndicated/
homecomfort/) (Last accessed Jan. 3, 2023).
61 NEEA, 2016–2017 Residential Building Stock
Assessment (Individua Reports for Single Family,
Manufactured Homes and Multifamily Homes)
(Available at: neea.org/data/residential-buildingstock-assessment) (Last accessed Jan. 3, 2023).
62 NYSERDA, 2019 Residential Building Stock
Assessment (Available at: www.nyserda.ny.gov/
About/Publications/Building-Stock-and-PotentialStudies/Residential-Building-Stock-Assessment)
(Last accessed Jan. 3, 2023).
63 Electric and Gas Program Administrators of
Massachusetts, Massachusetts Residential Building
Use and Equipment Characterization Study
(Available at: ma-eeac.org/wp-content/uploads/
Residential-Building-Use-and-EquipmentCharacterization-Study-Comprehensive-Report2022–03–01.pdf) (Last accessed Jan. 3, 2023).
64 CEC, 2019 California Residential Appliance
Saturation Study (Available at: www.energy.ca.gov/
publications/2021/2019-california-residentialappliance-saturation-study-rass) (Last accessed Jan.
3, 2023).
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commenters stated that it is not a valid
assumption that the market has
remained unchanged since 2012 or
2015, and that the use of such data in
the final rule will not be representative
of impacts on consumers. AHRI and
Rheem encouraged the Department to
update its analysis to use the CBECS
2018 data and to use the RECS 2020
data as soon as it becomes available. In
addition, AHRI and Rheem
recommended that DOE conduct
updated surveys, studies, and analyses
where the existing data sources are out
of date. (AHRI, No. 40 at p. 5; Rheem,
No. 37 at pp. 4–5) BWC commented that
throughout the TSD, numerous
references are made to what it perceived
to be outdated surveys and other data
sources. BWC stated that the reality of
today’s costs to consumers and
manufacturers are significantly beyond
what they were just a few years ago, let
alone more than a decade ago.
Accordingly, BWC strongly
recommended that DOE should conduct
surveys or studies to obtain the
information necessary to properly
inform major regulatory policy
decisions. (BWC, No. 39 at p. 3)
In response, DOE notes that for this
NOPR, it used the most recent data that
was available. While conducting the
preliminary analysis, RECS 2020 and
CBECS 2018 were not fully available
and did not have energy consumption
estimates. However, DOE did
incorporate CBECS 2018 for this NOPR
and updated the weighting for
residential sample based on RECS 2020.
To confirm sample weighting using
RECS 2020 and CBECS 2018, DOE also
reviewed trends from multiple sources
including Home Innovations data,
American Home Comfort Survey data,
and the American Housing Survey
(AHS) to determine any changes in
occupant density and types of home,
changes in the housing stock by region,
new construction trends, and changes in
the types of water heater used by region
and market segment. Regarding
conducting independent surveys, DOE
does not have the capacity to conduct
nationally-representative surveys with
sufficiently large sample sizes to
provide useful results, on the same level
as RECS and CBECS. However, as stated
previously, DOE compared its energy
use model results to multiple studies,
including NEEA data, RASS data, and
multiple other residential boiler studies
and determined that its methodology for
assessment of the current market is
appropriate.
Crown and U.S. Boiler stated that
DOE is significantly overestimating the
number of residential boilers used in
commercial buildings, which inflated
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the estimate of energy savings that
would result from adoption of a new
standard. They also stated that while
most of the buildings in the CBECS
sample may indeed have multiple
boilers, they are far more likely to have
multiple commercial boilers than DOE
has assumed. Crown and U.S. Boiler
stated that the preliminary TSD
indicates that DOE assumed that half of
all buildings over 10,000 square feet that
are heated with boilers use commercial
boilers and the other half use residential
boilers, but these commenters argued
that DOE has provided no rationale for
this breakdown. (Crown, No. 30 at p. 6;
U.S. Boiler, No. 31 at p. 6)
In response, DOE revised its estimates
of the number of consumer boilers in
commercial buildings based on
available shipment data from the 2022
BRG Building Solutions report,65 the
updated 2018 CBECS sample, and
revised sizing methodology for boilers
in commercial buildings. This resulted
in a decrease in the fraction of
commercial buildings above 10,000
square feet that use consumer boilers
from 50 percent to 22 percent. See
appendix 7A of the NOPR TSD for more
details.
DOE requests comment on DOE’s
methodology for determining the
fraction of consumer boilers used in
commercial buildings. DOE also seeks
input regarding the fraction of consumer
boilers in commercial buildings larger
than 10,000 square feet.
Crown and U.S. Boiler stated that
residential steam systems are obsolete
and that the newest residential steam
systems in the U.S. were installed long
before 1970, so all residential steam
boilers sold in the U.S. for space heating
are, therefore, used in replacement
installations. They stated that in some
cases, oil steam boilers are replaced
with gas steam boilers, making them
‘‘new owner’’ installations. Crown and
U.S. Boiler stated that it is reasonable to
expect the stock of buildings heated by
residential steam heating boilers and
steam boiler sales to decline over time.
(Crown, No. 30 at p. 6; U.S. Boiler, No.
31 at p. 6) Crown’s and U.S. Boiler’s
statements are consistent with DOE’s
sample development for steam boilers,
as discussed further in sample variables
in appendix 7A and in the shipments
analysis in appendix 9A of the NOPR
TSD.
2. Space Heating Energy Use
To estimate the annual energy
consumption of consumer boilers, DOE
65 BRG Building Solutions, The North American
Heating & Cooling Product Markets (2022 Edition)
(Available at: www.brgbuildingsolutions.com/
reports-insights) (Last accessed Jan. 3, 2023).
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first calculated the heating load based
on the RECS and CBECS estimates of the
annual energy consumption of the boiler
for each household or commercial
building. DOE estimated the house or
building heating load by referencing to
the existing boiler’s characteristics,
specifically its capacity and efficiency
(AFUE), as well as the heat generated
from the electrical components. The
AFUE of the existing boilers was
determined using the boiler vintage (the
year of installation of the product) from
RECS and historical data on the market
share of boilers by AFUE.
DOE adjusted the AFUE of the
existing and new boilers to reflect the
variation in efficiency in different
hydronic space heating applications by
associating a specific space heating
application with each sampled
household or building. The fieldadjusted AFUE of the existing and new
boilers was calculated depending on the
return water temperature, automatic
means for adjusting water temperature,
and jacket losses.
a. Heating Load Calculation
DOE estimated the house/building
heating load by using the energy use
estimates from RECS and CBECS for
each consumer boiler and then
assigning an existing boiler’s
characteristics, specifically its capacity
and efficiency (AFUE). If DOE assigned
multiple consumer boilers to a building,
then the heating load was divided
equally to each boiler. DOE then
adjusted the energy use to normalize for
weather by using long-term heating
degree-day (HDD) data for each
geographical region.66 DOE also
accounted for changes in building shell
characteristics between 2015 (for RECS
data) or 2018 (for CBECS data) and 2030
by applying the building shell efficiency
indices in the National Energy Modeling
System (NEMS) based on EIA’s Annual
Energy Outlook 2023 (AEO 2023).67
DOE also accounted for future heating
season climate based on AEO 2023 HDD
projections.
WMT stated that DOE’s analysis does
not represent the portion of the
insufficiently insulated homes and
buildings for which condensing boilers
would operate continuously at high fire
and yet may be unable to provide
adequate heat on the coldest days. WMT
66 National Oceanic and Atmospheric
Administration, NNDC Climate Data Online
(Available at: www.cpc.ncep.noaa.gov/products/
analysis_monitoring/cdus/degree_days/) (Last
accessed Jan. 3, 2023).
67 EIA, Annual Energy Outlook 2023 with
Projections to 2050, Washington, DC (Available at:
www.eia.gov/forecasts/aeo/) (Last accessed May 3,
2023).
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stated that the practical impact of the
variation in insulation quality across the
country is that the annual operating cost
of boilers in underserved and
disadvantaged portions of society is
understated in the current model,
because the burner operating hours
(BOH) modeled in the LCC analysis will
not adequately represent the actual
energy consumed to heat homes with
insufficient insulation. WMT stated that
the BOH approach modeled minimizes
this concern through the ‘‘building
envelope’’ approach described in the
Technical Support Document, but
neither the RECS nor the CBECS data
address such insulation concerns
adequately, and, therefore, these
subgroups must be evaluated at the
State and local level in addition to the
national level. (WMT, No. 32 at pp. 5–
6)
In response, DOE’s equipment sizing
approach considers the same maximum
output capacity for both noncondensing and condensing equipment,
and the level of heat provided in the
coldest days is assumed to be the same
for the baseline and higher efficiency
equipment. However, installing
contractors typically oversize the
equipment significantly so that the
boiler is able to meet the heating load
demand on the coldest days. If a
contractor decided to oversize the
condensing equipment, then this could
lead to increased energy use for the
condensing equipment (but not
necessarily increased burner operating
hours, since larger output capacity
could result in similar or decreased
operating hours). DOE argues, though,
that this additional energy use to be able
to meet the heating load in the coldest
days for an insufficiently insulated
home or building would lead to greater
comfort for the occupant and would
lead to an unfair comparison to the noncondensing baseline model, since the
installing contractor could also oversize
the non-condensing model to achieve a
similar result.
DOE notes that there may be a
significant number of insufficiently
insulated homes and buildings in the
U.S., but RECS and CBECS already
account for the higher energy use
associated with heating these buildings
in their energy consumption and
expenditure data. The number of
insufficiently insulated homes and
buildings has decreased over time
because of retrofit efforts (such as
weatherization programs for low-income
households) and the decreasing number
of older homes in the building stock as
some older homes get demolished. DOE
relies on ‘‘building envelope’’
projections from AEO 2023 to account
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for continued improvements to the
insulation of homes and buildings,
which accounts for changes in the
building codes over time as well. For
the NOPR analysis, DOE maintained its
equipment sizing approach and
approach for projecting changes in
‘‘building envelope,’’ as used in the
preliminary analysis.
b. Impact of Return Water Temperature
on Efficiency
Consumer boilers need a low return
water temperature (RWT) to condensate
the hot flue gas and operate efficiently,
as designed. When operating at a high
RWT, consumer may lose the efficiency
advantage. Considering the varying
conditions in the installations, DOE
accounted for boiler operational
efficiency in specific installations by
adjusting the AFUE of the sampled
boiler based on an average system return
water temperature. The criteria used to
determine the return water temperature
of the boiler system included
consideration of building vintage,
product type (condensing or noncondensing, single-stage or modulating),
and whether the boiler employed an
automatic means for adjusting water
temperature. Using product type and
system return water temperature, DOE
developed and applied the AFUE
adjustments based on average heating
season return water temperatures.
BWC expressed concern with DOE
using a curve fit of curves represented
by various manufacturers showing the
relationship of boiler efficiency versus
RWT when the efficiency values
represented were not verified by a third
party, and it cannot be guaranteed that
all these manufacturers characterized
the boiler efficiencies in the same way.
(BWC, No. 39 at p. 4) On this point,
DOE notes that for the preliminary
analysis, it used all the available data
from the 2016 Final Rule (including
data provided by Burnham in the 2015
NOPR for non-condensing and
condensing boilers) to determine the
impact of return water temperature on
boiler efficiency. For this NOPR, DOE
did not find any additional third-party
testing data to justify changing its
approach. DOE collected data on several
more models, and these sources indicate
a decrease similar to that encountered in
the previous data DOE used.
DOE requests comments, information,
and data regarding the relationship
between boiler efficiency and return
water temperature.
Crown and U.S. Boiler pointed to
DOE’s thermal efficiency versus RWT
graphs converging into a narrow band
between 86 percent and 88 percent as
the RWT approaches 140 °F as
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supporting their position that the AFUE
of a condensing boiler operating above
the dew point is largely independent of
the rated efficiency in condensing
mode. (Crown, No. 30 at p. 7; U.S.
Boiler, No. 31 at pp. 7–8) In response,
DOE would point out that although the
regression analysis does show a narrow
band at temperatures at or above 140 °F
RWT, there is still a differential between
the three condensing efficiency levels,
and that the graph presents the extent of
the efficiency decreases in different
temperature ranges. Consequently, DOE
contends that it is not accurate to
portray estimated condensing boiler
efficiency above dew point as
independent of rated efficiency.
BWC commented that DOE stated in
the preliminary analysis TSD that a
single-stage condensing boiler rated
without automatic means or a
condensing boiler (either two-stage or
modulating) with automatic means,
would have a field-adjusted efficiency
above 90 percent AFUE in a high RWT
system (160 °F), a result which does not
seem possible when an RWT above
130 °F would prevent the boiler from
condensing, and as such, its maximum
expected efficiency would range from
85-percent to 88-percent AFUE. (BWC,
No. 39 at pp. 3–4) Crown and U.S.
Boiler stated that the current DOE
assumption that adjustments for return
water temperature are additive and
constant relative to the rated AFUE at
120 °F RWT. According to the
commenters, this correction leads to a
95-percent AFUE modulating
condensing boiler having a fieldadjusted AFUE of 92.94 percent at
140 °F RWT, a result which Crown and
U.S. Boiler characterized as being
unreasonable and highly optimistic.
(Crown, No. 30 at p. 7; U.S. Boiler, No.
31 at pp. 7–8) Crown and U.S. Boiler
also stated that any ‘‘AFUE
adjustments’’ that are made should have
a sound technical basis, or not be made
at all. Crown and U.S. Boilers agreed
with DOE that actual energy use for a
boiler having a given rated AFUE will
vary from one installation to the next
based upon many factors, but stated that
DOE’s attempt to adjust the rated AFUE
to account for these varying field
conditions is flawed and generally tends
to overstate the efficiency of condensing
boilers relative to non-condensing
boilers. (Crown, No. 30 at p. 7; U.S.
Boiler, No. 31 at p. 7)
In response to Crown’s and U.S.
Boiler’s comments, DOE reviewed its
field-adjusted AFUE values and
compared them with the latest available
field data. Based on this data (see
appendix 7B of the NOPR TSD for
details), DOE was able to refine field-
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adjusted AFUE by taking into account
differences in local weather conditions,
equipment sizing, heat emitter types,
return water temperatures, and other
installation characteristics for each
sampled household or building. Overall,
DOE found that modulating condensing
boilers are able to match the heating
load even if they are significantly
oversized, compared to non-modulating
equipment that might short-cycle more
often if significantly oversized, which
would impact efficiency. DOE also notes
that current modulating condensing
boilers with outdoor reset controls are
able to handle a significant fraction of
the heating load during typical winter
conditions, even if the heat emitters are
not properly sized. On average, the
field-adjusted AFUE used in the
preliminary analysis is similar to the
field-adjusted efficiency for the NOPR,
but the updated approach provides a
more significant level of variability that
is found in the field. See appendix 7B
of the NOPR TSD for more details.
WMT stated that the vast majority of
current boiler installations operate at
180 °F circulating (return) water
temperatures and that the prevalence of
such boiler systems should be
accounted for in the analysis. The
commenter likewise argued that a
related reduction in efficiency (for
condensing boilers where additional
emitter surface area is not added)
should be accounted for in the analysis.
WMT also stated that higher efficiencies
are only consistently realized when the
heat emitter surface area is adequately
sized, because when it is not adequately
sized, increased efficiencies are highly
dependent upon the local climate.
(WMT, No. 32 at p. 5) AHRI stated that
according to a contractor survey they
conducted, when replacing a noncondensing boiler with a condensing
boiler, heat emitters are not being added
in the field due to the cost of additional
heat emitters or installation space
constraints. Therefore, AHRI argued that
DOE overstated the energy savings in its
model, because such installations
provide less than the stated efficiency
levels, and the boilers would have to
run longer to maintain home
temperatures. (AHRI, No. 42 at p. 4)
In response, DOE agrees that many
existing hydronic distribution systems
were originally designed to meet the
heating load on the coldest day, with
the hot water circulating through the
heat emitters (such as radiators) at
180 °F. Based on weather data, boilers
today typically experience conditions 68
68 The space heating design outdoor temperature
is typically defined as the temperature point above
which the actual ambient temperature would be for
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at design limits less than five percent of
the time when fulfilling space heating
needs. The conditions that boilers
usually face are considerably less than
design during the rest of the year. By
using bin data, DOE estimated that for
most consumer boiler installations, for
80 percent or more of the heating
season, boilers are required to consume
50 percent or less energy than the BTUs
needed to meet designed maximum
heating needs. In addition, the heating
system (including the boiler and the
installed radiator) is typically oversized
significantly compared to the design
conditions, and a significant number of
buildings have improved their building
shell in comparison to when the original
hydronic heating system was originally
installed. Condensing boilers also use
outdoor reset features to calculate the
right water temperature for the heat
emitters based upon the load that the
house or building is experiencing. DOE
analyzed the design conditions, reset
curves, and bin data for different houses
or buildings in DOE’s sample and
determined that for a large majority of
the heating season, the boiler can lower
the water temperature so that the return
temperatures coming back to the boiler
are below combustion gas dewpoint
levels,69 which allows the boiler flue
gases to condense and the boiler to
operate at or near its rated efficiency.
Another feature of condensing boilers is
that the burner modulates, which
typically increases the overall efficiency
of the unit by allowing it to operate the
majority of the time in part-load, which
is typically at or near its rated
efficiencies. In an ideal situation, the
heat emitter for a condensing boiler
installation is chosen to provide all the
BTUs needed. For this to occur, all of
the existing homes and commercial
buildings would have to change and/or
upgrade their existing heat emitters. As
shown in AHRI’s 2022 contractor
survey, although upgrading the heat
emitter does occur in the field to some
extent, the majority of the time it does
not. Therefore, for the NOPR, DOE
updated its energy use model to
estimate the fraction of the time the
condensing boiler would operate at
99 percent of all the hours in the year, based on a
30-year average. In other words, at the space heating
design temperature, the boiler would be expected
to encounter colder temperatures for only 1 percent
of the hours in a year.
69 For example, when a condensing boiler is
designed for 180 °F water, 70 °F indoors, and a
design outdoor temperature of between 0 °F and
10 °F, the reset curve will calculate a water
temperature that provides return temperatures
below the dewpoint of the flue gases. Such
mechanism would be expected to work as intended
down to 25 °F in order to ensure that the boiler is
operating in a condensing mode.
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different efficiencies based on return
water temperature by using binned
weather data for each household or
building installation. Such approach
should allow DOE to characterize the
impact of individual installations more
accurately, but on average, the
Department has found the resulting
efficiencies to be similar to the ones
estimated in the preliminary analysis.
DOE requests comment on DOE’s
updated methodology for determining
energy use for condensing boilers in
different return water temperature
applications.
c. Impact of Jacket Losses on Energy Use
In its analysis, DOE accounted for
jacket losses when the boiler is located
in a non-conditioned space (i.e.,
unconditioned basement or garage). For
boilers located in conditioned spaces,
DOE assumed that jacket losses
contribute to space heating as useful
heat.
Crown and U.S. Boiler stated that
there is little justification in applying
jacket loss to any boilers installed in
basements, especially when the DOE
test procedure treats non-weatherized
boilers as being located indoors in a
conditioned space, consistent with longstanding DOE practice. Crown and U.S.
Boiler also pointed out that there may
be a problem with the two jacket loss
factors K and CJ being inconsistent with
each other in ASHRAE 103–2017.
(Crown, No. 30 at p. 8; U.S. Boiler, No.
31 at p. 8)
In response, because some of the
jacket losses could contribute to heating
the conditioned space, DOE maintains
that the jacket loss adjustment values
are only applied to installations in
unconditioned basements. In regard to
the jacket loss values, since there are
very limited test data, for the NOPR,
DOE revised its jacket loss value for
condensing boilers so that it is equal to
on average 0.5 (per ASHRAE 103–2022
for finned-tube boilers, which would
more closely approximate condensing
boiler designs, and DOE assumed 0.5
percent for the jacket loss fraction.
d. Impact of Excess Air Adjustments
A properly controlled amount of
excess air provided to the boiler during
operation helps with efficient
combustion and safe venting, but will
impact the efficiency of the boiler if the
excess air becomes too much. The
current DOE test procedure requires the
burners of gas-fired boilers to be
adjusted to their maximum Btu input
ratings at the normal pressure and to set
the primary air shutters in accordance
with the manufacturer’s
recommendation to give a good flame.
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However, as many consumer boilers
operate on the lower end of the firing
rates in the field, the excess air level
calibrated at high fire decreases the
operational efficiency. For the
preliminary analysis, DOE accounted for
differences in excess air between the
test procedure and field conditions;
DOE assumed that the increased excess
air level in the field would be based on
the assumed stack temperature and draft
type, and addressed this by reducing
AFUE by an adjustment factor ranging
from 0.0 percent to 1.6 percent.
Crown and U.S. Boiler stated that
DOE’s ‘‘excess air adjustment’’ adds
error to the analysis and needs to be
dropped. Crown and U.S. Boiler stated
that because DOE’s test procedure does
not require gas burner excess air to be
adjusted in accordance with
manufacturer’s instructions, and
because excess air on non-atmospheric
gas burners can often be adjusted
independently of input, they believe
that non-atmospheric boilers are more
likely than atmospheric to run in the
field at an excess air level above (and
efficiency below) that at which the
AFUE was measured, which is exactly
opposite what is done in DOE’s
adjustment. (Crown, No. 30 at p. 9; U.S.
Boiler, No. 31 at p. 9)
In response, DOE assumed that boilers
at high fire operate at 15 to 20 percent
excess air, based on an article in the
ASHRAE Journal 70 and the relationship
between excess air, stack temperature,
and combustion efficiency from the
Engineering Toolbox.71 Based on these
two sources, DOE made the following
assumptions. For natural draft
(atmospheric) boilers below 86 percent
AFUE, DOE assumed 20 percent excess
air and 400 °F stack temperature,
resulting in a triangular distribution of
AFUE impact from 0 percent to 1.6
percent (0.8 percent average). For noncondensing mechanical draft boilers and
natural draft boilers above 86-percent
AFUE, DOE assumed 15 percent excess
air and 400 °F stack temperature,
resulting in a 0.4 percent average, which
is half of the impact on AFUE compared
to natural draft boilers below 86 percent
AFUE. For condensing boilers, DOE
assumed 15 percent excess air and
200 °F stack temperature, resulting in
0.2 percent average, which is half of the
impact on AFUE compared to noncondensing mechanical draft boilers.
DOE has not found additional data or
70 Eoff, D., Understanding Fuel Savings in the
Boiler Room, ASHRAE Journal (2008) 50(12): pp.
38–43.
71 The Engineering Toolbox, Combustion
Efficiency and Excess Air (Available at:
www.engineeringtoolbox.com/boiler-combustionefficiency-d_271.html) (Last accessed Jan. 3, 2023).
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information to support changing its
methodology.
DOE requests comments, information,
and data showing the relationship
between boiler efficiency and excess air
during AFUE testing and in the field.
3. Water Heating Use
Consumer boilers are often used to
provide hot water in addition to space
heating. The most common means of
doing so are through an indirect water
heater, tankless coil, or as an integrated
part of the boiler. This functionality’s
energy use is taken into account in the
DOE test procedure for consumer
boilers.
As mentioned previously, DOE does
not account for other boiler uses such as
snow melt systems, pool or spa heating,
or steam or hot water production for
commercial processes, since currently
DOE does not have any information
about the prevalence and energy use of
such systems. DOE welcomes
information and data on these
additional system types and processes.
RECS 2015 and CBECS 2018 do not
directly provide information about
whether a boiler is used to provide hot
water. For that to happen, DOE
determined that it is a prerequisite for
the households and buildings with (a)
boiler(s) to report using the same fuel
for both space and water heating. DOE
also estimated the probability of
consumer boilers used for water heating
based on a 2015 AHRI contractor
survey.72 DOE determined that boilers
are used for water heating in 50 percent
of gas-fired hot water boiler
installations, 5 percent of gas-fired
steam boiler installations, 40 percent of
oil-fired hot water boiler installations,
and 5 percent of oil-fired steam boiler
installations.
On this topic, Crown and U.S. Boiler
stated that according to EPCA’s
definition of a ‘‘furnace,’’ within which
boilers are included, nothing is said
about domestic water production, so
DOE’s authority to include the energy
use in the cost-benefit analysis for a
standard is questionable. Crown and
U.S. Boiler also stated that DOE’s
residential boiler test method is not
designed to measure this energy
consumption (including idle losses) and
that DOE’s crude attempt to estimate it
includes several questionable and
arbitrary assumptions. (Crown, No. 30 at
pp. 9–10; U.S. Boiler, No. 31 at pp. 9–
10) In response, DOE notes that EPCA
requires DOE to consider the savings in
72 AHRI, Survey of Boiler Installation Contractors
(2015), Usage of Boilers for Both Heat and Hot
Water, pp. 10–11 (Available at:
www.regulations.gov/document/EERE-2012-BTSTD-0047-0066) (Last accessed Jan. 3, 2023).
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operating costs throughout the
estimated average life of the covered
product in the type (or class) compared
to any increase in the price of, or in the
initial charges for, or maintenance
expenses of, the covered product that
are likely to result from a standard. (42
U.S.C. 6295(o)(2)(B)(i)(II)) As there is no
restriction on the type of energyconsuming service provided by a
covered product, it is appropriate for
DOE to include all such energy
consumption and related costs
associated with boiler operation,
including those for domestic hot water
supply. DOE believes that its energy use
approach for estimating energy use for
water heating and idle losses is
reasonable, but welcomes any
comments, methodology suggestions,
and data to make further improvements
to its energy use model.
Crown and U.S. Boiler also stated that
DOE is likely overstating the use of
water heating by assuming any boiler,
other than an oil-fired steam boiler, is
providing water heating if RECS 2015 or
CBECS 2012 reports the use of ‘‘tankless
water heating.’’ (Crown, No. 30 at pp. 9–
10; U.S. Boiler, No. 31 at p. 10) Overall,
DOE has found that the fraction of
boilers that are used for water heating in
its sample matches the available
contractor survey data compiled by
AHRI in 2014 and 2022. For the
sampling process, DOE assumed that for
oil-fired boilers (both steam and hot
water), if RECS 2015 or CBECS 2018
reports the use of ‘‘tankless water
heating,’’ then the boiler provides hot
water. For gas-fired boilers, only a
fraction of the reported ‘‘tankless water
heating’’ is assumed to be provided by
the boiler.
See appendix 7B of the NOPR TSD for
more information about the energy use
analysis.
F. Life-Cycle Cost and Payback Period
Analysis
DOE conducted LCC and PBP
analyses to evaluate the economic
impacts on individual consumers of
potential energy conservation standards
for consumer boilers. 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 used the following
two metrics to measure consumer
impacts:
• The LCC is the total consumer
expense of an appliance or product over
the life of that product, consisting of
total installed cost (manufacturer selling
price, distribution chain markups, sales
tax, and installation costs) plus
operating costs (expenses for energy use,
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maintenance, and repair). To compute
the operating costs, DOE discounts
future operating costs to the time of
purchase and sums them over the
lifetime of the product.
• The PBP is the estimated amount of
time (in years) it takes consumers to
recover the increased purchase cost
(including installation) of a moreefficient product through lower
operating costs. DOE calculates the PBP
by dividing the change in purchase cost
at higher efficiency levels by the change
in annual operating cost for the year that
amended or new standards are assumed
to take effect.
For any given efficiency level, DOE
measures the change in LCC relative to
the LCC in the no-new-standards case,
which reflects the estimated efficiency
distribution of consumer boilers in the
absence of new or amended energy
conservation standards. In contrast, the
PBP for a given efficiency level is
measured relative to the baseline
product.
For each considered efficiency level
in each product class, DOE calculated
the LCC and PBP for a nationally
representative set of housing units and
commercial buildings. As stated
previously, DOE developed household
samples from RECS 2015 and CBECS
2018. For each sample household and
commercial building, DOE determined
the energy consumption for the
consumer boilers and the appropriate
energy price. By developing a
representative sample of households
and commercial buildings, the analysis
captured the variability in energy
consumption and energy prices
associated with the use of consumer
boilers.
Inputs to the calculation of total
installed cost include the cost of the
product—which includes MPCs,
manufacturer markups, retailer and
distributor markups, and sales taxes—
and installation costs. Inputs to the
calculation of operating expenses
include annual energy consumption,
energy prices and price projections,
repair and maintenance costs, product
lifetimes, and discount rates. DOE
created distributions of values for
product lifetime, discount rates, and
sales taxes, with probabilities attached
to each value, to account for their
uncertainty and variability.
The computer model DOE uses to
calculate the LCC relies on a Monte
Carlo simulation to incorporate
uncertainty and variability into the
analysis. The Monte Carlo simulations
randomly sample input values from the
probability distributions and consumer
boiler user samples. For this
rulemaking, the Monte Carlo approach
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is implemented in MS Excel together
with the Crystal BallTM add-on.73 The
model calculated the LCC for products
at each efficiency level for 10,000
housing units and commercial buildings
per simulation run. The analytical
results include a distribution of 10,000
data points showing the range of LCC
savings for a given efficiency level
relative to the no-new-standards case
efficiency distribution. In performing an
iteration of the Monte Carlo simulation
for a given consumer, product efficiency
is chosen based on its probability. If the
chosen product efficiency is greater than
or equal to the efficiency of the standard
level under consideration, the LCC
calculation reveals that a consumer is
not impacted by the standard level. By
accounting for consumers who already
purchase more-efficient products, DOE
avoids overstating the potential benefits
from increasing product efficiency.
DOE calculated the LCC and PBP for
consumers of consumer boilers as if
each were to purchase a new product in
the expected year of required
compliance with new or amended
standards. New and amended standards
would apply to consumer boilers
manufactured 5 years after the date on
which any new or amended standard is
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published. (42 U.S.C. 6295(m)(4)(A)(ii))
At this time, DOE estimates publication
of a final rule in mid-2024. Therefore,
for purposes of its analysis, DOE used
2030 as the first full year of compliance
with any amended standards for
consumer boilers.
Table IV.9 summarizes the approach
and data DOE used to derive inputs to
the LCC and PBP calculations. The
subsections that follow provide further
discussion. Details of the spreadsheet
model, and of all the inputs to the LCC
and PBP analyses, are contained in
chapter 8 of the NOPR TSD and its
appendices.
TABLE IV.9—SUMMARY OF INPUTS AND METHODS FOR THE LCC AND PBP ANALYSIS *
Inputs
Source/method
Product Cost .........................................
Derived by multiplying MPCs by manufacturer and retailer markups and sales tax, as appropriate. Used
historical data to derive a price scaling index to project product costs.
Baseline installation cost determined with data from RSMeans 2023. Assumed no change with efficiency level.
The total annual energy use multiplied by the hours per year. Average number of hours based on field
data.
Variability: Based on RECS 2015 and CBECS 2018.
Natural Gas: Based on EIA’s Natural Gas Navigator data for 2022 and RECS 2015 billing data;
Electricity: Based on EIA’s Form 861 data for 2022 and RECS 2015 billing data;
Propane and Fuel Oil: Based on EIA’s State Energy Data System (SEDS) for 2021.
Variability: Energy prices by States were used for residential and commercial applications.
Marginal prices used for natural gas, propane, and electricity prices.
Based on AEO2023 price projections.
Based on RSMeans data and other sources.
GHW: 26.9 years; GST: 23.7 years; OHW: 25.6 years; OST: 19.6 years.
Residential: approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances, or might be affected indirectly. Primary data source was the Federal Reserve Board’s Survey of Consumer Finances.
Commercial: Calculated as the weighted-average cost of capital for businesses purchasing consumer
boilers. Primary data source was Damodaran Online.
2030.
Installation Costs ..................................
Annual Energy Use ..............................
Energy Prices .......................................
Energy Price Trends ............................
Repair and Maintenance Costs ............
Product Lifetime ...................................
Discount Rates .....................................
Compliance Date ..................................
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* References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the NOPR TSD.
1. Product Cost
To calculate consumer product costs,
DOE multiplied the MPCs developed in
the engineering analysis by the markups
described previously (along with sales
taxes). DOE used different markups for
baseline products and higher-efficiency
products, because DOE applies an
incremental markup to the increase in
MSP associated with higher-efficiency
products.
Examination of historical price data
for certain appliances and equipment
that have been subject to energy
conservation standards indicates that
the assumption of constant real prices
may, in many cases, overestimate longterm trends in appliance and equipment
prices. Economic literature and
historical data suggest that the real costs
of these products may in fact trend
downward over time according to
‘‘learning’’ or ‘‘experience’’ curves.
In the experience curve method, the
real cost of production is related to the
cumulative production or ‘‘experience’’
with a manufactured product. This
experience is usually measured in terms
of cumulative production. As
experience (production) accumulates,
the cost of producing the next unit
decreases. The percentage reduction in
cost that occurs with each doubling of
cumulative production is known as the
learning rate. In typical experience
curve formulations, the learning rate
parameter is derived using two
historical data series: cumulative
production and price (or cost). DOE
obtained historical PPI data for heating
equipment from 1999 to 2021 for cast
iron boilers and from 1980 to 1986 and
73 Crystal BallTM is commercially-available
software tool to facilitate the creation of these types
of models by generating probability distributions
and summarizing results within Excel (Available at:
www.oracle.com/technetwork/middleware/
crystalball/overview/) (Last accessed Jan.
3, 2023).
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1994 to 2014 for steel boilers from the
Bureau of Labor Statistics (BLS).74 The
PPI data reflect nominal prices, adjusted
for product quality changes. An
inflation-adjusted (deflated) price index
for heating equipment manufacturing
was calculated by dividing the PPI
series by the implicit price deflator for
Gross Domestic Product Chained Price
Index.75
From 1999 to 2001, the deflated price
index of the cast iron heating boiler was
decreasing. Since then, the indices for
cast iron boilers and steel boilers have
both risen, due to rising prices of the
raw materials. However, given the
uncertainty in the material prices and
the economy, it is uncertain the current
trend of the price indices will be
sustained. Therefore, DOE decided to
use constant prices as the default price
74 See
www.bls.gov/ppi/.
www.bea.gov/data/gdp/gross-domestic-
75 See
product.
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assumption to project future consumer
boiler prices. Thus, projected prices for
the LCC and PBP analysis are equal to
the 2021 values for each efficiency level
in each product class.
DOE requests comments on the
default constant price trend for
consumer boilers. DOE seeks comments
on how material prices and
technological advancement would be
expected to impact future prices of
consumer boilers.
2. Installation Cost
Installation cost includes labor,
overhead, and any miscellaneous
materials and parts needed to install the
product, such as venting and piping
modifications and condensate disposal
that might be required when installing
products at various efficiency levels.
DOE estimated the costs associated with
installing a boiler in a new housing
unit/commercial building or as a
replacement for an existing boiler. DOE
used data from RSMeans to estimate the
baseline and higher efficiency
installation costs for consumer boilers.76
DOE calculated the basic installation
cost, which is applicable to both
replacement and new construction
boiler installations and includes the cost
of putting in place and setting up the
boiler, permitting, and removal or
disposal fees. DOE also considered
additional costs (‘‘adders’’) for a fraction
of installations of non-condensing and
condensing boilers. These additional
costs may account for installing a new
vent system, chimney relining, updating
of flue vent connectors, vent resizing,
the costs for a stainless-steel vent, and
condensate withdrawal (if required). In
addition, DOE accounted for the costs
associated with adding water heating
service using the boiler (for example,
through an indirect tank or through
combination space heating/water
heating boilers) for a fraction of
installations. See chapter 8 and
appendix 8C of the TSD for more details
on installation cost including average
installation costs by product class and
efficiency level.
AHRI expressed concerns that
RSMeans does not have enough
resolution with respect to the
differences in installation times for
condensing and non-condensing boilers.
(AHRI, No. 40 at p.6) WMT stated that
RSMeans should not be utilized as a
true job costing calculator because it
does not accurately capture the true and
nuanced costs of installation work.
WMT believes the RSMeans data is
intended as an initial estimation tool,
providing information for businesses to
76 See
www.rsmeansonline.com/.
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benchmark against the larger industry
and to provide quotations of
complicated projects, and, in fact,
RSMeans itself states that they have no
expressed or implied warranty as to the
fitness of the information for a
particular purpose. WMT believes the
actual cost of a project is determined
after the work is completed, and,
therefore, the best source of information
for the difference in installation
activities is the manufacturer’s service
call information. (WMT, No. 32 at pp.
10–11)
In response, DOE notes that the
Department does not utilize RSMeans as
the sole source for its estimation of
boiler installation costs. DOE uses
RSMeans data to provide labor costs,
materials costs, and labor hours for a
variety of installation tasks associated
with installing a boiler. In order to
appropriately characterize the
installation costs, DOE used a variety of
additional sources including consultant
reports, manufacturer installation
manuals, and other online resources.
The resulting installation cost model for
consumer boilers provides a distribution
of costs that matches with available
field data from 2014 and 2022 AHRI
contractor surveys and other online
resources (see Appendix 8D for more
details).
Crown and U.S. Boiler argued that
DOE used labor rates from RSMeans that
do not appear applicable to residential
boiler installation, service, and
maintenance. Crown and U.S. Boiler
stated that, for example, installation
work on simple gas-fired natural draft
non-condensing boilers is sometimes
performed by plumbers. (Crown, No. 30
at p. 11; U.S. Boiler, No. 31 at p. 10) In
response, DOE uses RSMeans data and
consultant reports to estimate the
appropriate labor crew for residential
boiler tasks. DOE is aware that
residential consumer boiler installations
can be, and in certain cases are,
accomplished by plumbers and other
contractors, but RSMeans crew type for
boilers approximates the average labor
costs per hour for a crew performing the
main boiler installation tasks. Also, the
cost differential for this crew type
versus a plumber for example is not
very significant. (See appendix 8D of the
NOPR TSD). Therefore, DOE kept its
approach for using labor rates based on
RSMeans for the NOPR analysis.
Crown and U.S. Boiler stated DOE is
underestimating the relative difference
in the installation costs for condensing
and non-condensing boilers, and past
discussions with their customers
suggest that a $3,500 adder for a
condensing boiler installation, as
evidenced by DOE’s consultant, is closer
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to reality. (Crown, No. 30 at p. 11; U.S.
Boiler, No. 31 at p. 11) In contrast,
NEAA and the Joint Advocates stated
that DOE’s analysis of installation costs
for consumer boilers is comprehensive
and reasonable for condensing boiler
installations and includes an evaluation
of the installation issues associated with
switching from a non-condensing to a
condensing boiler. (NEAA, No. 36 at p.
2; Joint Advocates, No. 35 at p. 3)
NYSERDA stated that DOE correctly
found that new technologies have
entered the market to help alleviate
previously challenging installations,
particularly related to venting, for
condensing products. NYSERDA further
commented that the contractors have
significant experience installing these
products in a wide variety of scenarios,
as almost 40 percent of all furnaces and
boilers in New York achieve a
condensing level of performance.
NYSERDA added that DOE’s analysis,
which revealed that fewer than 5
percent of installations could be labeled
as challenging, is well-supported and
reflects the significant gain of market
share that condensing products have
achieved over the last twenty years.
(NYSERDA, No. 33 at p.3)
In response, DOE acknowledges that a
small fraction of replacement
installations may be difficult, but DOE
does not believe that the difficulties are
insurmountable. DOE notes that in
response to the NOPR for the current
residential furnaces rulemaking, the
American Council for an EnergyEfficient Economy (ACEEE) stated that
the Energy Coordinating Agency, a
major weatherization program in
Philadelphia that has installed many
condensing furnaces in row houses, has
developed moderate cost solutions (at
most $350) to common problems such
as having no place to horizontally vent
directly from the basement. (Docket No.
EERE–2014–BT–STD–0031, ACEEE, No.
113 at p. 7) DOE’s analysis accounts for
additional costs for that small fraction of
installations that would require
significant installation costs in the range
of several thousand dollars. DOE also
accounts for adders for condensing
models in a distribution of costs that
matches with available field data from
2014 and 2022 AHRI contractor surveys
and other online resources (see
appendix 8D of the NOPR TSD for more
details). Although in some areas and
certain applications a bigger relative
difference can be observed in the field,
DOE argues that the distribution of costs
it develops for the installation cost
analysis will better represent field
applications overall. DOE agrees with
NYSERDA that the fraction of remaining
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difficult installations has been
decreasing as the market share of
condensing boiler installations has
increased over time.
PB Heat stated that the current
minimum efficiency levels for Category
I, chimney-vented boilers are near
physical limits of chimney venting. The
commenter added that increasing boiler
minimum efficiency levels beyond the
current levels would significantly
reduce the applications where a
Category I boiler could be installed with
an existing chimney and produce
reliable and safe operation over its
expected life. PB Heat asserted that
increasing the minimum efficiency
would reduce the flue temperature,
which along with chimney height is a
key driver for venting of flue gases, and
this would increase the likelihood of
condensation in the chimney (causing
premature degradation) and the
likelihood of poor draft, which can
result in flue gas spillage into the heated
space. (PB Heat, No. 34 at p. 1)
In response, DOE agrees that Category
I venting may no longer be suitable for
amended energy conservation standards
set at significantly higher levels of boiler
efficiency. DOE has estimated that in
cases of replacement with nearcondensing gas-fired boilers (85–89
percent AFUE), instead of using
Category I chimney venting or Category
II stainless steel venting, installers
would use Category III stainless steel
venting with mechanical draft.77 When
considering condensing boilers,
Category I or Category II venting
presents reliability issues, even with
stainless steel venting, because of the
variety of operating conditions
encountered in the field. Accordingly,
for this analysis, DOE assumed that for
such installations (that otherwise would
require Category II venting), it would be
appropriate to install a mechanical draft
boiler with Category III venting (which
requires stainless steel venting), in order
to prevent safety and reliability issues.
DOE included the cost of AL29–4C
stainless steel venting for all Category III
installations.
AHRI stated that its contractor survey
showed that while direct venting is a
common means to vent condensing
boilers, it is not the only method being
used in the field. The commenter
opined that the choice in venting is
most likely based on the availability of
the product and, as such, must be
maintained as an option to ensure that
77 For replacement with an 84-percent AFUE
boiler, DOE found that that it is necessary to use
special venting in a small fraction of cases based on
shipments data provided by Burnham during the
2015 NOPR. [EERE–2012–BT–STD–0047 (Burnham,
No. 60, p.18)].
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contractors can install and vent boilers
safely and effectively in all situations
that they may encounter. (AHRI, No. 42
at p. 8) In response, for the preliminary
analysis, DOE assumed that direct
venting is used by a fraction of
condensing installations. For the NOPR
analysis, DOE updated its fraction of
direct vent installations to match the
data provided by AHRI’s contractor
survey.
AHRI stated that DOE is not including
in its costing model the cost of
replacement baseboard. AHRI
elaborated that when a consumer
switches from a non-condensing boiler
to a condensing boiler, they will need to
replace or increase the length of their
baseboard to work with lower water
temperatures in order to realize the
energy savings potential of the
condensing boiler. (AHRI, No. 40 at p.
1) AHRI’s 2022 contractor survey shows
that upgrading the heat emitter rarely
occurs in practice. Therefore, for this
analysis, DOE has chosen not to include
the cost of replacing or increasing the
length of the baseboard for retrofitting
an existing non-condensing boiler with
a condensing boiler. Instead, DOE has
chosen to adjust the energy efficiency of
the boiler to compensate for the
decrease in the field efficiency of
condensing boilers when the heat
emitter is not sized properly.
3. Annual Energy Consumption
For each sampled household and
commercial building, DOE determined
the energy consumption for a consumer
boiler at different efficiency levels using
the approach described previously in
section IV.E of this document.
Higher-efficiency boilers reduce the
operating costs for a consumer, which
can lead to greater use of the boiler (i.e.,
a ‘‘rebound effect’’). A direct rebound
effect occurs when a product that is
made more efficient is used more
intensively, such that the expected
energy savings from the efficiency
improvement may not fully materialize.
At the same time, consumers benefit
from increased utilization of products
due to rebound. Although some
households may increase their boiler
use in response to increased efficiency,
DOE does not include the rebound effect
in the LCC analysis because the
increased utilization of the water heater
provides value to the consumer. DOE
does include rebound in the NIA for a
conservative estimate of national energy
savings and the corresponding impact to
consumer NPV. See section IV.H.3 of
this document and chapter 10 of the
NOPR TSD for more details.
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4. Energy Prices
Because marginal energy prices more
accurately capture the incremental
savings associated with a change in
energy use from higher efficiency, they
provide a better representation of
incremental change in consumer costs
than average energy prices. Therefore,
DOE applied average energy prices for
the energy use of the products
purchased in the no-new-standards
case, and marginal energy prices for the
incremental change in energy use
associated with the other efficiency
levels considered.
DOE derived average monthly
marginal residential and commercial
electricity, natural gas, LPG, and fuel oil
prices for each State using data from
EIA.78 79 80 DOE calculated marginal
monthly regional energy prices by: (1)
first estimating an average annual price
for each region; (2) multiplying by
monthly energy price factors, and (3)
multiplying by seasonal marginal price
factors for electricity, natural gas, LPG,
and fuel oil. The analysis used historical
data up to 2022 for residential and
commercial natural gas and electricity
prices and historical data up to 2021 for
LPG and fuel oil prices adjusted to 2022
values using AEO data. Further details
may be found in chapter 8 of the NOPR
TSD.
The Joint Commenters encouraged
DOE to evaluate one or more alternate
natural gas price scenarios to better
understand the effect of increased gas
prices, because they believe that DOE
significantly underestimates future
natural gas prices using the projections
from AEO 2021. The Joint Commenters
argued that as the movement towards
electrification continues and the
efficiencies of gas-fired appliances
increase, customers and sales of natural
gas will likely decline over time and
that multiple studies indicate that a
consistent decline in gas customers and/
or consumption will result in an
increase in gas prices for the remaining
customers. (Joint Commenters, No. 35 at
p. 2)
In response, because the extent of
widespread electrification, and the
associated impact on natural gas prices,
are very uncertain at this point, DOE
78 U.S. Department of Energy-Energy Information
Administration, Form EIA–861M (formerly EIA–
826) detailed data (2022) (Available at:
www.eia.gov/electricity/data/eia861m/) (Last
accessed May 3, 2023).
79 U.S. Department of Energy-Energy Information
Administration, Natural Gas Navigator (2022)
(Available at: www.eia.gov/naturalgas/data.php)
(Last accessed May 3, 2023).
80 U.S. Department of Energy-Energy Information
Administration, 2021 State Energy Data System
(SEDS) (2021) (Available at: www.eia.gov/state/
seds/) (Last accessed May 3, 2023).
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prefers to rely on the latest AEO price
forecasts in its analysis. DOE uses other
inputs from the AEO analysis, and the
Department contends that it is
important to maintain consistency in
terms of its use of AEO in DOE’s other
inputs and energy price projections
since they are interconnected in the
National Energy Modeling System
(NEMS) that EIA uses.81 DOE notes that
if future natural gas prices end up
higher than DOE estimates due to
electrification, the economic
justification for the standards proposed
for gas-fired boilers in this NOPR would
become stronger still. DOE’s analysis
also includes sensitivity analysis using
energy prices in high and low economic
growth scenarios. However, DOE has
tentatively concluded that such
alternate energy price trends are too
speculative for use as the agency’s
primary analysis.
Accordingly, for this NOPR, to
estimate energy prices in future years,
DOE multiplied the 2022 energy prices
by the projection of annual average
price changes for each of the nine
Census Divisions from the Reference
case in AEO 2023, which has an end
year of 2050.82 To estimate price trends
after 2050, DOE used the average annual
growth rate in prices from 2046 to 2050
based on the methods used in the 2022
Life-Cycle Costing Manual for the
Federal Energy Management Program
(FEMP).83
ddrumheller on DSK120RN23PROD with PROPOSALS2
5. Maintenance and Repair Costs
Repair costs are associated with
repairing or replacing product
components that have failed in an
appliance; maintenance costs are
associated with maintaining the
operation of the product. Typically,
small incremental increases in product
efficiency produce no, or only minor,
changes in repair and maintenance costs
compared to baseline efficiency
products. In the present case, DOE
included additional repair costs for
higher-efficiency consumer boilers
(including repair costs associated with
electronic ignition, controls, and
blowers for condensing designs) based
on 2023 RSMeans data. DOE also
81 See www.eia.gov/outlooks/aeo/info_nems_
archive.php.
82 EIA. Annual Energy Outlook 2023 with
Projections to 2050. Washington, DC (Available at:
www.eia.gov/forecasts/aeo/) (Last accessed May 3,
2023).
83 Lavappa, Priya D. and J.D. Kneifel, Energy Price
Indices and Discount Factors for Life-Cycle Cost
Analysis—2022 Annual Supplement to NIST
Handbook 135. National Institute of Standards and
Technology (NIST). NISTIR 85–3273–37 (Available
at: www.nist.gov/publications/energy-price-indicesand-discount-factors-life-cycle-cost-analysis-2022annual) (Last accessed Jan. 3, 2023).
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accounted for regional differences in
labor costs by using RSMeans regional
cost factors. Further details may be
found in appendix 8F of the NOPR TSD.
Crown and U.S. Boiler stated that
DOE used labor rates from RSMeans that
do not appear applicable to residential
boiler service and maintenance. Crown
and U.S. Boiler stated that maintenance
and repair on residential boilers mostly
will be performed by an HVAC
technician, which requires a completely
different skill set from the ‘‘steam fitter
and steam fitter apprentice’’ that DOE
assumed. (Crown, No. 30 at p. 11; U.S.
Boiler, No. 31 at p. 10).
In response, DOE uses RSMeans data
and consultant reports to estimate the
appropriate labor crew for residential
boiler tasks. DOE is aware that
residential consumer boiler
maintenance and repair are typically
accomplished by an HVAC technician,
but the RSMeans crew type for boilers
approximates the average labor costs per
hour for a crew performing these
maintenance and repair tasks. See IV.F.2
of this document for further discussions
about the use of RSMeans. Therefore,
DOE kept its approach for using labor
rates from RSMeans.
6. Product Lifetime
Product lifetime is the age at which an
appliance is retired from service. To
determine boiler lifetimes, DOE relied
on RECS 1990, 1993, 2001, 2005, 2009,
2015, and 2020. DOE also used the U.S.
Census’s biennial American Housing
Survey (AHS), from 1974–2021, which
surveys all housing and notes the
presence of a range of appliances. DOE
used the appliance age data from these
surveys, as well as the historical boiler
shipments, to generate an estimate of
the survival function for consumer
boilers. The survival function provides
a lifetime range from minimum to
maximum, as well as an average
lifetime.
PB Heat and AHRI stated that
condensing boilers have a shorter
lifespan than non-condensing boilers, in
line with AHRI’s Survey of Boiler
Installation Contractors (July 2015) and
EER Consultants on boiler lifetime. (PB
Heat, No. 34 at p. 1; AHRI, No. 40 at p.
5) AHRI stated that the contractor
survey it conducted showed that
condensing boilers on average are
expected to last between 10–20 years.
(AHRI, No. 42 at p. 6) BWC commented
that condensing boilers are technically
more complex products with additional
components, and that they have higher
lifetime service and maintenance costs
compared to non-condensing boilers,
which are contributing factors that make
it challenging for condensing boilers to
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have the same life span as noncondensing boilers. (BWC, No. 39 at p.
2) PB Heat mentioned the complexity of
condensing boilers and negatively
impacting their lifetime, and the
company stated that the heat exchanger
of a boiler is the key component whose
failure is highly likely to drive early
end-of-life decisions. (PB Heat, No. 34 at
p. 2) Crown and U.S. Boilers stated that
condensing boilers have a significantly
shorter life expectancy than noncondensing boilers because of their
increased complexity, exposure of
components to acids, and also the much
tighter flue and water passages that are
subject to fouling if not cleaned
diligently. Crown and U.S. Boilers
pointed to the difference in the heat
exchanger warranty coverages as an
indication of what manufacturers
themselves expect the lifetime to be.
(Crown, No. 30 at p. 11–15; U.S. Boilers,
No. 31 at pp. 12–16) WMT stated that
the product lives of condensing boilers
are approximately half that of the 25- to
30-year expected life of cast iron noncondensing boilers. (WMT, No. 32 at pp.
2–3) Crown and U.S. Boilers also stated
that many of DOE’s sources are even
older than the 2016 AHRI survey whose
values DOE did not adopt. (Crown, No.
30 at p. 12; U.S. Boilers, No. 31 at p. 12)
After carefully considering these
comments, DOE has concluded that
there is not enough data available to
accurately distinguish the lifetime of
non-condensing and condensing gasfired boilers, because they have not been
prevalent in the U.S. market long
enough to demonstrate whether their
average lifetime is less than or greater
than 25 years. Commenters provided
opinions based on their conjecture and
certain anecdotal experiences, but they
did not provide data that would
evidence a significantly reduced
lifetime for condensing boilers. In
addition, condensing boiler
technologies have been improving since
their introduction to the U.S. market;
therefore, the lifetime of the earliest
condensing boilers may not be
representative of current or future
condensing boiler designs.
Consequently, condensing lifetime
estimates from AHRI’s contractor survey
might be biased towards earliest
condensing boiler designs, and it lacks
clarity as to the number of condensing
boilers installed that were 15 years or
older. Therefore, DOE has maintained
the same lifetime for condensing and
non-condensing boilers for this NOPR.
However, as mentioned previously, DOE
did include additional repair costs for
condensing boilers that would likely
allow for a lifetime similar to non-
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condensing boilers, by assuming
different service lifetimes for heat
exchangers for condensing boilers and
non-condensing boilers based on
warranty data from product literature
and survey data provided by
stakeholders.
In light of the above, for this NOPR,
DOE used the appliance age data
derived from RECS 1990–2020 and the
U.S. Census’s biennial American
Housing Survey (AHS) 1974–2021, as
well as the historical boiler shipments,
to generate an estimate of the survival
function for consumer boilers. The
survival function provides a lifetime
range from minimum to maximum, as
well as an average lifetime. Utilizing
this approach, DOE estimates the
average product lifetime to be 24.6 years
for consumer boilers. This estimate is
consistent with the range of values
identified in a literature review in
appendix 8G of the NOPR TSD.
ddrumheller on DSK120RN23PROD with PROPOSALS2
7. Discount Rates
In the calculation of LCC, DOE
applies discount rates appropriate to
households and commercial buildings
to estimate the present value of future
operating cost savings. DOE estimated a
distribution of discount rates for
consumer boilers based on the
opportunity cost of consumer funds and
cost of capital for commercial
applications.
DOE applies weighted-average
discount rates calculated from consumer
debt and asset data, rather than marginal
or implicit discount rates.84 The LCC
analysis estimates net present value
over the lifetime of the product, so the
appropriate discount rate will reflect the
general opportunity cost of household
funds, taking this time scale into
account. Given the long time horizon
modeled in the LCC analysis, the
application of a marginal interest rate
associated with an initial source of
funds is inaccurate. Regardless of the
method of purchase, consumers are
expected to continue to rebalance their
debt and asset holdings over the LCC
analysis period, based on the
restrictions consumers face in their debt
payment requirements and the relative
84 The implicit discount rate is inferred from a
consumer purchase decision between two otherwise
identical goods with different first cost and
operating cost. It is the interest rate that equates the
increment of first cost to the difference in net
present value of lifetime operating cost,
incorporating the influence of several factors:
transaction costs; risk premiums and response to
uncertainty; time preferences; and interest rates at
which a consumer is able to borrow or lend. The
implicit discount rate is not appropriate for the LCC
analysis because it reflects a range of factors that
influence consumer purchase decisions, rather than
the opportunity cost of the funds that are used in
purchases.
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size of the interest rates available on
debts and assets. DOE estimates the
aggregate impact of this rebalancing
using the historical distribution of debts
and assets. For commercial applications,
DOE’s method views the purchase of a
higher-efficiency appliance as an
investment that yields a stream of
energy cost savings. DOE derived the
discount rates for the LCC analysis by
estimating the cost of capital for
companies or public entities that
purchase consumer boilers. For private
firms, the weighted-average cost of
capital (WACC) is commonly used to
estimate the present value of cash flows
to be derived from a typical company
project or investment. Most companies
use both debt and equity capital to fund
investments, so their cost of capital is
the weighted average of the cost to the
firm of equity and debt financing, as
estimated from financial data for
publicly-traded firms in the sectors that
purchase consumer boilers. As discount
rates can differ across industries, DOE
estimates separate discount rate
distributions for a number of aggregate
sectors with which elements of the LCC
building sample can be associated.
To establish residential discount rates
for the LCC analysis, DOE identified all
relevant household debt or asset classes
in order to approximate a consumer’s
opportunity cost of funds related to
appliance energy cost savings. It
estimated the average percentage shares
of the various types of debt and equity
by household income group using data
from the Federal Reserve Board’s
triennial Survey of Consumer
Finances 85 (SCF) starting in 1995 and
ending in 2019. Using the SCF and other
sources, DOE developed a distribution
of rates for each type of debt and asset
by income group to represent the rates
that may apply in the year in which
amended standards would take effect.
DOE assigned each sample household a
specific discount rate drawn from one of
the distributions. The average rate
across all types of household debt and
equity and income groups, weighted by
the shares of each type, is 4.2 percent.
To establish commercial discount
rates for the small fraction of consumer
boilers installed in commercial
buildings, DOE estimated the weightedaverage cost of capital using data from
Damodaran Online.86 The weighted85 The Federal Reserve Board, Survey of
Consumer Finances (1995, 1998, 2001, 2004, 2007,
2010, 2013, 2016, and 2019) (Available at:
www.federalreserve.gov/econres/scfindex.htm) (Last
accessed Jan. 3, 2023).
86 Damodaran Online, Data Page: Costs of Capital
by Industry Sector (2022) (Available at:
pages.stern.nyu.edu/∼adamodar/) (Last accessed
May 3, 2023).
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average cost of capital is commonly
used to estimate the present value of
cash flows to be derived from a typical
company project or investment. Most
companies use both debt and equity
capital to fund investments, so their cost
of capital is the weighted average of the
cost to the firm of equity and debt
financing. DOE estimated the cost of
equity using the capital asset pricing
model, which assumes that the cost of
equity for a particular company is
proportional to the systematic risk faced
by that company. DOE’s commercial
discount rate approach is based on the
methodology described in an LBNL
report, and the distribution varies by
business activity.87 The average rate for
consumer boilers used in commercial
applications in this NOPR analysis,
across all business activity, is 10.0
percent.
See chapter 8 of this NOPR TSD for
further details on the development of
consumer and commercial discount
rates.
8. Energy Efficiency Distribution in the
No-New-Standards Case
To accurately estimate the share of
consumers that would be affected by a
potential energy conservation standard
at a particular efficiency level, DOE’s
LCC analysis considered the projected
distribution (market shares) of product
efficiencies under the no-new-standards
case (i.e., the case without amended or
new energy conservation standards) in
the compliance year (2030). This
approach reflects the fact that some
consumers may purchase products with
efficiencies greater than the baseline
levels.
To estimate the energy efficiency
distribution of consumer boilers for
2030, DOE used available shipments
data by efficiency, including previous
AHRI-submitted historical shipments
data, ENERGY STAR unit shipments
data, 2013–2021 HARDI shipment data,
and data from the 2022 BRG Building
Solutions report. To cover gaps in the
available shipments data, DOE used
DOE’s public CCD model database and
AHRI certification directory.
In its comments on the May 2022
Preliminary Analysis, AHRI submitted
2021 shipment data for gas-fired hot
water boilers to DOE. AHRI stated that
while there is an array of products at 85percent AFUE in the AHRI Directory
and CCD, these products do not account
for a significant portion of current
87 Fujita, K. Sydny. Commercial, Industrial, and
Institutional Discount Rate Estimation for Efficiency
Standards Analysis: Sector-Level Data 1998–2022.
2023. (Available at: eta-publications.lbl.gov/
publications/commercial-industrial-and-2) (Last
accessed May 3, 2023).
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shipments. (AHRI, No. 42 at p. 2) For
the NOPR, DOE included these data to
supplement its fraction of 85-percent
AFUE gas-fired hot water consumer
boilers.
The estimated market shares for the
no-new-standards case for consumer
boilers are shown in Table IV.10.
TABLE IV—10 NO-NEW-STANDARDS CASE ENERGY EFFICIENCY DISTRIBUTIONS IN 2030 FOR CONSUMER BOILERS
Product class
Gas-fired Hot Water .................................................................................................................................
0
1
2
3
4
0
1
0
1
2
0
1
Gas-fired Steam .......................................................................................................................................
Oil-fired Hot Water ...................................................................................................................................
ddrumheller on DSK120RN23PROD with PROPOSALS2
Oil-fired Steam .........................................................................................................................................
Each building in the sample was then
assigned a boiler efficiency sampled
from the no-new-standards-case
efficiency distribution for the
appropriate product class shown in
Table IV.10. In assigning boiler
efficiencies, DOE determined that, based
on the presence of well-understood
market failures (discussed at the end of
this section), a random assignment of
efficiencies, with some modifications
discussed below, best accounts for
consumer behavior in the consumer
boilers market. Random assignment of
efficiencies reflects the full range of
consumer behaviors in this market,
including consumers who make
economically beneficial decisions and
consumers that, due to market failures,
do not make such economically
beneficial decisions.
The LCC Monte Carlo simulations
draw from the efficiency distributions
and randomly assign an efficiency to the
consumer boilers purchased by each
sample household and commercial
building in the no-new-standards case.
The resulting percentage shares within
the sample match the market shares in
the efficiency distributions. But, as
mentioned previously, DOE considered
available data in determining whether
any modifications should be made to
the random assignment methodology.
First, DOE considered the 2022 AHCS
survey,88 which includes questions to
recent purchasers of HVAC equipment
regarding the perceived efficiency of
their equipment (Standard, High, and
Super-High Efficiency), as well as
questions related to various household
and demographic characteristics. From
these data, DOE found that households
88 Decision Analysts, 2022 American Home
Comfort Studies (Available at:
www.decisionanalyst.com/Syndicated/
HomeComfort/) (Last accessed Jan. 3, 2023).
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with larger square footage exhibited a
higher fraction of High or Super-High
efficiency equipment installed. DOE
used the AHCS data to adjust the
efficiency distributions as follows: (1)
the market share of higher-efficiency
equipment for households under 1,500
sq. ft. was decreased by 5 percentage
points; and (2) the market share of
condensing equipment for households
above 2,500 sq. ft. was increased by 5
percentage points.
AHRI stated that, based on contractor
survey data submitted with its
comment, a condensing boiler is nearly
twice as likely to be chosen over a noncondensing model in new construction.
(AHRI, No. 42 at p. 3) In response, DOE
notes that for the preliminary analysis,
DOE already assigned a greater fraction
of condensing boilers to the new
construction market. However, for the
NOPR, DOE increased its fraction of
condensing boilers assigned to the new
construction market further to match the
data provided in the 2022 AHRI
contractor survey.
AGA, APGA, and NPGA stated that
DOE should place greater emphasis on
providing an argument for the
plausibility and magnitude of any
market failure related to the energy
efficiency gap in its analyses. These
commenters added that for some
commercial goods in particular, there
should be a presumption that market
actors behave rationally, unless DOE
can provide evidence or argument to the
contrary. (AGA, APGA, and NPGA, No.
38 at p. 4)
In contrast to the preceding
comments, NYSERDA stated that DOE’s
assignment of boiler efficiency in the
no-new-standards case, using State-level
market data in conjunction with the
2015 RECS and the 2019 American
Home Comfort Study, is thorough and
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(%)
Efficiency level
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13.3
2.5
10.7
45.4
7.6
7.6
1.6
7.5
1.9
1.0
0.8
0.1
robust and that DOE has appropriately
used its wide discretion in this matter
to conduct a reasonable and rigorous
analysis of consumer purchasing
decisions. (NYSERDA, No. 33 at p. 3)
The Joint Commenters also expressed
the view that DOE’s assignment of
efficiency levels in the no-newstandards case reasonably reflects actual
consumer behavior and that the
Department’s assignment of boiler
efficiency in the no-new-standards case
is not entirely random. Specifically, the
Joint Commenters stated that DOE used
State-level market data to preferentially
assign higher-efficiency boilers to States
with higher fractions of high-efficiency
boiler shipments, and within each State,
DOE used the 2015 RECS and the 2019
American Home Comfort Study to
account for subgroups that could select
higher-efficiency boilers more often,
such as homes with higher square
footage. Further, the Joint Commenters
pointed out that there are various
market failures, as well as aspects of
consumer preference, that significantly
impact how products are chosen by
consumers, and there are often
misaligned incentives in rental
properties, where the landlord
purchases and installs the boiler while
the renter is responsible for paying the
utility bill. Additionally, the Joint
Commenters stated that information
about the purchase price, installation
cost, and projected energy costs of
boilers is not always transparent, so
consumers are likely to make decisions
that do not result in the highest net
present value for their specific scenario.
(Joint Commenters, No. 35 at p. 3)
In response, for this NOPR, DOE
continued to assign boiler efficiency to
households in the no-new-standards
case in two steps, first at the State level
and then at the building-specific level.
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However, DOE’s approach was modified
to include other household
characteristics. The market share of each
efficiency level at the State level is
based on historical shipments data
(from the 2012 AHRI and 2013–2021
HARDI data) and to assign the efficiency
at the building-specific level, DOE
carefully considered any available data
that might improve assignment of boiler
efficiency in the LCC analysis. First,
DOE examined the 2013–2021 HARDI
data of gas boiler input capacity by
efficiency level and region. DOE did not
find a significant correlation between
input capacity and condensing boiler
market share in a given region, a
correlation which might be expected a
priori since buildings with larger boiler
input capacity are more likely to be
larger and have greater energy
consumption. DOE next considered the
Gas Technology Institute (GTI) data for
21 Illinois households, which included
the efficiency of the boiler (AFUE), size
of the boiler (input capacity), square
footage of the house, and annual energy
use.89 Recognizing the relatively small
sample size, DOE notes that these data
exhibit no significant correlations
between boiler efficiency and other
household characteristics (with most
boiler installations in this sample being
non-condensing boilers with high
energy use). DOE also considered other
data of boiler efficiency compared to
household characteristics for other parts
of the country, including the NEEA
Database and permit data.90 These data
also suggest fairly weak correlation
between boiler efficiency and household
characteristics or economic factors.
Finally, DOE considered the 2022 AHCS
survey data. From these data, DOE did
find a statistically significant
correlation: Households with larger
square footage exhibited a higher
fraction of High or Super-High
efficiency equipment installed.
While DOE acknowledges that
economic factors may play a role when
consumers, commercial building
owners, or builders decide on what type
of boiler to install, assignment of boiler
efficiency for a given installation, based
solely on economic measures such as
life-cycle cost or simple payback period,
most likely would not fully and
accurately reflect actual real-world
installations. There are a number of
market failures discussed in the
economics literature that illustrate how
89 Gas Technology Institute (GTI), Empirical
Analysis of Natural Gas Furnace Sizing and
Operation, GTI–16/0003 (Nov. 2016) (Available at:
www.regulations.gov/document/EERE-2014-BTSTD-0031-0309) (Last accessed Jan. 3, 2023).
90 See neea.org/data/residential-building-stockassessment (Last accessed Jan. 3, 2023).
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purchasing decisions with respect to
energy efficiency are unlikely to be
perfectly correlated with energy use, as
described below. DOE maintains that
the method of assignment, which is in
part random, is a reasonable approach.
It simulates behavior in the boiler
market, where market failures result in
purchasing decisions not being perfectly
aligned with economic interests, and it
does so more realistically than relying
only on apparent cost-effectiveness
criteria derived from the limited
information in CBECS or RECS. DOE
further emphasizes that its approach
does not assume that all purchasers of
boilers make economically irrational
decisions (i.e., the lack of a correlation
is not the same as a negative
correlation). As part of the random
assignment, some homes or buildings
with large heating loads will be assigned
higher-efficiency boilers, and some
homes or buildings with particularly
low heating loads will be assigned
baseline boilers, which aligns with the
available data. By using this approach,
DOE acknowledges the uncertainty
inherent in the data and minimizes any
bias in the analysis by using random
assignment, as opposed to assuming
certain market conditions that are
unsupported by the available evidence.
The following discussion provides
more detail about the various market
failures that affect consumer boiler
purchases. First, consumers are
motivated by more than simple financial
trade-offs. There are consumers who are
willing to pay a premium for more
energy-efficient products because they
are environmentally conscious.91 There
are also several behavioral factors that
can influence the purchasing decisions
of complicated multi-attribute products,
such as boilers. For example, consumers
(or decision makers in an organization)
are highly influenced by choice
architecture, defined as the framing of
the decision, the surrounding
circumstances of the purchase, the
alternatives available, and how they are
presented for any given choice
scenario.92 The same consumer or
decision maker may make different
choices depending on the characteristics
of the decision context (e.g., the timing
of the purchase, competing demands for
funds), which have nothing to do with
the characteristics of the alternatives
91 Ward, D.O., Clark, C.D., Jensen, K.L., Yen, S.T.,
& Russell, C.S. (2011): ‘‘Factors influencing
willingness-to pay for the ENERGY STAR® label,’’
Energy Policy, 39(3), 1450–1458 (Available at:
www.sciencedirect.com/science/article/abs/pii/
S0301421510009171) (Last accessed Jan. 3, 2023).
92 Thaler, R.H., Sunstein, C.R., and Balz, J.P.
(2014), ‘‘Choice Architecture’’ in The Behavioral
Foundations of Public Policy, Eldar Shafir (ed).
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themselves or their prices. Consumers
or decision makers also face a variety of
other behavioral phenomena including
loss aversion, sensitivity to information
salience, and other forms of bounded
rationality.93 Thaler, who won the
Nobel Prize in Economics in 2017 for
his contributions to behavioral
economics, and Sunstein point out that
these behavioral factors are strongest
when the decisions are complex and
infrequent, when feedback on the
decision is muted and slow, and when
there is a high degree of information
asymmetry.94 These characteristics
describe almost all purchasing
situations of appliances and equipment,
including boilers. The installation of a
new or replacement boiler is done very
infrequently, as evidenced by the mean
lifetime of 24.6 years for boilers.
Additionally, it would take at least one
full heating season for any impacts on
operating costs to be fully apparent.
Further, if the purchaser of the boiler is
not the entity paying the energy costs
(e.g., a building owner and tenant), there
may be little to no feedback on the
purchase. Additionally, there are
systematic market failures that are likely
to contribute further complexity to how
products are chosen by consumers, as
explained in the following paragraphs.
The first of these market failures—the
split-incentive or principal-agent
problem—is likely to affect boilers more
than many other types of appliances.
The principal-agent problem is a market
failure that results when the consumer
that purchases the equipment does not
internalize all of the costs associated
with operating the equipment. Instead,
the user of the product, who has no
control over the purchase decision, pays
the operating costs. There is a high
likelihood of split-incentive problems in
the case of rental properties where the
landlord makes the choice of what
boiler to install, whereas the renter is
responsible for paying energy bills. In
the LCC sample, about 30 percent of
households with a boiler are renters.
These fractions are significantly higher
for low-income households (see section
IV.I of this document). In new
construction, builders influence the
type of boiler used in many homes but
93 Thaler, R.H., and Bernartzi, S. (2004), ‘‘Save
More Tomorrow: Using Behavioral Economics in
Increase Employee Savings,’’ Journal of Political
Economy 112(1), S164–S187. See also Klemick, H.,
et al. (2015) ‘‘Heavy-Duty Trucking and the Energy
Efficiency Paradox: Evidence from Focus Groups
and Interviews,’’ Transportation Research Part A:
Policy & Practice, 77, 154–166. (providing evidence
that loss aversion and other market failures can
affect otherwise profit-maximizing firms).
94 Thaler, R.H., and Sunstein, C.R. (2008), Nudge:
Improving Decisions on Health, Wealth, and
Happiness. New Haven, CT: Yale University Press.
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do not pay operating costs. Finally,
contractors install a large share of
boilers in replacement situations, and
they can exert a high degree of influence
over the type of boiler purchased by
suggesting certain designs or models for
the replacement.
In addition to the split-incentive
problem, there are other market failures
that are likely to affect the choice of
boiler efficiency made by consumers.
For example, emergency replacements
of essential equipment such as boilers
are strongly biased toward like-for-like
replacement (i.e., replacing the nonfunctioning equipment with a similar or
identical product). Time is a
constraining factor during emergency
replacements and consumers may not
consider the full range of available
options on the market, despite their
availability. The consideration of
alternative product options is far more
likely for planned replacements and
installations in new construction.
Additionally, Davis and Metcalf 95
conducted an experiment demonstrating
that the nature of the information
available to consumers from
EnergyGuide labels posted on air
conditioning equipment results in an
inefficient allocation of energy
efficiency across households with
different usage levels. Their findings
indicate that households are likely to
make decisions regarding the efficiency
of the climate-control equipment of
their homes that do not result in the
highest net present value for their
specific usage pattern (i.e., their
decision is based on imperfect
information and, therefore, is not
necessarily optimal). Also, most
consumers did not properly understand
the labels (specifically whether energy
consumption and cost estimates were
national averages or specific to their
State). As such, consumers did not make
the most informed decisions.
In part because of the way
information is presented, and in part
because of the way consumers process
information, there is also a market
failure consisting of a systematic bias in
the perception of equipment energy
usage, which can affect consumer
choices. Attari, Krantz, and Weber 96
95 Davis, L.W., and G.E. Metcalf (2016): ‘‘Does
better information lead to better choices? Evidence
from energy-efficiency labels,’’ Journal of the
Association of Environmental and Resource
Economists, 3(3), 589–625 (Available at:
www.journals.uchicago.edu/doi/full/10.1086/
686252) (Last accessed Jan. 3, 2023).
96 Attari, S.Z., M.L. DeKay, C.I. Davidson, and W.
Bruine de Bruin (2010): ‘‘Public perceptions of
energy consumption and savings.’’ Proceedings of
the National Academy of Sciences 107(37), 16054–
16059 (Available at: www.pnas.org/content/107/37/
16054) (Last accessed Jan. 3, 2023).
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show that consumers tend to
underestimate the energy use of large
energy-intensive appliances, but
overestimate the energy use of small
appliances. Therefore, it is likely that
consumers systematically underestimate
the energy use associated with boilers,
resulting in less cost-effective boiler
purchases.
These market failures affect a sizeable
share of the consumer population. A
study by Houde 97 indicates that there is
a significant subset of consumers that
appear to purchase appliances without
taking into account their energy
efficiency and operating costs at all.
There are market failures relevant to
boilers installed in commercial
applications as well. It is often assumed
that because commercial and industrial
customers are businesses that have
trained or experienced individuals
making decisions regarding investments
in cost-saving measures, some of the
commonly observed market failures
present in the general population of
residential customers should not be as
prevalent in a commercial setting.
However, there are many characteristics
of organizational structure and historic
circumstance in commercial settings
that can lead to underinvestment in
energy efficiency.
First, a recognized problem in
commercial settings is the principalagent problem, where the building
owner (or building developer) selects
the equipment and the tenant (or
subsequent building owner) pays for
energy costs.98 99 Indeed, more than a
quarter of commercial buildings in the
CBECS 2018 sample are occupied at
least in part by a tenant, not the
building owner (indicating that, in
DOE’s experience, the building owner
likely is not responsible for paying
energy costs). Additionally, some
commercial buildings have multiple
tenants. There are other similar
misaligned incentives embedded in the
organizational structure within a given
firm or business that can also impact the
choice of a boiler. For example, if one
97 Houde, S. (2018): ‘‘How Consumers Respond to
Environmental Certification and the Value of
Energy Information,’’ The RAND Journal of
Economics, 49 (2), 453–477 (Available at:
onlinelibrary.wiley.com/doi/full/10.1111/17562171.12231) (Last accessed Jan. 3, 2023).
98 Vernon, D., and Meier, A. (2012),
‘‘Identification and quantification of principal–
agent problems affecting energy efficiency
investments and use decisions in the trucking
industry,’’ Energy Policy, 49, 266–273.
99 Blum, H. and Sathaye, J. (2010), ‘‘Quantitative
Analysis of the Principal–Agent Problem in
Commercial Buildings in the U.S.: Focus on Central
Space Heating and Cooling,’’ Lawrence Berkeley
National Laboratory, LBNL–3557E (Available at:
escholarship.org/uc/item/6p1525mg) (Last accessed
Jan. 3, 2023).
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department or individual within an
organization is responsible for capital
expenditures (and therefore equipment
selection) while a separate department
or individual is responsible for paying
the energy bills, a market failure similar
to the principal-agent problem can
result.100 Additionally, managers may
have other responsibilities and often
have other incentives besides operating
cost minimization, such as satisfying
shareholder expectations, which can
sometimes be focused on short-term
returns.101 Decision-making related to
commercial buildings is highly complex
and involves gathering information from
and for a variety of different market
actors. It is common to see conflicting
goals across various actors within the
same organization, as well as
information asymmetries between
market actors in the energy efficiency
context in commercial building
construction.102
Second, the nature of the
organizational structure and design can
influence priorities for capital
budgeting, resulting in choices that do
not necessarily maximize
profitability.103 Even factors as simple
as unmotivated staff or lack of prioritysetting and/or a lack of a long-term
energy strategy can have a sizable effect
on the likelihood that an energyefficient investment will be
undertaken.104 U.S. tax rules for
100 Prindle, B., Sathaye, J., Murtishaw, S.,
Crossley, D., Watt, G., Hughes, J., and de Visser, E.
(2007), ‘‘Quantifying the effects of market failures
in the end-use of energy,’’ Final Draft Report
Prepared for International Energy Agency
(Available from International Energy Agency, Head
of Publications Service, 9 rue de la Federation,
75739 Paris, Cedex 15 France).
101 Bushee, B. J. (1998), ‘‘The influence of
institutional investors on myopic R&D investment
behavior,’’ Accounting Review, 305–333.
DeCanio, S.J. (1993), ‘‘Barriers Within Firms to
Energy Efficient Investments,’’ Energy Policy, 21(9),
906–914 (explaining the connection between shorttermism and underinvestment in energy efficiency).
102 International Energy Agency (IEA). (2007).
Mind the Gap: Quantifying Principal-Agent
Problems in Energy Efficiency. OECD Pub.
(Available at: www.iea.org/reports/mind-the-gap)
(Last accessed Jan. 3, 2023).
103 DeCanio, S.J. (1994). ‘‘Agency and control
problems in US corporations: the case of energyefficient investment projects,’’ Journal of the
Economics of Business, 1(1), 105–124.
Stole, L.A., and Zwiebel, J. (1996).
‘‘Organizational design and technology choice
under intrafirm bargaining,’’ The American
Economic Review, 195–222.
104 Rohdin, P., and Thollander, P. (2006).
‘‘Barriers to and driving forces for energy efficiency
in the non-energy intensive manufacturing industry
in Sweden,’’ Energy, 31(12), 1836–1844.
Takahashi, M and Asano, H (2007). ‘‘Energy Use
Affected by Principal-Agent Problem in Japanese
Commercial Office Space Leasing,’’ In Quantifying
the Effects of Market Failures in the End-Use of
Energy. American Council for an Energy-Efficient
Economy. February 2007.
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commercial buildings may incentivize
lower capital expenditures, since capital
costs must be depreciated over many
years, whereas operating costs can be
fully deducted from taxable income or
passed through directly to building
tenants.105
Third, there are asymmetric
information and other potential market
failures in financial markets in general,
which can affect decisions by firms with
regard to their choice among alternative
investment options, with energy
efficiency being one such option.106
Asymmetric information in financial
markets is particularly pronounced with
regard to energy efficiency
investments.107 There is a dearth of
information about risk and volatility
Visser, E and Harmelink, M (2007). ‘‘The Case of
Energy Use in Commercial Offices in the
Netherlands,’’ In Quantifying the Effects of Market
Failures in the End-Use of Energy. American
Council for an Energy-Efficient Economy. February
2007.
Bjorndalen, J. and Bugge, J. (2007). ‘‘Market
Barriers Related to Commercial Office Space
Leasing in Norway,’’ In Quantifying the Effects of
Market Failures in the End-Use of Energy. American
Council for an Energy-Efficient Economy. February
2007.
Schleich, J. (2009). ‘‘Barriers to energy efficiency:
A comparison across the German commercial and
services sector,’’ Ecological Economics, 68(7), 2150–
2159.
Muthulingam, S., et al. (2013), ‘‘Energy Efficiency
in Small and Medium-Sized Manufacturing Firms,’’
Manufacturing & Service Operations Management,
15(4), 596–612 (Finding that manager inattention
contributed to the non-adoption of energy efficiency
initiatives).
Boyd, G.A., Curtis, E.M. (2014), ‘‘Evidence of an
‘energy management gap’ in US manufacturing:
Spillovers from firm management practices to
energy efficiency,’’ Journal of Environmental
Economics and Management, 68(3), 463–479.
105 Lovins, A. (1992), Energy-Efficient Buildings:
Institutional Barriers and Opportunities (Available
at: rmi.org/insight/energy-efficient-buildingsinstitutional-barriers-and-opportunities/) (Last
accessed Jan. 3, 2023).
106 Fazzari, S.M., Hubbard, R.G., Petersen, B.C.,
Blinder, A.S., and Poterba, J.M. (1988). ‘‘Financing
constraints and corporate investment,’’ Brookings
Papers on Economic Activity, 1988(1), 141–206.
Cummins, J.G., Hassett, K.A., Hubbard, R.G., Hall,
R.E., and Caballero, R.J. (1994). ‘‘A reconsideration
of investment behavior using tax reforms as natural
experiments,’’ Brookings Papers on Economic
Activity, 1994(2), 1–74.
DeCanio, S.J., and Watkins, W.E. (1998).
‘‘Investment in energy efficiency: do the
characteristics of firms matter?’’ Review of
Economics and Statistics, 80(1), 95–107.
Hubbard R.G. and Kashyap A. (1992). ‘‘Internal
Net Worth and the Investment Process: An
Application to U.S. Agriculture,’’ Journal of
Political Economy, 100, 506–534.
107 Mills, E., Kromer, S., Weiss, G., and Mathew,
P. A. (2006). ‘‘From volatility to value: analysing
and managing financial and performance risk in
energy savings projects,’’ Energy Policy, 34(2), 188–
199.
Jollands, N., Waide, P., Ellis, M., Onoda, T.,
Laustsen, J., Tanaka, K., and Meier, A. (2010). ‘‘The
25 IEA energy efficiency policy recommendations
to the G8 Gleneagles Plan of Action,’’ Energy Policy,
38(11), 6409–6418.
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related to energy efficiency investments,
and energy efficiency investment
metrics may not be as visible to
investment managers,108 which can bias
firms towards more certain or familiar
options. This market failure results not
because the returns from energy
efficiency as an investment are
inherently riskier, but because
information about the risk itself tends
not to be available in the same way it
is for other types of investment, like
stocks or bonds. In some cases, energy
efficiency is not a formal investment
category used by financial managers,
and if there is a formal category for
energy efficiency within the investment
portfolio options assessed by financial
managers, they are seen as weakly
strategic and not seen as likely to
increase competitive advantage.109 This
information asymmetry extends to
commercial investors, lenders, and realestate financing, which is biased against
new and perhaps unfamiliar technology
(even though it may be economically
beneficial).110 Another market failure
known as the first-mover disadvantage
can exacerbate this bias against adopting
new technologies, as the successful
integration of new technology in a
particular context by one actor generates
information about cost-savings, and
other actors in the market can then
benefit from that information by
following suit; yet because the first to
adopt a new technology bears the risk
but cannot keep to themselves all the
informational benefits, firms may
inefficiently underinvest in new
technologies.111
In sum, the commercial and industrial
sectors face many market failures that
can result in an under-investment in
energy efficiency. This means that
discount rates implied by hurdle
rates 112 and required payback periods
108 Reed, J.H., Johnson, K., Riggert, J., and Oh,
A.D. (2004), ‘‘Who plays and who decides: The
structure and operation of the commercial building
market,’’ U.S. Department of Energy Office of
Building Technology, State and Community
Programs (Available at: www1.eere.energy.gov/
buildings/publications/pdfs/commercial_initiative/
who_plays_who_decides.pdf) (Last accessed Jan. 3,
2023).
109 Cooremans, C. (2012). ‘‘Investment in energy
efficiency: do the characteristics of investments
matter?’’ Energy Efficiency, 5(4), 497–518.
110 Lovins 1992, op. cit. The Atmospheric Fund
(2017), Money on the table: Why investors miss out
on the energy efficiency market (Available at:
taf.ca/publications/money-table-investors-energyefficiency-market/) (Last accessed Jan. 3, 2023).
111 Blumstein, C. and Taylor, M. (2013),
Rethinking the Energy-Efficiency Gap: Producers,
Intermediaries, and Innovation. Energy Institute at
Haas Working Paper 243 (Available at:
haas.berkeley.edu/wp-content/uploads/WP243.pdf)
(Last accessed Jan. 3, 2023).
112 A hurdle rate is the minimum rate of return
on a project or investment required by an
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55169
of many firms are higher than the
appropriate cost of capital for the
investment.113 The preceding arguments
for the existence of market failures in
the commercial and industrial sectors
are corroborated by empirical evidence.
One study in particular showed
evidence of substantial gains in energy
efficiency that could have been
achieved without negative
repercussions on profitability, but the
investments had not been undertaken by
firms.114 The study found that multiple
organizational and institutional factors
caused firms to require shorter payback
periods and higher returns than the cost
of capital for alternative investments of
similar risk. Another study
demonstrated similar results with firms
requiring very short payback periods of
1–2 years in order to adopt energysaving projects, implying hurdle rates of
50 to 100 percent, despite the potential
economic benefits.115 A number of other
case studies similarly demonstrate the
existence of market failures preventing
the adoption of energy-efficient
technologies in a variety of commercial
sectors around the world, including
office buildings,116 supermarkets,117
and the electric motor market.118
The existence of market failures in the
residential and commercial sectors is
well supported by the economics
literature and by a number of case
studies. If DOE developed an efficiency
distribution that assigned boiler
efficiency in the no-new-standards case
solely according to energy use or
economic considerations such as lifecycle cost or payback period, the
resulting distribution of efficiencies
organization or investor. It is determined by
assessing capital costs, operating costs, and an
estimate of risks and opportunities.
113 DeCanio 1994, op. cit.
114 DeCanio, S.J. (1998). ‘‘The Efficiency Paradox:
Bureaucratic and Organizational Barriers to
Profitable Energy-Saving Investments,’’ Energy
Policy, 26(5), 441–454.
115 Andersen, S.T., and Newell, R.G. (2004).
‘‘Information programs for technology adoption: the
case of energy-efficiency audits,’’ Resource and
Energy Economics, 26, 27–50.
116 Prindle 2007, op. cit. Howarth, R.B., Haddad,
B.M., and Paton, B. (2000). ‘‘The economics of
energy efficiency: insights from voluntary
participation programs,’’ Energy Policy, 28, 477–
486.
117 Klemick, H., Kopits, E., Wolverton, A. (2017).
‘‘Potential Barriers to Improving Energy Efficiency
in Commercial Buildings: The Case of Supermarket
Refrigeration,’’ Journal of Benefit-Cost Analysis,
8(1), 115–145.
118 de Almeida, E.L.F. (1998), ‘‘Energy efficiency
and the limits of market forces: The example of the
electric motor market in France’’, Energy Policy,
26(8), 643–653.
Xenergy, Inc. (1998), United States Industrial
Electric Motor Systems Market Opportunity
Assessment (Available at: www.energy.gov/sites/
default/files/2014/04/f15/mtrmkt.pdf) (Last
accessed Jan. 3, 2023).
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within the building sample would not
reflect any of the market failures or
behavioral factors above. Thus, DOE
concludes such a distribution would not
be representative of the consumer boiler
market. Further, even if a specific
household/building/organization is not
subject to the market failures above, the
purchasing decision of boiler efficiency
can be highly complex and influenced
by a number of factors not captured by
the building characteristics available in
the RECS or CBECS samples. These
factors can lead to households or
building owners choosing a boiler
efficiency that deviates from the
efficiency predicted using only energy
use or economic considerations such as
life-cycle cost or payback period (as
calculated using the information from
RECS 2015 or CBECS 2018). However,
DOE intends to investigate this issue
further, and it welcomes suggestions as
to how it might improve its assignment
of boiler efficiency in its analyses.
See chapter 8 of the NOPR TSD for
further information on the derivation of
the efficiency distributions.
9. Payback Period Analysis
The payback period is the amount of
time (expressed in years) it takes the
consumer to recover the additional
installed cost of more-efficient products,
compared to baseline products, through
energy cost savings. Payback periods
that exceed the life of the product mean
that the increased total installed cost is
not recovered in reduced operating
expenses.
The inputs to the PBP calculation for
each efficiency level are the change in
total installed cost of the product and
the change in the first-year annual
operating expenditures relative to the
baseline. DOE refers to this as a ‘‘simple
PBP’’ because it does not consider
changes over time in operating cost
savings. The PBP calculation uses the
same inputs as the LCC analysis when
deriving first-year operating costs.
As noted previously, EPCA
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 first
year’s energy savings resulting from the
standard, as calculated under the
applicable test procedure. (42 U.S.C.
6295(o)(2)(B)(iii)) For each considered
efficiency level, DOE determined the
value of the first year’s energy savings
by calculating the energy savings in
accordance with the applicable DOE test
procedure, and multiplying those
savings by the average energy price
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projection for the year in which
compliance with the amended standards
would be required.
G. Shipments Analysis
DOE uses projections of annual
product shipments to calculate the
national impacts of potential amended
or new energy conservation standards
on energy use, NPV, and future
manufacturer cash flows.119 The
shipments model takes an accounting
approach, tracking market shares of
each product class and the vintage of
units in the stock. Stock accounting uses
product shipments as inputs to estimate
the age distribution of in-service
product stocks for all years. The age
distribution of in-service product stocks
is a key input to calculations of both the
NES and NPV, because operating costs
for any year depend on the age
distribution of the stock.
DOE developed shipment projections
based on historical data and an analysis
of key market drivers for each product.
DOE estimated consumer boiler
shipments by projecting shipments in
three market segments: (1) replacement
of existing consumer boilers; (2) new
housing; and (3) new owners in
buildings that did not previously have
a consumer boiler or existing boiler
owners that are adding an additional
consumer boiler.120
To project boiler replacement
shipments, DOE developed retirement
functions from boiler lifetime estimates
and applied them to the existing
products in the housing stock, which
are tracked by vintage. DOE calculated
replacement shipments using historical
shipments and the lifetime estimates.
Annual historical shipments sources
are: (1) Appliance Magazine; 121 (2)
multiple AHRI data submittals (2003–
2012); (3) BRG Building Solutions 2022
report; (4) ENERGY STAR unit
shipments data; 122 (5) 2013–2021
HARDI shipments; and (6) the 2016
Consumer Boiler Final Rule. In
addition, DOE adjusted replacement
shipments by taking into account
demolitions, using the estimated
changes to the housing stock from AEO
2023.
To project shipments to the new
housing market, DOE used the AEO
2023 housing starts and commercial
building floor space projections to
estimate future numbers of new homes
and commercial building floor space.
DOE then used data from U.S. Census
Characteristics of New Housing,123 124
Home Innovation Research Labs Annual
Builder Practices Survey,125 RECS 2020
housing characteristics data, AHS 2021,
and CBECS 2018 building
characteristics data to estimate new
construction boiler saturations by
consumer boiler product class.
DOE estimated shipments to the new
owners market based on the residual
shipments from the calculated
replacement and new construction
shipments compared to historical
shipments in the last five years (2017–
2021 for this NOPR). DOE compared
this with data from Decision Analysts’
2002 to 2022 American Home Comfort
Study 126 and 2022 BRG data, which
showed similar historical fractions of
new owners. DOE assumed that the new
owner fraction in 2030 would be the be
equal to the 10-year average of the
historical data (2012–2021) and then
decrease to zero by the end of the
analysis period (2059). If the resulting
fraction of new owners is negative, DOE
assumed that it was primarily due to
equipment switching or nonreplacement and added this number to
replacements (thus reducing the
replacements value).
BWC commented that DOE’s
projections may be overstated because
they do not appear to account for how
State and local policies will impact the
shipments of boilers. As an example,
BWC stated that proposed actions by the
California Air Resources Board, as well
as a few California Air Districts, will
push the market away from gas-fired
boilers. In addition, BWC stated that
there is similar activity in some of the
Northeastern States, such as the New
119 DOE uses data on manufacturer shipments as
a proxy for national sales, as aggregate data on sales
are lacking. In general, one would expect a close
correspondence between shipments and sales.
120 The new owners primarily consist of
households that add or switch to a different space
heating option during a major remodel. Because
DOE calculates new owners as the residual between
its shipments model compared to historical
shipments, new owners also include shipments that
switch away from boiler product class to another.
121 Appliance Magazine. Appliance Historical
Statistical Review: 1954–2012. 2014. UBM Canon.
122 ENERGY STAR, Unit Shipments data 2010–
2021. multiple reports (Available at:
www.energystar.gov/partner_resources/products_
partner_resources/brand_owner_resources/unit_
shipment_data) (Last accessed Jan. 3, 2023).
123 U.S. Census, Characteristics of New Housing
from 1999–2021 (Available at: www.census.gov/
construction/chars/) (Last accessed Jan. 3, 2023).
124 U.S. Census, Characteristics of New Housing
(Multi-Family Units) from 1973–2021 (Available at:
www.census.gov/construction/chars/mfu.html)
(Last accessed Jan. 3, 2023).
125 Home Innovation Research Labs (independent
subsidiary of the National Association of Home
Builders (NAHB). Annual Builder Practices Survey
(2015–2019) (Available at:
www.homeinnovation.com/trends_and_reports/
data/new_construction) (Last accessed Jan. 3, 2023).
126 Decision Analysts, 2002, 2004, 2006, 2008,
2010, 2013, 2016, 2019, and 2022 American Home
Comfort Study (Available at:
www.decisionanalyst.com/Syndicated/
HomeComfort/) (Last accessed Jan. 3, 2023).
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Jersey Department of Environmental
Protection’s all-electric boiler proposal
and New York City’s all-electric
ordinance. (BWC, No. 39 at pp. 2–3)
WMT noted that the market is
increasingly transitioning towards
higher efficiencies without Federal
prompting and that this transition is
occurring in specific areas and regions
where higher-efficiency boilers provide
the most financial benefit and the
application allows for it. (WMT, No. 32
at p. 11)
For the preliminary analysis,
assumptions regarding future policies
encouraging higher-efficiency
equipment, electrification of
households, and electric boilers were
speculative at that time, so such policies
were not incorporated into the
shipments projection. Current
requirements in many parts of California
for low NOX boilers could increase the
cost of these boilers, but it is currently
unclear if it will be enough to drive
shipments towards other space heating
options (including heat pumps). Thus, it
is very uncertain to what extent
installations of heat pumps would
increase at the expense of consumer
boiler shipments. DOE agrees that
ongoing electrification efforts at various
levels of government could impact
consumer decisions to switch away
from fossil-fuel appliances such as
boilers (including recently passed
Federal rebates and incentives 127 and
proposed 2030 emission standards from
the California Air Resource Board 128),
but the Department has limited data on
the potential fraction of shipments that
might switch from gas- or oil-fired
boilers to electric space heating options
in the no-new-standards case. For the
NOPR analysis, however, DOE was able
to refine its shipments analysis and
reduce the fraction of gas-fired boilers
projected in the future based on most
updated saturation data. See chapter 9
of the NOPR TSD for further details.
127 The High-Efficiency Electric Home Rebate Act
(HEEHRA) provides point-of-sale consumer rebates
to enable low- and moderate-income households to
electrify their homes. HEEHRA covers 100 percent
of electrification project costs (up to item-specific
caps) for low-income households and 50 percent of
costs (up to item-specific caps) for moderate-income
households. The Energy Efficient Home
Improvement credit, or 25C, allows households to
deduct from their taxes up to 30 percent of the cost
of upgrades to their homes, including installing
heat pumps, insulation, and importantly, upgrading
their breaker boxes to accommodate additional
electric load.
128 See ww2.arb.ca.gov/sites/default/files/202208/2022_State_SIP_Strategy.pdf; p. 101. The CARB
vote that plans to ban gas furnaces and water
heaters by 2030, was not the final phase in the
process and requires State agencies to draft a rule
for phasing out gas-fueled appliances, and then the
rule will be under final consideration in 2025.
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DOE requests comments on its
approach for taking into account
electrification efforts in its shipment
analysis. DOE also requests comments
on other local, State, and Federal
policies that may impact the shipments
projection of consumer boilers.
AGA, APGA, and NPGA stated that
allowing only condensing gas boilers
would take away consumer choice.
Particularly in the replacement market
and where condensing boilers cannot be
installed or are cost prohibitive, these
commenters argued that consumers will
either try to repair the existing gas boiler
or change out the gas boiler with an
more energy-intensive product such as
an electric boiler. (AGA, APGA, and
NPGA, No. 38 at p. 3) Similarly, PB Heat
stated that increasing the minimum
efficiency to condensing levels will
drive middle- and lower-income
consumers to repair older equipment in
order to avoid the high cost of installing
a condensing boiler. (PB Heat, No. 34 at
p. 2) AHRI stated that the majority of
boilers are used in replacement
installations and that these replacement
locations cannot easily be modified to
meet the requirements of condensing
equipment, and in some cases,
accommodation of condensing
equipment is not possible. Therefore,
AHRI argued that a condensing standard
could potentially lead to increased cases
of fuel switching. (AHRI, No. 40 at p. 2)
In response, DOE agrees that a
fraction of consumers could elect to
repair instead of replace their
equipment due to higher efficiency
standards. The NOPR analysis
accounted for the impact of increased
product price for the considered
efficiency levels on shipments by
incorporating relative price elasticity in
the shipments model. This approach
gives some weight to the operating cost
savings from higher-efficiency products.
A price elasticity of demand less than
zero reflects the expectation that
demand will decrease when prices
increase. To model the impact of the
increase in relative price from a
particular standard level on residential
boiler shipments, DOE assumed that the
shipments that do not occur represent
consumers that would repair their
product rather than replace it, extending
the life of the product on average by six
years in those cases.
For the NOPR, DOE evaluated the
potential for switching from gas-fired
and oil-fired hot water boilers to other
heating systems in response to amended
energy conservation standards. The
main alternative to hot water boilers
would be installation of an electric
boiler, a forced-air furnace, a heat
pump, or a mini-split heat pump. These
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alternatives would require significant
installation costs such as adding
ductwork or an electrical upgrade, and
an electric boiler would have very high
relative energy costs. Given that the
increase in installed cost of boilers
meeting the amended standards, relative
to the no-new-standards case, is small,
DOE has concluded that consumer
switching away from hot water boilers
due to amended standards would be
rare. Therefore, DOE did not analyze
fuel switching for consumer boilers for
the NOPR.
See chapter 9 of the NOPR TSD for
further information on the development
of shipments.
H. National Impact Analysis
The NIA assesses the national energy
savings (NES) and the NPV from a
national perspective of total consumer
costs and savings that would be
expected to result from new or amended
standards at specific efficiency levels.129
(‘‘Consumer’’ in this context refers to
consumers of the product being
regulated.) DOE calculates the NES and
NPV for the potential standard levels
considered based on projections of
annual product shipments, along with
the annual energy consumption and
total installed cost data from the energy
use and LCC analyses. For the present
analysis, DOE projected the energy
savings, operating cost savings, product
costs, and NPV of consumer benefits
over the lifetime of consumer boilers
sold from 2030 through 2059.
DOE evaluates the impacts of new or
amended standards by comparing a case
without such standards with standardscase projections. The no-new-standards
case characterizes energy use and
consumer costs for each product class in
the absence of new or amended energy
conservation standards. For this
projection, DOE considers historical
trends in efficiency and various forces
that are likely to affect the mix of
efficiencies over time. DOE compares
the no-new-standards case with
projections characterizing the market for
each product class if DOE adopted new
or amended standards at specific energy
efficiency levels (i.e., the TSLs or
standards cases) for that class. For the
standards cases, DOE considers how a
given standard would likely affect the
market shares of products with
efficiencies greater than the standard.
DOE uses a spreadsheet model to
calculate the energy savings and the
national consumer costs and savings
from each TSL. Interested parties can
review DOE’s analyses by changing
129 The NIA accounts for impacts in the 50 States
and U.S. territories.
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various input quantities within the
spreadsheet. The NIA spreadsheet
model uses typical values (as opposed
to probability distributions) as inputs.
Table IV.11 summarizes the inputs
and methods DOE used for the NIA
analysis for the NOPR. Discussion of
these inputs and methods follows the
table. See chapter 10 of the NOPR TSD
for further details.
TABLE IV.11—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS
Inputs
Method
Shipments .............................................
Compliance Date of Standard ..............
Efficiency Trends ..................................
Annual shipments from shipments model.
2030.
No-new-standards case: Based on historical data. Standards cases: Roll-up in the compliance year and
then DOE estimated growth in shipment-weighted efficiency in all the standards cases.
Annual weighted-average values are a function of energy use at each TSL.
Annual weighted-average values are a function of cost at each TSL.
Incorporates projection of future product prices based on historical data.
Annual weighted-average values as a function of the annual energy consumption per unit and energy
prices.
Based on RSMeans data and other sources.
AEO2023 projections (to 2050) and extrapolation thereafter.
A time-series conversion factor based on AEO2023.
Annual Energy Consumption per Unit
Total Installed Cost per Unit ................
Annual Energy Cost per Unit ...............
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Repair and Maintenance Cost per Unit
Energy Price Trends ............................
Energy Site-to-Primary and FFC Conversion.
Discount Rate .......................................
Present Year ........................................
3 percent and 7 percent.
2023.
1. Product Efficiency Trends
A key component of the NIA is the
trend in energy efficiency projected for
the no-new-standards case and each of
the standards cases. Section IV.F.8 of
this document describes how DOE
developed an energy efficiency
distribution for the no-new-standards
case (which yields a shipment-weighted
average efficiency) for each of the
considered product classes for the first
full year of anticipated compliance with
an amended or new standard. To project
the trend in efficiency absent amended
standards for consumer boilers over the
entire shipments projection period, DOE
used available historical shipments data
and manufacturer input. The approach
is further described in chapter 10 of the
NOPR TSD.
For the standards cases, DOE used a
‘‘roll-up’’ scenario to establish the
shipment-weighted efficiency for the
year that standards are assumed to
become effective (2030). In this
scenario, the market shares of products
in the no-new-standards case that do not
meet the standard under consideration
would ‘‘roll up’’ to meet the new
standard level, and the market share of
products above the standard would
remain unchanged.
To develop standards-case efficiency
trends after 2030, DOE used historical
shipment data and current boiler model
availability by efficiency level (see
chapter 8 of the NOPR TSD). DOE
estimated growth in shipment-weighted
efficiency by assuming that the
implementation of ENERGY STAR’s
performance criteria and other
incentives would gradually increase the
market shares of higher-efficiency
consumer boilers. DOE also took into
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account increased incentives for higherefficiency equipment and electrification
efforts.
Crown and U.S. Boilers stated that
they expect the growth of condensing
boiler market share to slow as the share
of remaining non-condensing boiler
sales are increasingly confined to
difficult installations, as well as
situations where the use of condensing
boilers makes no economic or technical
sense. However, these commenters do
not agree with DOE’s projected rate of
growth decline, a key parameter which
would impact the calculation of benefits
attributable to an amended standard.
(Crown, No. 30 at pp. 15–16; U.S.
Boilers, No. 31 at pp. 16–17) AHRI
expressed concern that the Department’s
future shipments model is overly
aggressive and suggested that the future
shipment projections should be
reconsidered at the higher efficiency
levels. (AHRI, No. 40 at p. 2)
In response, DOE reviewed recent
shipments trends and incentives. Based
on the latest data, DOE was able to
reassess its growth in condensing boiler
shipments, which slightly decreased the
projected market share of condensing
boilers for use in this NOPR as
compared to the preliminary analysis.
DOE requests comments on its
approach for developing efficiency
trends beyond 2030.
2. National Energy Savings
The national energy savings analysis
involves a comparison of national
energy consumption of the considered
products between each potential
standards case (trial standard level
(TSL)) and the case with no new or
amended energy conservation
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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). DOE
calculated annual NES based on the
difference in national energy
consumption for the no-new standards
case and for each higher-efficiency
standard case. DOE estimated energy
consumption and savings based on site
energy and converted the electricity
consumption and savings to primary
energy (i.e., the energy consumed by
power plants to generate site electricity)
using annual conversion factors derived
from AEO2023. Cumulative energy
savings are the sum of the NES for each
year over the timeframe of the analysis.
Use of higher-efficiency products is
sometimes associated with a direct
rebound effect, which refers to an
increase in utilization of the product
due to the increase in efficiency. DOE
did not find any data on the rebound
effect specific to consumer boilers.
Consequently, DOE applied a rebound
effect of 10 percent for consumer boilers
used in residential applications based
on studies of other residential products
and 0 percent for consumer boilers used
in commercial applications. The
calculated NES at each efficiency level
is, therefore, reduced by 10 percent in
residential applications. DOE also
included the rebound effect in the NPV
analysis by accounting for the
additional net benefit from increased
consumer boiler usage, as described in
section IV.H.3 of this document.
DOE requests comments and any data
on the potential for direct rebound.
In 2011, in response to the
recommendations of a committee on
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‘‘Point-of-Use and Full-Fuel-Cycle
Measurement Approaches to Energy
Efficiency Standards’’ appointed by the
National Academy of Sciences, DOE
announced its intention to use 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 which DOE
explained its determination that EIA’s
National Energy Modeling System
(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). NEMS is a public
domain, multi-sector, partial
equilibrium model of the U.S. energy
sector 130 that EIA uses to prepare its
Annual Energy Outlook. The FFC factors
incorporate losses in production and
delivery in the case of natural gas
(including fugitive emissions) and
additional energy used to produce and
deliver the various fuels used by power
plants. The approach used for deriving
FFC measures of energy use and
emissions is described in appendix 10B
of the NOPR TSD.
3. Net Present Value Analysis
The inputs for determining the NPV
of the total costs and benefits
experienced by consumers are: (1) total
annual installed cost; (2) total annual
operating costs (energy costs and repair
and maintenance costs), and (3) a
discount factor to calculate the present
value of costs and savings. DOE
calculates net savings each year as the
difference between the no-newstandards case and each standards case
in terms of total savings in operating
costs versus total increases in installed
costs. DOE calculates operating cost
savings over the lifetime of each product
shipped during the projection period.
As discussed in section IV.F.1 of this
document, DOE developed consumer
boiler price trends based on historical
PPI data. DOE applied the same trends
to project prices for each product class
at each considered efficiency level. To
evaluate the effect of uncertainty
regarding the price trend estimates, DOE
investigated the impact of different
product price projections on the
consumer NPV for the considered TSLs
for consumer boilers. In addition to the
default constant price trend, DOE
130 For more information on NEMS, refer to The
National Energy Modeling System: An Overview
2018, DOE/EIA–0383(2018) (April 2019) (Available
at: www.eia.gov/forecasts/aeo/index.cfm) (Last
accessed Jan. 3, 2023).
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considered two product price sensitivity
cases: (1) a high-price case based on an
exponential fit of deflated heating
equipment PPI from 1980 to 2021 and
(2) a low-price case based on an
exponential fit of deflated steel heating
boiler PPI from 1980 to 1998 (partially
extrapolated). The derivation of these
price trends and the results of these
sensitivity cases are described in
appendix 10C of the NOPR TSD.
The energy cost savings are calculated
using the estimated energy savings in
each year and the projected price of the
appropriate form of energy. To estimate
energy prices in future years, DOE
multiplied the average regional energy
prices by the projection of annual
national-average residential and
commercial energy price changes in the
Reference case from AEO 2023, which
has an end year of 2050. To estimate
price trends after 2050, DOE used a
constant value derived from the average
value between 2046 through 2050. As
part of the NIA, DOE also analyzed
scenarios that used inputs from variants
of the AEO 2023 Reference case that
have lower and higher economic
growth. Those cases have lower and
higher energy price trends compared to
the Reference case. NIA results based on
these cases are presented in appendix
10D of the NOPR TSD.
In considering the consumer welfare
gained due to the direct rebound effect,
DOE accounted for change in consumer
surplus attributed to additional cooling
from the purchase of a more-efficient
unit. Overall consumer welfare is
generally understood to be enhanced
from rebound (i.e., a measure of the
enjoyment the boiler consumer receives
through additional heating comfort).
The net consumer impact of the
rebound effect is included in the
calculation of operating cost savings in
the consumer NPV results. See
appendix 10E of the NOPR TSD for
details on DOE’s treatment of the
monetary valuation of the rebound
effect.
DOE requests comments on its
approach to monetizing the impact of
the rebound effect.
In calculating the NPV, DOE
multiplies the net savings in future
years by a discount factor to determine
their present value. For this NOPR, DOE
estimated 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
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regulatory analysis.131 The discount
rates for the determination of NPV are
in contrast to the discount rates used in
the LCC analysis, which are designed to
reflect a consumer’s perspective. The 7percent real value is an estimate of the
average before-tax rate of return to
private capital in the U.S. economy. The
3-percent real value represents the
‘‘social rate of time preference,’’ which
is the rate at which society discounts
future consumption flows to their
present value.
I. Consumer Subgroup Analysis
In analyzing the potential impact of
new or amended energy conservation
standards on consumers, DOE evaluates
the impact on identifiable subgroups of
consumers that may be
disproportionately affected by a new or
amended national standard. The
purpose of a subgroup analysis is to
determine the extent of any such
disproportional impacts. DOE evaluates
impacts on particular subgroups of
consumers by analyzing the LCC
impacts and PBP for those particular
consumers from alternative standard
levels. For this NOPR, DOE analyzed the
impacts of the considered standard
levels on three subgroups: (1) lowincome households; (2) senior-only
households, and (3) small businesses.
The analysis used subsets of the RECS
2015 and CBECS 2018 samples
composed of households or commercial
settings that meet the criteria for the
three subgroups. DOE used the LCC and
PBP spreadsheet model to estimate the
impacts of the considered efficiency
levels on these subgroups. Chapter 11 in
the NOPR TSD describes the consumer
subgroup analysis.
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate
the financial impacts of amended energy
conservation standards on
manufacturers of consumer boilers and
to estimate the potential impacts of such
standards on direct employment and
manufacturing capacity. The MIA has
both quantitative and qualitative aspects
and includes analyses of projected
industry cash flows, the INPV,
investments in research and
development (R&D) and manufacturing
capital, and domestic manufacturing
employment. Additionally, the MIA
seeks to determine how amended energy
conservation standards might affect
131 United States Office of Management and
Budget. Circular A–4: Regulatory Analysis (Sept.
17, 2003) Section E (Available at:
obamawhitehouse.archives.gov/omb/circulars_
a004_a-4/) (Last accessed Jan. 3, 2023).
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manufacturing employment, capacity,
and competition, as well as how
standards contribute to overall
regulatory burden. Finally, the MIA
serves to identify any disproportionate
impacts on manufacturer subgroups,
including small business manufacturers.
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 include data on the
industry cost structure, unit production
costs, product shipments, gross margin
percentages (i.e., manufacturer
markups), and investments in R&D and
manufacturing capital required to
produce compliant products. The key
GRIM outputs are the INPV, which is
the sum of industry annual cash flows
over the analysis period, discounted
using the industry-weighted average
cost of capital, and the impact to
domestic manufacturing employment.
The model uses standard accounting
principles to estimate the impacts of
more-stringent energy conservation
standards on a given industry by
comparing changes in INPV and
domestic manufacturing employment
between a no-new-standards case and
the various standards cases (i.e., TSLs).
To capture the uncertainty relating to
manufacturer pricing strategies
following amended standards, the GRIM
estimates a range of possible impacts
under different manufacturer markup
scenarios.
The qualitative part of the MIA
addresses manufacturer characteristics
and market trends. Specifically, the MIA
considers such factors as a potential
standard’s impact on manufacturing
capacity, competition within the
industry, the cumulative impact of other
DOE and non-DOE regulations, and
impacts on manufacturer subgroups.
The complete MIA is outlined in
chapter 12 of the NOPR TSD.
DOE conducted the MIA for this
rulemaking in three phases. In Phase 1
of the MIA, DOE prepared a profile of
the consumer boiler manufacturing
industry based on the market and
technology assessment, preliminary
manufacturer interviews, and publiclyavailable information. This included a
top-down analysis of consumer boiler
manufacturers that DOE used to derive
preliminary financial inputs for the
GRIM (e.g., revenues; materials, labor,
overhead, and depreciation expenses;
selling, general, and administrative
expenses (SG&A); and R&D expenses).
DOE also used public sources of
information to further calibrate its
initial characterization of the consumer
boiler manufacturing industry,
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including company filings of form 10–
K from the SEC,132 corporate annual
reports, the U.S. Census Bureau’s
Annual Survey of Manufactures
(ASM),133 and reports from Dun &
Bradstreet.134
In Phase 2 of the MIA, DOE prepared
a framework industry cash-flow analysis
to quantify the potential impacts of
amended energy conservation
standards. The GRIM uses several
factors to determine a series of annual
cash flows starting with the
announcement of the standard and
extending over a 30-year period
following the compliance date of the
standard. These factors include annual
expected revenues, costs of sales, SG&A
and R&D expenses, taxes, and capital
expenditures. In general, energy
conservation standards can affect
manufacturer cash flow in three distinct
ways: (1) creating a need for increased
investment; (2) raising production costs
per unit, and (3) altering revenue due to
higher per-unit prices and changes in
sales volumes.
In addition, during Phase 2, DOE
developed interview guides to distribute
to manufacturers of consumer boilers in
order to develop other key GRIM inputs,
including product and capital
conversion costs, and to gather
additional information on the
anticipated effects of energy
conservation standards on revenues,
direct employment, capital assets,
industry competitiveness, and subgroup
impacts.
In Phase 3 of the MIA, DOE
conducted structured, detailed
interviews with representative
manufacturers. During these interviews,
DOE discussed engineering,
manufacturing, procurement, and
financial topics to validate assumptions
used in the GRIM and to identify key
issues or concerns. See section IV.J.3 of
this document for a description of the
key issues raised by manufacturers
during the interviews. As part of Phase
3, DOE also evaluated subgroups of
manufacturers that may be
disproportionately impacted by
amended standards or that may not be
accurately represented by the average
cost assumptions used to develop the
132 U.S. Securities and Exchange Commission,
Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system (Available at: www.sec.gov/edgar/
search/) (Last accessed Jan. 3, 2023).
133 U.S. Census Bureau, Annual Survey of
Manufactures. ‘‘Summary Statistics for Industry
Groups and Industries in the U.S (2021)’’ (Available
at: www.census.gov/data/tables/time-series/econ/
asm/2018–2021-asm.html) (Last accessed Jan. 3,
2023).
134 The Dun & Bradstreet Hoovers login is
available at: app.dnbhoovers.com (Last accessed
Jan. 3, 2023).
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industry cash-flow analysis. Such
manufacturer subgroups may include
small business manufacturers, lowvolume manufacturers, niche players,
and/or manufacturers exhibiting a cost
structure that largely differs from the
industry average. DOE identified two
manufacturer subgroups for a separate
impact analysis: (1) small business
manufacturers and (2) OEMs that own
domestic foundry assets. The small
business subgroup is discussed in
section VI.B, ‘‘Review under the
Regulatory Flexibility Act,’’ and the
OEMs that own domestic foundry assets
subgroup is discussed in section V.B.2.d
of this document and in chapter 12 of
the NOPR TSD.
2. Government Regulatory Impact Model
and Key Inputs
DOE uses the GRIM to quantify the
changes in cash flow due to amended
standards that result in a higher or
lower industry value. The GRIM uses a
standard, annual discounted cash-flow
analysis that incorporates manufacturer
costs, markups, shipments, and industry
financial information as inputs. The
GRIM models changes in costs,
distribution of shipments, investments,
and manufacturer margins that could
result from amended energy
conservation standards. The GRIM
spreadsheet uses the inputs to arrive at
a series of annual cash flows, beginning
in 2023 (the base year of the analysis)
and continuing to 2059. DOE calculated
INPVs by summing the stream of annual
discounted cash flows during this
period. For manufacturers of consumer
boilers, DOE used a real discount rate of
9.7 percent, which was derived from
industry financials and then modified
according to feedback received during
manufacturer interviews.
The GRIM calculates cash flows using
standard accounting principles and
compares changes in INPV between the
no-new-standards case and each
standards case. The difference in INPV
between the no-new-standards case and
a standards case represents the financial
impact of the amended energy
conservation standard on
manufacturers. As discussed previously,
DOE developed critical GRIM inputs
using a number of sources, including
publicly-available data, results of the
engineering analysis, results of the
shipments analysis, and information
gathered from industry stakeholders
during the course of manufacturer
interviews. The GRIM results are
presented in section V.B.2. Additional
details about the GRIM, the discount
rate, and other financial parameters can
be found in chapter 12 of the NOPR
TSD.
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a. Manufacturer Production Costs
Manufacturing more-efficient
products is typically more expensive
than manufacturing baseline products
due to the use of more complex
components, which are typically more
costly than baseline components. The
changes in the MPCs of covered
products can affect the revenues, gross
margins, and cash flow of the industry.
For this rulemaking, DOE relied on the
efficiency-level approach. This
approach ensures that the efficiency
levels considered in the engineering
analysis are attainable using
technologies which are commercially
available and viable for consumer
boilers. As such, DOE was able to
conduct teardown analyses on
consumer boilers which meet each
efficiency level, and, thus, ascertain a
list of representative design options
which manufacturers are most likely to
employ in order to achieve these
efficiencies. For a complete description
of the MPCs, see chapter 5 of the NOPR
TSD or section IV.C of this document.
b. Shipments Projections
The GRIM estimates manufacturer
revenues based on total unit shipment
projections and the distribution of those
shipments 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 projections derived from the
shipments analysis from 2023 (the base
year) to 2059 (the end year of the
analysis period). See chapter 9 of the
NOPR TSD or section IV.G of this
document for additional details.
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c. Product and Capital Conversion Costs
Amended energy conservation
standards could cause manufacturers to
incur 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 investments in research,
development, testing, marketing, and
other non-capitalized costs necessary to
make product designs comply with
amended energy conservation
standards. Capital conversion costs are
investments in property, plant, and
equipment necessary to adapt or change
existing production facilities such that
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new compliant product designs can be
fabricated and assembled.
DOE based its estimates of the
product conversion costs necessary to
meet the varying efficiency levels on
information from manufacturer
interviews, design pathways analyzed in
the engineering analysis, and market
share and model count information.
During confidential interviews, DOE
asked manufacturers to estimate the
redesign effort and engineering
resources required at various efficiency
levels to quantify the product
conversion costs. Manufacturer data
were aggregated to better reflect the
industry as a whole and to protect
confidential information. DOE scaled
product conversion costs by the number
of models that would require redesign to
account for the portion of companies
that were not interviewed. Such
approach allows DOE to arrive at an
industry-wide conversion cost estimate.
DOE relied on information derived
from manufacturer interviews and the
engineering analysis to evaluate the
level of capital conversion costs
manufacturers would likely incur at the
analyzed efficiency levels. During
interviews, manufacturers provided
estimates and descriptions of the
required tooling and plant changes that
would be necessary to upgrade product
lines to meet the various efficiency
levels. DOE used estimates of capital
expenditure requirements derived from
the product teardown analysis and
engineering analysis to validate
manufacturer feedback. For noncondensing efficiency levels above
baseline, DOE estimated that
manufacturers would require new
tooling for some new casting designs.
For efficiency levels requiring
condensing technology, DOE estimated
that manufacturers with a significant
volume of non-condensing gas-fired hot
water boilers would incur large capital
conversion costs to develop additional
assembly lines for condensing boilers.
Based on manufacturer feedback, DOE
assumed manufacturers would continue
to source condensing heat exchangers
and would not shift to in-house
manufacturing of condensing heat
exchangers. DOE estimated industry
capital conversion costs by
extrapolating the interviewed
manufacturers’ capital conversion costs
for each product class to account for the
market share of companies that were not
interviewed.
In general, DOE assumes all
conversion-related investments occur
between the year of publication of the
final rule and the year by which
manufacturers must comply with the
amended standard. The conversion cost
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figures used in the GRIM can be found
in section V.B.2 of this document. For
additional information on the estimated
capital and product conversion costs,
see chapter 12 of the NOPR TSD.
d. Manufacturer Markup Scenarios
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 manufacturer
markups to the MPCs estimated in the
engineering analysis for each product
class and efficiency level. Modifying
these manufacturer markups in the
standards case yields different sets of
impacts on manufacturers. For the MIA,
DOE modeled two standards-case
scenarios to represent uncertainty
regarding the potential impacts on
prices and profitability for
manufacturers following the
implementation of amended energy
conservation standards: (1) a
preservation of gross margin percentage
scenario; and (2) a preservation of
operating profit scenario. These
scenarios lead to different manufacturer
markup values that, when applied to the
MPCs, result in varying revenue and
cash-flow impacts on manufacturers.
Under the preservation of gross
margin percentage scenario, DOE
applied a single uniform ‘‘gross margin
percentage’’ markup across all product
classes and all efficiency levels
(including baseline efficiency), 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 manufacturer production costs
increase with efficiency, this scenario
implies that the per-unit dollar profit
will increase. DOE assumed a gross
margin percentage of 29 percent for all
product classes.135 Manufacturers tend
to believe it is optimistic to assume that
they would be able to maintain the same
gross margin percentage as their
production costs increase, particularly
for minimally-efficient products.
Therefore, this scenario represents a
high bound of industry profitability
under an amended energy conservation
standard.
Under the preservation of operating
profit scenario, as the cost of production
goes up under a standards case,
manufacturers are generally required to
reduce their manufacturer markups to a
level that maintains base-case operating
profit. DOE implemented this scenario
135 The gross margin percentage of 29 percent is
based on a manufacturer markup of 1.41.
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in the GRIM by lowering the
manufacturer markups at each TSL to
yield approximately the same earnings
before interest and taxes in the
standards case as in the no-newstandards case in the year after the
expected compliance date of the
amended energy conservation
standards. The implicit assumption
behind this scenario is that the industry
can only maintain its operating profit in
absolute dollars after the standard takes
effect. Therefore, operating profit in
percentage terms is reduced between the
no-new-standard case and the standards
cases. This scenario represents a lower
bound of industry profitability under an
amended energy conservation standard.
A comparison of industry financial
impacts under the two manufacturer
markup scenarios is presented in
section V.B.2 of this document.
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3. Manufacturer Interviews
DOE interviewed manufacturers
representing approximately 45 percent
of the domestic consumer boiler
shipments. Participants included a
cross-section of domestic-based and
foreign-based OEMs. Participants
included manufacturers with a wide
range of market shares and product class
offerings.
In interviews, DOE asked
manufacturers to describe their major
concerns regarding potential morestringent energy conservation standards
for consumer boilers. The following
section highlights manufacturer
concerns that helped inform the
projected potential impacts of an
amended standard on the industry.
Manufacturer interviews are conducted
by DOE consultants under nondisclosure agreements (NDAs), so the
Department does not document these
discussions in the same way that it does
public comments, in terms of providing
comment summaries and DOE’s
responses throughout the rest of this
document.
a. The Replacement Market
In interviews, several manufacturers
discussed the potential challenges and
benefits of moving to a condensing
standard for consumer boilers.
Several manufacturers estimated that,
on average, between 80 to 90 percent of
consumer boiler sales are through the
replacement market, rather than the new
construction channel. They noted that
since condensing and non-condensing
products require different venting
infrastructure, a condensing standard
could lead to higher installation costs
for the consumer, as well as technical
and/or safety challenges with
installation and operation, in certain
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cases. Some manufacturers stated that
since the current consumer boiler
market is structured around the legacy
venting infrastructures that exist in most
homes, raising standards on gas-fired
hot water boilers above 84-percent
AFUE would be very disruptive to the
market.
Other manufacturers noted that while
it may be expensive to replace a noncondensing boiler with a condensing
boiler in some instances, there are
pathways to complete installations
safely. They requested that DOE account
for the higher installation costs in
analyses, rather than creating separate
product classes for non-condensing
consumer boilers.
4. Discussion of MIA Comments
AHRI noted that small OEMs will be
impacted by this rulemaking, especially
with respect to cast-iron boilers. (AHRI,
No. 40 at p. 6) AHRI recommended that
the Department should give more
weight to the consideration of Statelevel impact on consumers and small
manufacturers instead of the use of a
national average value for those
subgroups. (AHRI, No. 40 at p. 2)
In response, DOE evaluated subgroups
of manufacturers that may be
disproportionately impacted by
amended standards, including small
business manufacturers. DOE identified
three small, domestic OEMs of covered
consumer boilers. Regarding the impact
on small manufacturers, see section VI.B
of this document for a discussion of the
potential impact of amended energy
conservation standards for consumer
boilers on the three small OEMs
identified. The distributional impacts of
a potential standard, which capture
State-level differences, are part of the
LCC analysis (see section IV.F of this
document). Specific subgroups,
including small businesses, are part of
the subgroup analysis (see section IV.I
of this document). The aggregate
national impacts are part of the NIA (see
section IV.H of this document). All of
these analyses are considered by DOE
when making a determination of
economic justification, per EPCA
requirements.
In response to the May 2022
Preliminary Analysis, Crown, U.S.
Boiler, WMT, PB Heat, BWC, and AHRI
stated that the adoption of a condensing
standard will likely have a
disproportionate, negative impact on
domestic manufacturers (Crown, No. 30
at pp. 16–17; U.S. Boiler, No. 31 at pp
17–18; WMT, No. 32 at p. 12; PB Heat,
No. 34 at p. 2; BWC, No. 39 at p. 4;
AHRI, No. 40 at p. 7) Crown, U.S.
Boiler, and WMT emphasized that, in
particular, manufacturers with
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foundries would be disproportionally
affected by potential amended energy
conservation standards for consumer
boilers. (Crown, No. 30 at pp. 16–17;
U.S. Boiler, No. 31 at pp 17–18; WMT,
No. 32 at p. 12) Stakeholders
commented on a range of potential
negative impacts of more stringent
standards, including: (1) increases in
cast-iron prices in other boiler types; (2)
possible foundry closures; (3) potential
job losses associated with foundry
operation, casting, and assembly, which
could lead to a reduction in domestic
manufacturing employment; and (4)
significant stranded assets. The
following paragraphs discuss these
stakeholder concerns in detail.
Crown, U.S. Boiler, WMT, and AHRI
commented that raising the gas-fired hot
water standard to a condensing level
would result in increased
manufacturing costs for the other castiron product classes, even if the
standards for those classes were to be
left unchanged. (Crown, No. 30 at pp. 5–
6; U.S. Boiler, No. 31 at pp. 5–6; WMT,
No. 32 at p. 12; AHRI, No. 40 at p. 7)
Crown and U.S. Boiler stated that this
is because the cast-iron foundries
producing heat exchangers for noncondensing boilers have large, fixed
costs that would no longer be shared
with gas-fired hot water consumer
boilers. (Crown, No. 30 at pp. 5–6; U.S.
Boiler, No. 31 at pp. 5–6) WMT noted
that the cost structure of cast-iron boiler
manufacturers is different from most
other businesses. WMT stated that
because of the similarity of cast-iron
heat exchanger designs between product
classes, a reduction in the annual
volume of the larger product class (i.e.,
gas-fired hot water) will have a
significant cost impact upon the lowervolume product classes. (WMT, No. 32
at p. 12) AHRI claimed that eliminating
non-condensing gas-fired boilers will
cause an increase in the cost of cast-iron
heat exchangers, which would largely
impact the steam boiler replacement
market. Furthermore, AHRI asserted that
due to the similarity of cast iron heat
exchangers for hot water boilers and
steam boilers, a reduction in the annual
volume of the gas-fired hot water
category will have a significant cost
impact upon the smaller product
categories of gas-fired steam, oil-fired
hot water, and oil-fired steam boilers.
(AHRI, No. 40 at p. 7)
As noted in section IV.C.2 of this
document, research indicates that most
consumer boiler OEMs use third-party
foundries for their boiler castings. For
the consumer boiler OEMs that own
foundry assets, DOE analyzes the
disproportionate impacts of a
condensing standard on those
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manufacturers in section V.B.2.d of this
document, ‘‘Impacts on Subgroups of
Manufacturers.’’ As discussed in detail
in section V.B.2.d of this document,
DOE used the engineering analysis to
estimate the depreciation and overhead
associated with an average gas-fired hot
water cast-iron heat exchanger. Next,
DOE used the shipments analysis and
estimated market share of boilers
produced by vertically integrated OEMs
(i.e., consumer boiler OEMs with
foundry assets and in-house casting) to
estimate the amount depreciation and
overhead that would potentially need to
be reallocated to the remaining cast-iron
product classes under a condensing
standard. DOE then modeled two
manufacturer markup scenarios to
understand the range of potential
impacts for foundry-owners. This
modeling resulted in higher production
costs and reduced profitability for
foundry-owners. See section V.B.2.d of
this document for further details.
Crown, U.S. Boiler, and WMT
indicated that some foundries may no
longer be commercially viable under a
condensing gas-fired hot water standard.
(Crown, No. 30 at pp. 5–6; U.S. Boiler,
No. 31 at pp. 5–6; WMT, No. 32 at p.
12) Crown and U.S. Boiler indicated
that foundry closure could lead to
reduced availability of gas-fired steam,
oil-fired hot water, and/or oil-fired
steam boilers and higher costs for new
boilers and replacement parts. (Crown,
No. 30 at pp. 5–6; U.S. Boiler, No. 31
at pp. 5–6) WMT stated that an increase
in efficiency standards would result in,
‘‘closing of at least one cast iron foundry
within the United States.’’ (WMT, No.
32 at p. 12) Crown and U.S. Boiler noted
that foundries engaged in manufacturing
cast-iron boilers are almost exclusively
located in the U.S., including their
casting supplier, Casting Solutions,
located in Zanesville, Ohio. (Crown, No.
30 at p. 16; U.S. Boiler, No. 31 at p. 17)
In response, DOE initially identified
three foundries in the United States that
supply castings for the domestic
consumer boiler market. DOE identified
these foundries using publicly-available
information and verified the
information in confidential
manufacturer interviews. Of these three
foundries, two are owned by consumer
boiler OEMs. The remaining foundry,
located in Waupaca, Wisconsin,
provides castings for a range of markets
(e.g., automotive, rail, industrial). In the
GRIM, DOE assumes both OEMs
maintain their foundries under a
condensing standard. The subgroup
analysis modeling resulted in higher
production costs and reduced
profitability for foundry-owners. DOE
discusses the potential impacts of
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amended standards on OEMs that own
foundry assets in section V.B.2.d of this
document.
Crown, U.S. Boiler, WMT, PB Heat,
BWC, and AHRI all asserted that
amended standards would lead to a loss
of American jobs and the need to import
heat exchangers for consumer boilers
from overseas. (Crown, No. 30 at pp. 16–
17; U.S. Boiler, No. 31 at pp. 17–18;
WMT, No. 32 at p. 12; PB Heat, No. 34
at p. 2; BWC, No. 39 at p. 4; AHRI, No.
40 at p. 7)
Crown and U.S. Boiler stated that
raising standards for gas-fired hot water
consumer boilers would have devasting
impacts on cast-iron manufacturers. As
a specific example, they discussed that
their casting provider, Casting Solutions
(a division of their parent company,
Burnham Holdings, Inc. (BHI)) currently
employs over 100 people, with most of
them being union manufacturing
workers. The commenters argued that in
addition to potential foundry job losses,
there are other manufacturing jobs
associated with machining castings and
assembling cast-iron boilers at several
BHI divisions that would be at risk,
including approximately 89 jobs at U.S.
Boiler’s manufacturing facility and
approximately 30 jobs at Crown’s
manufacturing facility, which is located
in a ‘‘depressed inner-city Philadelphia
neighborhood.’’ (Crown, No. 30 at pp.
16–17; U.S. Boiler, No. 31 at pp. 17–18)
BWC recommended that DOE should
account for the substantial percentage of
high-efficiency consumer boilers that
are produced by foreign manufacturers
as part of this rulemaking, as well as key
components in condensing boilers, such
as stainless-steel heat exchangers.
(BWC, No. 39 at p. 4) AHRI urged the
Department to examine the impact on
jobs as a result of a condensing rule, as
well as examining the cost of importing
heat exchangers from foreign sources
(including increased shipping costs and
any tariffs). (AHRI, No. 40 at p. 7)
Regarding the potential job losses
associated with a potential condensing
standard for consumer boilers, DOE
analyzes the potential impact of
amended standards on domestic direct
employment as part of the MIA. DOE
estimates that over 90 percent of noncondensing consumer boilers, including
key components such as cast-iron heat
exchangers, are manufactured in the
United States, whereas approximately
60 percent of condensing consumer
boilers are manufactured in the United
States. DOE recognizes that key
components for condensing gas-fired
hot water boilers, such as stainless-steel
condensing heat exchangers are
manufactured outside of the United
States. Furthermore, developing an in-
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house condensing heat exchanger
production line would require large
upfront investments, which may not be
cost-effective given the relatively low
levels of domestic gas-fired boiler sales
compared to other markets. Therefore,
DOE has tentatively concluded that
setting a condensing standard for gasfired hot water boilers, which accounts
for approximately 75 percent of annual
boiler shipments, would likely lead to a
reduction in domestic direct
employment in the consumer boiler
industry in the range of 14 to 61 jobs,
depending on the adopted standard
level. See section V.B.2.b of this
document for analysis of impacts on
direct employment.
Regarding the cost of importing heat
exchangers from foreign sources,
manufacturers provided feedback on the
current cost of imported heat
exchangers, which includes inbound
freight costs and tariffs, during
manufacturer interviews. DOE
incorporated this feedback into its
analysis when developing its MPCs,
and, thus, these impacts are accounted
for as a portion of the cost for purchased
parts. See section IV.C.2 of this
document for additional details on the
cost analysis and MPCs.
Crown, U.S. Boiler, and WMT
asserted that adoption of a condensing
standard, at a minimum, would strand
millions of dollars in assets, including
gas-fired hot water cast-iron section
patterns. (Crown, No. 30 at p. 16; U.S.
Boiler, No. 31 at p. 17; WMT, No. 32 at
p. 12)
In response, DOE incorporates the
estimated stranded assets (i.e., the
residual un-depreciated value of tooling
and equipment that would have enjoyed
longer use if amended energy
conservation standard had not made
them obsolete) for each analyzed
standard case into its model. In the
GRIM, the remaining book value of
existing tooling and equipment, the
value of which is affected by the
amended energy conservation
standards, acts as a tax shield that
mitigates decreases in cash flow from
operations in the year of the writedown. To estimate potential stranded
assets, DOE relied on manufacturer
feedback, SEC 10–K filings of relevant
consumer boiler OEMs, and results of
the engineering analysis. See chapter 12
of the NOPR TSD for additional details
on stranded assets.
WMT indicated that cumulative
regulatory burden is experienced from
rulemakings pertaining to consumer
boilers, commercial water heaters, small
electric motors, furnace fans, and others.
(WMT, No. 32 at p. 12) AHRI requested
that DOE evaluate the regulatory burden
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that will be placed on consumer as well
as manufacturers. (AHRI, No. 40 at p. 2)
Rheem stated that due to the
numerous products facing amended
standards, an overwhelming majority of
manufactures will face increased burden
in the coming years for product
redesigns and compliance. The
commenter urged DOE to place more
emphasis on identifying and mitigating
manufacturers burden when amending
energy conservation standards for water
heating, boilers, and pool heating
products and equipment. Rheem also
supported AHRI’s comments on
cumulative burden on consumers,
noting the increased financial burden
placed on them due to amended
standards (e.g., higher purchase prices,
higher repair rates). (Rheem, No. 37 at
p. 6)
In response, DOE notes that it
analyzes cumulative regulatory burden
pursuant to section 13(g) of appendix A.
See section V.B.2.e of this document for
a list of DOE regulations that affect
consumer boiler manufacturers that
could take effect approximately three
years before or after the expected 2030
compliance date of amended energy
conservation standards for consumer
boilers. At the time of publication, DOE
notes that amended energy conservation
standards have not been proposed for
furnace fans.136 Regarding small electric
motors, as detailed in the notice of
proposed determination published in
the Federal Register on February 6,
2023, DOE has tentatively determined
that more-stringent energy conservation
standards would not be cost-effective.
88 FR 7629. If DOE proposes or finalizes
any energy conservation standards for
these products prior to finalizing energy
conservation standards for consumer
boilers, DOE will include the energy
conservation standards for these other
products as part of its consideration of
cumulative regulatory burden for this
consumer boiler’s rulemaking.
Although DOE does not analyze the
cumulative burden on consumers,
section V.B.1.a of this document
discusses the economic impact of
amended standards on individual
consumers, which is the main impact
consumers will face with a finalized
energy conservation standards.
K. Emissions Analysis
The emissions analysis consists of
two components. The first component
estimates the effect of potential energy
conservation standards on power sector
and site (where applicable) combustion
136 See www1.eere.energy.gov/buildings/
appliance_standards/standards.aspx?productid=54
(Last accessed Jan. 3, 2023).
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emissions of CO2, NOX, SO2, and Hg.
The second component estimates the
impacts of potential standards on
emissions of two additional greenhouse
gases, CH4 and N2O, as well as the
reductions to emissions of other gases
due to ‘‘upstream’’ activities in the fuel
production chain. These upstream
activities comprise extraction,
processing, and transporting fuels to the
site of combustion.
The analysis of electric power sector
emissions of CO2, NOX, SO2, and Hg
uses emissions factors intended to
represent the marginal impacts of the
change in electricity consumption
associated with amended or new
standards. The methodology is based on
results published for the AEO, including
a set of side cases that implement a
variety of efficiency-related policies.
The methodology is described in
appendix 13A in the NOPR TSD. The
analysis presented in this document
uses projections from AEO 2023. Power
sector emissions of CH4 and N2O from
fuel combustion are estimated using
Emission Factors for Greenhouse Gas
Inventories published by the
Environmental Protection Agency
(EPA).137
The on-site operation of consumer
boilers requires combustion of fossil
fuels and results in emissions of CO2,
NOX, SO2 CH4 and N2O where these
products are used. Site emissions of
these gases were estimated using
Emission Factors for Greenhouse Gas
Inventories and, for NOX and SO2
emissions intensity factors from an EPA
publication.138
FFC upstream emissions, which
include emissions from fuel combustion
during extraction, processing, and
transportation of fuels, and ‘‘fugitive’’
emissions (direct leakage to the
atmosphere) of CH4 and CO2, are
estimated based on the methodology
described in chapter 15 of the NOPR
TSD.
The emissions intensity factors are
expressed in terms of physical units per
MWh or MMBtu of site energy savings.
For power sector emissions, specific
emissions intensity factors are
calculated by sector and end use. Total
emissions reductions are estimated
using the energy savings calculated in
the national impact analysis.
137 Available at www.epa.gov/system/files/
documents/2023–03/ghg_emission_factors_hub.pdf
(Last accessed May 3, 2023).
138 U.S. Environmental Protection Agency,
External Combustion Sources. In Compilation of Air
Pollutant Emission Factors. AP–42. Fifth Edition.
Volume I: Stationary Point and Area Sources.
Chapter 1. (Available at: www.epa.gov/ttn/chief/
ap42/) (Last accessed Jan. 3, 2023).
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1. Air Quality Regulations Incorporated
in DOE’s Analysis
DOE’s no-new-standards case for the
electric power sector reflects the AEO,
which incorporates the projected
impacts of existing air quality
regulations on emissions. AEO 2023
generally represents current legislation
and environmental regulations,
including recent government actions,
that were in place at the time of
preparation of AEO 2023, including the
emissions control programs discussed in
the following paragraphs.139
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 and the District of
Columbia (DC). (42 U.S.C. 7651 et seq.)
SO2 emissions from numerous States in
the eastern half of the United States are
also limited under the Cross-State Air
Pollution Rule (CSAPR). 76 FR 48208
(August 8, 2011). CSAPR requires these
States to reduce certain emissions,
including annual SO2 emissions, and
went into effect as of January 1, 2015.140
AEO 2023 incorporates implementation
of CSAPR, including the update to the
CSAPR ozone season program emission
budgets and target dates issued in 2016.
81 FR 74504 (Oct. 26, 2016).
Compliance with CSAPR is 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 an efficiency standard could
be used to permit offsetting increases in
SO2 emissions by another regulated
EGU.
However, beginning in 2016, SO2
emissions began to fall as a result of the
Mercury and Air Toxics Standards
139 For further information, see the Assumptions
to AEO 2023 report that sets forth the major
assumptions used to generate the projections in the
Annual Energy Outlook (Available at: www.eia.gov/
outlooks/aeo/assumptions/) (Last accessed May 3,
2023).
140 CSAPR requires States to address annual
emissions of SO2 and NOX, precursors to the
formation of fine particulate matter (PM2.5)
pollution, in order to address the interstate
transport of pollution with respect to the 1997 and
2006 PM2.5 National Ambient Air Quality Standards
(NAAQS). CSAPR also requires certain States to
address the ozone season (May–September)
emissions of NOX, a precursor to the formation of
ozone pollution, in order to address the interstate
transport of ozone pollution with respect to the
1997 ozone NAAQS. 76 FR 48208 (August 8, 2011).
EPA subsequently published a supplemental rule
that included an additional five States in the
CSAPR ozone season program (76 FR 80760 (Dec.
27, 2011)) (Supplemental Rule).
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(MATS) for power plants. 77 FR 9304
(Feb. 16, 2012). In the MATS final 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 are being reduced
as a result of the control technologies
installed on coal-fired power plants to
comply with the MATS requirements
for acid gas. In order to continue
operating, coal power plants must have
either flue gas desulfurization or dry
sorbent injection systems installed. Both
technologies, which are used to reduce
acid gas emissions, also reduce SO2
emissions. Because of the emissions
reductions under the MATS, it is
unlikely that excess SO2 emissions
allowances resulting from the lower
electricity demand would be needed or
used to permit offsetting increases in
SO2 emissions by another regulated
EGU. Therefore, energy conservation
standards that decrease electricity
generation would generally reduce SO2
emissions. DOE estimated SO2
emissions reduction using emissions
factors based on AEO 2023.
CSAPR also established limits on NOX
emissions for numerous States in the
eastern half of the United States. Energy
conservation standards would have
little effect on NOX emissions in those
States covered by CSAPR emissions
limits if excess NOX emissions
allowances resulting from the lower
electricity demand could be used to
permit offsetting increases in NOX
emissions from other EGUs. In such
case, NOX emissions would remain near
the limit even if electricity generation
goes down. A different case could
possibly result, depending on the
configuration of the power sector in the
different regions and the need for
allowances, such that NOX emissions
might not remain at the limit in the case
of lower electricity demand. In this case,
energy conservation standards might
reduce NOX emissions in covered
States. Despite this possibility, DOE has
chosen to be conservative in its analysis
and has maintained the assumption that
standards will not reduce NOX
emissions in States covered by CSAPR.
Energy conservation standards would be
expected to reduce NOX emissions in
the States not covered by CSAPR. DOE
used AEO 2023 data to derive NOX
emissions factors for the group of States
not covered by CSAPR.
The MATS limit mercury emissions
from power plants, but they do not
include emissions caps, and, as such,
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DOE’s energy conservation standards
would be expected to slightly reduce Hg
emissions. DOE estimated mercury
emissions reduction using emissions
factors based on AEO 2023, which
incorporates the MATS.
WMT expressed concern over the
reliance upon the emissions impact
analysis in the energy conservation
standards rulemaking due to its
potential to be controversial in light of
the Supreme Court ruling on West
Virginia v. EPA and the ‘‘major question
doctrine’’ cited therein. (WMT, No. 32 at
p. 2) In response, DOE maintains that
environmental and public health
benefits associated with the more
efficient use of energy are important to
take into account when considering the
need for national energy conservation,
which is required by EPCA. (42 U.S.C.
6295(o)(2)(B)(i)(VI)) In addition, DOE’s
emissions impact analysis is consistent
with its Procedures, Interpretations, and
Policies for Consideration in New or
Revised Energy Conservation Standards
and Test Procedures for Consumer
Products and Commercial/Industrial
Equipment.141 Furthermore, DOE
considers potential emissions and
related health benefits as a separate
analysis from the consumer,
manufacturer, and national impact
analyses. As discussed in section V.C of
this document, DOE’s proposed
standards are justified under EPCA even
without consideration of those
additional emissions and health
benefits.
L. Monetizing Emissions Impacts
As part of the development of this
proposed rule, for the purpose of
complying with the requirements of
Executive Order 12866, DOE considered
the estimated monetary benefits from
the reduced emissions of CO2, CH4,
N2O, NOX, and SO2 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 products
shipped in the projection period for
each TSL. This section summarizes the
basis for the values used for monetizing
the emissions benefits and presents the
values considered in this NOPR.
To monetize the benefits of reducing
GHG emissions, this analysis uses the
interim estimates presented in the
Technical Support Document: Social
Cost of Carbon, Methane, and Nitrous
Oxide Interim Estimates Under
141 See www.regulations.gov/document/EERE2021-BT-STD-0003-0075.
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Executive Order 13990 published in
February 2021 by the IWG.
1. Monetization of Greenhouse Gas
Emissions
DOE estimates the monetized benefits
of the reductions in emissions of CO2,
CH4, and N2O by using a measure of the
social cost (SC) of each pollutant (e.g.,
SC–CO2). These estimates represent the
monetary value of the net harm to
society associated with a marginal
increase in emissions of these pollutants
in a given year, or the benefit of
avoiding that increase. These estimates
are intended to include (but are not
limited to) climate-change-related
changes in net agricultural productivity,
human health, property damages from
increased flood risk, disruption of
energy systems, risk of conflict,
environmental migration, and the value
of ecosystem services.
DOE exercises its own judgment in
presenting monetized climate benefits
as recommended by applicable
Executive orders, and DOE would reach
the same conclusion presented in this
proposed rulemaking in the absence of
the social cost of greenhouse gases. That
is, the social costs of greenhouse gases,
whether measured using the February
2021 interim estimates presented by the
Interagency Working Group on the
Social Cost of Greenhouse Gases or by
another means, did not affect the rule
ultimately proposed by DOE.
DOE estimated the global social
benefits of CO2, CH4, and N2O
reductions using SC–GHG values that
were based on the interim values
presented in the Technical Support
Document: Social Cost of Carbon,
Methane, and Nitrous Oxide Interim
Estimates under Executive Order 13990,
published in February 2021 by the IWG.
The SC–GHGs is the monetary value of
the net harm to society associated with
a marginal increase in emissions in a
given year, or the benefit of avoiding
that increase. In principle, SC–GHGs
includes the value of all climate change
impacts, including (but not limited to)
changes in net agricultural productivity,
human health effects, property damage
from increased flood risk and natural
disasters, disruption of energy systems,
risk of conflict, environmental
migration, and the value of ecosystem
services. The SC–GHGs, therefore,
reflects the societal value of reducing
emissions of the gas in question by one
metric ton. The SC–GHGs is the
theoretically appropriate value to use in
conducting benefit-cost analyses of
policies that affect CO2, N2O, and CH4
emissions. As a member of the IWG
involved in the development of the
February 2021 SC–GHG TSD, DOE
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agrees that the interim SC–GHG
estimates represent the most appropriate
estimate of the SC–GHG until revised
estimates have been developed
reflecting the latest, peer-reviewed
science.
The SC–GHG estimates presented
here were developed over many years,
using transparent process, peerreviewed methodologies, the best
science available at the time of that
process, and with input from the public.
Specifically, in 2009, the IWG, that
included the DOE and other Executive
Branch agencies and offices, was
established to ensure that agencies were
using the best available science and to
promote consistency in the social cost of
carbon (SC–CO2) values used across
agencies. The IWG published SC–CO2
estimates in 2010 that were developed
from an ensemble of three widely cited
integrated assessment models (IAMs)
that estimate global climate damages
using highly aggregated representations
of climate processes and the global
economy combined into a single
modeling framework. The three IAMs
were run using a common set of input
assumptions in each model for future
population, economic, and CO2
emissions growth, as well as
equilibrium climate sensitivity—a
measure of the globally averaged
temperature response to increased
atmospheric CO2 concentrations. These
estimates were updated in 2013 based
on new versions of each IAM. In August
2016, the IWG published estimates of
the social cost of methane (SC–CH4) and
nitrous oxide (SC–N2O) using
methodologies that are consistent with
the methodology underlying the SC–
CO2 estimates. The modeling approach
that extends the IWG SC–CO2
methodology to non-CO2 GHGs has
undergone multiple stages of peer
review. The SC–CH4 and SC–N2O
estimates were developed by Marten et
al.142 and underwent a standard doubleblind peer review process prior to
journal publication. In 2015, as part of
the response to public comments
received to a 2013 solicitation for
comments on the SC–CO2 estimates, the
IWG announced a National Academies
of Sciences, Engineering, and Medicine
review of the SC–CO2 estimates to offer
advice on how to approach future
updates to ensure that the estimates
continue to reflect the best available
science and methodologies. In January
2017, the National Academies released
their final report, ‘‘Valuing Climate
Damages: Updating Estimation of the
Social Cost of Carbon Dioxide,’’ and
recommended specific criteria for future
updates to the SC–CO2 estimates, a
modeling framework to satisfy the
specified criteria, and both near-term
updates and longer-term research needs
pertaining to various components of the
estimation process (National
Academies, 2017).143 Shortly thereafter,
in March 2017, President Trump issued
Executive Order 13783, which
disbanded the IWG, withdrew the
previous TSDs, and directed agencies to
ensure SC–CO2 estimates used in
regulatory analyses are consistent with
the guidance contained in OMB’s
Circular A–4, ‘‘including with respect to
the consideration of domestic versus
international impacts and the
consideration of appropriate discount
rates’’ (E.O. 13783, Section 5(c)).
Benefit-cost analyses following E.O.
13783 used SC–GHG estimates that
attempted to focus on the U.S.-specific
share of climate change damages as
estimated by the models and were
calculated using two discount rates
recommended by Circular A–4, 3
percent and 7 percent. All other
methodological decisions and model
versions used in SC–GHG calculations
remained the same as those used by the
IWG in 2010 and 2013, respectively.
On January 20, 2021, President Biden
issued Executive Order 13990, which reestablished the IWG and directed it to
ensure that the U.S. Government’s
estimates of the social cost of carbon
and other greenhouse gases reflect the
best available science and the
recommendations of the National
Academies (2017). The IWG was tasked
with first reviewing the SC–GHG
estimates currently used in Federal
analyses and publishing interim
estimates within 30 days of the E.O. that
reflect the full impact of GHG
emissions, including by taking global
damages into account. The interim SC–
GHG estimates published in February
2021 are used here to estimate the
climate benefits for this proposed
rulemaking. The E.O. instructs the IWG
to undertake a fuller update of the SC–
GHG estimates by January 2022 that
takes into consideration the advice of
the National Academies (2017) and
other recent scientific literature. The
February 2021 SC–GHG TSD provides a
complete discussion of the IWG’s initial
review conducted under E.O. 13990. In
142 Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C.
Newbold, and A. Wolverton, Incremental CH4 and
N2O mitigation benefits consistent with the U.S.
Government’s SC–CO2 estimates. Climate Policy
(2015) 15(2): pp. 272–298.
143 National Academies of Sciences, Engineering,
and Medicine. Valuing Climate Damages: Updating
Estimation of the Social Cost of Carbon Dioxide
(2017) The National Academies Press: Washington,
DC.
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particular, the IWG found that the SC–
GHG estimates used under E.O. 13783
fail to reflect the full impact of GHG
emissions in multiple ways.
First, the IWG found that the SC–GHG
estimates used under E.O. 13783 fail to
fully capture many climate impacts that
affect the welfare of U.S. citizens and
residents, and those impacts are better
reflected by global measures of the SC–
GHG. Examples of omitted effects from
the E.O. 13783 estimates include direct
effects on U.S. citizens, assets, and
investments located abroad, supply
chains, U.S. military assets and interests
abroad, and tourism, as well as spillover
pathways such as economic and
political destabilization and global
migration that can lead to adverse
impacts on U.S. national security,
public health, and humanitarian
concerns. In addition, assessing the
benefits of U.S. GHG mitigation
activities requires consideration of how
those actions may affect mitigation
activities by other countries, as those
international mitigation actions will
provide a benefit to U.S. citizens and
residents by mitigating climate impacts
that affect U.S. citizens and residents. A
wide range of scientific and economic
experts have emphasized the issue of
reciprocity as support for considering
global damages of GHG emissions. If the
United States does not consider impacts
on other countries, it is difficult to
convince other countries to consider the
impacts of their emissions on the United
States. The only way to achieve an
efficient allocation of resources for
emissions reduction on a global basis—
and so benefit the U.S. and its citizens—
is for all countries to base their policies
on global estimates of damages. As a
member of the IWG involved in the
development of the February 2021 SC–
GHG TSD, DOE agrees with this
assessment, and, therefore, in this
proposed rule, DOE centers attention on
a global measure of SC–GHG. This
approach is the same as that taken in
DOE regulatory analyses from 2012
through 2016. A robust estimate of
climate damages that accrue only to U.S.
citizens and residents does not currently
exist in the literature. As explained in
the February 2021 TSD, existing
estimates are both incomplete and an
underestimate of total damages that
accrue to the citizens and residents of
the U.S. because they do not fully
capture the regional interactions and
spillovers discussed above, nor do they
include all of the important physical,
ecological, and economic impacts of
climate change recognized in the
climate change literature. As noted in
the February 2021 SC–GHG TSD, the
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IWG will continue to review
developments in the literature,
including more robust methodologies
for estimating a U.S.-specific SC–GHG
value, and explore ways to better inform
the public of the full range of carbon
impacts. As a member of the IWG, DOE
will continue to follow developments in
the literature pertaining to this issue.
Second, the IWG found that the use of
the social rate of return on capital (7
percent under current OMB Circular A–
4 guidance) to discount the future
benefits of reducing GHG emissions
inappropriately underestimates the
impacts of climate change for the
purposes of estimating the SC–GHG.
Consistent with the findings of the
National Academies (2017) and the
economic literature, the IWG continued
to conclude that the consumption rate of
interest is the theoretically appropriate
discount rate in an intergenerational
context,144 and recommended that
discount rate uncertainty and relevant
aspects of intergenerational ethical
considerations be accounted for in
selecting future discount rates.
Furthermore, the damage estimates
developed for use in the SC–GHG are
estimated in consumption-equivalent
terms, and so an application of OMB
Circular A–4’s guidance for regulatory
analysis would then use the
consumption discount rate to calculate
the SC–GHG. DOE agrees with this
assessment and will continue to follow
developments in the literature
pertaining to this issue. DOE also notes
that while OMB Circular A–4, as
published in 2003, recommends using
3-percent and 7-percent discount rates
144 Interagency Working Group on Social Cost of
Carbon, Social Cost of Carbon for Regulatory Impact
Analysis under Executive Order 12866 (2010)
United States Government (Last accessed Jan. 3,
2023) (Available at: www.epa.gov/sites/default/
files/2016-12/documents/scc_tsd_2010.pdf);
Interagency Working Group on Social Cost of
Carbon. Technical Update of the Social Cost of
Carbon for Regulatory Impact Analysis Under
Executive Order 12866 (2013) (Last accessed April
15, 2022) (Available at: www.federalregister.gov/
documents/2013/11/26/2013-28242/technicalsupport-document-technical-update-of-the-socialcost-of-carbon-for-regulatory-impact); Interagency
Working Group on Social Cost of Greenhouse Gases,
United States Government. Technical Support
Document: Technical Update on the Social Cost of
Carbon for Regulatory Impact Analysis-Under
Executive Order 12866 (August 2016) (Last accessed
Jan. 3, 2023) (Available at: www.epa.gov/sites/
default/files/2016-12/documents/sc_co2_tsd_
august_2016.pdf); Interagency Working Group on
Social Cost of Greenhouse Gases, United States
Government. Addendum to Technical Support
Document on Social Cost of Carbon for Regulatory
Impact Analysis under Executive Order 12866:
Application of the Methodology to Estimate the
Social Cost of Methane and the Social Cost of
Nitrous Oxide (August 2016) (Available at:
www.epa.gov/sites/default/files/2016-12/
documents/addendum_to_sc-ghg_tsd_august_
2016.pdf) (Last accessed Jan. 3, 2023).
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as ‘‘default’’ values, Circular A–4 also
reminds agencies that ‘‘different
regulations may call for different
emphases in the analysis, depending on
the nature and complexity of the
regulatory issues and the sensitivity of
the benefit and cost estimates to the key
assumptions.’’ On discounting, Circular
A–4 recognizes that ‘‘special ethical
considerations arise when comparing
benefits and costs across generations,’’
and Circular A–4 acknowledges that
analyses may appropriately ‘‘discount
future costs and consumption benefits
. . . at a lower rate than for
intragenerational analysis.’’ In the 2015
Response to Comments on the Social
Cost of Carbon for Regulatory Impact
Analysis, OMB, DOE, and the other IWG
members recognized that ‘‘Circular A–4
is a living document’’ and ‘‘the use of
7 percent is not considered appropriate
for intergenerational discounting. There
is wide support for this view in the
academic literature, and it is recognized
in Circular A–4 itself.’’ Thus, DOE
concludes that a 7-percent discount rate
is not appropriate to apply to value the
social cost of greenhouse gases in the
analysis presented in this analysis.
To calculate the present and
annualized values of climate benefits,
DOE uses the same discount rate as the
rate used to discount the value of
damages from future GHG emissions, for
internal consistency. That approach to
discounting follows the same approach
that the February 2021 TSD
recommends ‘‘to ensure internal
consistency—i.e., future damages from
climate change using the SC–GHG at 2.5
percent should be discounted to the
base year of the analysis using the same
2.5 percent rate.’’ DOE has also
consulted the National Academies’ 2017
recommendations on how SC–GHG
estimates can ‘‘be combined in RIAs
with other cost and benefits estimates
that may use different discount rates.’’
The National Academies reviewed
‘‘several options,’’ including
‘‘presenting all discount rate
combinations of other costs and benefits
with [SC–GHG] estimates.’’
As a member of the IWG involved in
the development of the February 2021
SC–GHG TSD, DOE agrees with this
assessment and will continue to follow
developments in the literature
pertaining to this issue. While the IWG
works to assess how best to incorporate
the latest, peer reviewed science to
develop an updated set of SC–GHG
estimates, it set the interim estimates to
be the most recent estimates developed
by the IWG prior to the group being
disbanded in 2017. The estimates rely
on the same models and harmonized
inputs and are calculated using a range
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of discount rates. As explained in the
February 2021 SC–GHG TSD, the IWG
has recommended that agencies revert
to the same set of four values drawn
from the SC–GHG distributions based
on three discount rates as were used in
regulatory analyses between 2010 and
2016 and were subject to public
comment. For each discount rate, the
IWG combined the distributions across
models and socioeconomic emissions
scenarios (applying equal weight to
each) and then selected a set of four
values recommended for use in benefitcost analyses: an average value resulting
from the model runs for each of three
discount rates (2.5 percent, 3 percent,
and 5 percent), plus a fourth value,
selected as the 95th percentile of
estimates based on a 3-percent discount
rate. The fourth value was included to
provide information on potentially
higher-than-expected economic impacts
from climate change. As explained in
the February 2021 SC–GHG TSD, and
DOE agrees, this update reflects the
immediate need to have an operational
SC–GHG for use in regulatory benefitcost analyses and other applications that
was developed using a transparent
process, peer-reviewed methodologies,
and the science available at the time of
that process. Those estimates were
subject to public comment in the
context of dozens of proposed
rulemakings, as well as in a dedicated
public comment period in 2013.
There are a number of limitations and
uncertainties associated with the SC–
GHG estimates. First, the current
scientific and economic understanding
of discounting approaches suggests
discount rates appropriate for
intergenerational analysis in the context
of climate change are likely to be less
than 3 percent, near 2 percent or
lower.145 Second, the IAMs used to
produce these interim estimates do not
include all of the important physical,
ecological, and economic impacts of
climate change recognized in the
climate change literature and the
science underlying their ‘‘damage
functions’’—i.e., the core parts of the
IAMs that map global mean temperature
changes and other physical impacts of
climate change into economic (both
market and nonmarket) damages—lags
behind the most recent research. For
example, limitations include the
145 Interagency Working Group on Social Cost of
Greenhouse Gases (IWG) (2021) Technical Support
Document: Social Cost of Carbon, Methane, and
Nitrous Oxide Interim Estimates under Executive
Order 13990. February. United States Government.
(Available at www.whitehouse.gov/briefing-room/
blog/2021/02/26/a-return-to-science-evidencebased-estimates-of-the-benefits-of-reducing-climatepollution/) (Last accessed Jan. 3, 2023).
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incomplete treatment of catastrophic
and non-catastrophic impacts in the
integrated assessment models, their
incomplete treatment of adaptation and
technological change, the incomplete
way in which inter-regional and
intersectoral linkages are modeled,
uncertainty in the extrapolation of
damages to high temperatures, and
inadequate representation of the
relationship between the discount rate
and uncertainty in economic growth
over long time horizons. Likewise, the
socioeconomic and emissions scenarios
used as inputs to the models do not
reflect new information from the last
decade of scenario generation or the full
range of projections. The modeling
limitations do not all work in the same
direction in terms of their influence on
the SC–CO2 estimates. However, as
discussed in the February 2021 TSD, the
IWG has recommended that, taken
together, the limitations suggest that the
interim SC–GHG estimates used in this
proposed rule likely underestimate the
damages from GHG emissions. DOE
concurs with this assessment.
DOE’s derivations of the SC–GHG
(i.e., SC–CO2, SC–N2O, and SC–CH4)
values used for this NOPR are discussed
in the following sections, and the results
of DOE’s analyses estimating the
benefits of the reductions in emissions
of these GHGs are presented in section
V.B.8 of this document.
a. Social Cost of Carbon
The SC–CO2 values used for this
NOPR were based on the values
developed for the IWG’s February 2021
TSD, which are shown in Table IV.4 in
five-year increments from 2020 to 2050.
The set of annual values that DOE used,
which was adapted from estimates
published by EPA,146 is presented in
Appendix 14–A of the NOPR TSD.
These estimates are based on methods,
assumptions, and parameters identical
to the estimates published by the IWG
(which were based on EPA modeling),
and include values for 2051 to 2070.
DOE expects additional climate benefits
to accrue for products still operating
after 2070, but a lack of available SC–
CO2 estimates for emissions years
beyond 2070 prevents DOE from
monetizing these potential benefits in
this analysis.
For purposes of capturing the
uncertainties involved in regulatory
impact analysis, DOE has determined it
is appropriate include all four sets of
SC–CO2 values, as recommended by the
IWG.147
TABLE IV.12—ANNUAL SC–CO2 VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050
[2020$ per metric ton CO2]
Discount rate and statistic
Year
2020
2025
2030
2035
2040
2045
2050
5%
3%
2.5%
3%
Average
Average
Average
95th percentile
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
DOE multiplied the CO2 emissions
reduction estimated for each year by the
SC–CO2 value for that year in each of
the four cases. DOE adjusted the values
to 2022$ using the implicit price
deflator for gross domestic product
(GDP) from the Bureau of Economic
Analysis. 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
14
17
19
22
25
28
32
51
56
62
67
73
79
85
rate that had been used to obtain the
SC–CO2 values in each case.
b. Social Cost of Methane and Nitrous
Oxide
The SC–CH4 and SC–N2O values used
for this NOPR were based on the values
developed for the February 2021 TSD.
Table IV.13 shows the updated sets of
SC–CH4 and SC–N2O estimates from the
latest interagency update in 5-year
76
83
89
96
103
110
116
152
169
187
206
225
242
260
increments from 2020 to 2050. The full
set of annual values used is presented
in appendix 14–A of the NOPR TSD. To
capture the uncertainties involved in
regulatory impact analysis, DOE has
determined it is appropriate to include
all four sets of SC–CH4 and SC–N2O
values, as recommended by the IWG.
DOE derived values after 2050 using the
approach described above for the SC–
CO2.
TABLE IV.13—ANNUAL SC–CH4 AND SC–N2O VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050
[2020$ per metric ton]
SC–CH4
SC–N2O
Discount rate and statistic
Discount rate and statistic
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Year
2020
2025
2030
2035
2040
5%
3%
2.5%
3%
5%
3%
2.5%
3%
Average
Average
Average
95th percentile
Average
Average
Average
95th percentile
..................................
..................................
..................................
..................................
..................................
670
800
940
1,100
1,300
1,500
1,700
2,000
2,200
2,500
146 See EPA, Revised 2023 and Later Model Year
Light-Duty Vehicle GHG Emissions Standards:
Regulatory Impact Analysis, Washington, DC,
December 2021. Available at nepis.epa.gov/Exe/
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2,000
2,200
2,500
2,800
3,100
3,900
4,500
5,200
6,000
6,700
5,800
6,800
7,800
9,000
10,000
ZyPDF.cgi?Dockey=P1013ORN.pdf (last accessed
February 21, 2023).
147 For example, the February 2021 TSD discusses
how the understanding of discounting approaches
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21,000
23,000
25,000
28,000
27,000
30,000
33,000
36,000
39,000
48,000
54,000
60,000
67,000
74,000
suggests that discount rates appropriate for
intergenerational analysis in the context of climate
change may be lower than 3 percent.
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55183
TABLE IV.13—ANNUAL SC–CH4 AND SC–N2O VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050—Continued
[2020$ per metric ton]
SC–N2O
SC–CH4
Discount rate and statistic
Discount rate and statistic
Year
5%
3%
2.5%
3%
5%
3%
2.5%
3%
Average
Average
Average
95th percentile
Average
Average
Average
95th percentile
2045 ..................................
2050 ..................................
1,500
1,700
2,800
3,100
DOE multiplied the CH4 and N2O
emissions reduction estimated for each
year by the SC–CH4 and SC–N2O
estimates for that year in each of the
cases. DOE adjusted the values to 2022$
using the implicit price deflator for
gross domestic product (GDP) from the
Bureau of Economic Analysis. To
calculate a present value of the stream
of monetary values, DOE discounted the
values in each of the cases using the
specific discount rate that had been
used to obtain the SC–CH4 and SC–N2O
estimates in each case.
ddrumheller on DSK120RN23PROD with PROPOSALS2
2. Monetization of Other Emissions
Impacts
For the NOPR, DOE estimated the
monetized value of NOX and SO2
emissions reductions from electricity
generation using the latest benefit-perton estimates for that sector from the
EPA’s Benefits Mapping and Analysis
Program.148 DOE used EPA’s values for
PM2.5-related benefits associated with
NOX and SO2 and for ozone-related
benefits associated with NOX for 2025,
2030, and 2040, calculated with
discount rates of 3 percent and 7
percent. DOE used linear interpolation
to define values for the years not given
in the 2025 to 2040 period; for years
beyond 2040, the values are held
constant. DOE combined the EPA
regional benefit per ton estimates with
regional information on electricity
consumption and emissions from AEO
2023 to define weighted-average
national values for NOX and SO2 (see
appendix 14B of the NOPR TSD).
DOE also estimated the monetized
value of NOX and SO2 emissions
reductions from site use of natural gas
in consumer boilers using benefit-perton estimates from the EPA’s Benefits
Mapping and Analysis Program.149
148 Estimating the Benefit per Ton of Reducing
PM2.5 Precursors from 17 Sectors, February 2018
(Available at www.epa.gov/benmap/estimatingbenefit-ton-reducing-directly-emitted-pm25-pm25precursors-and-ozone-precursors) (Last accessed
May 3, 2023).
149 Estimating the Benefit per Ton of Reducing
PM2.5 and Ozone Precursors from 21 Sectors, April
2023 (Available at www.epa.gov/benmap/
estimating-benefit-ton-reducing-directly-emitted-
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3,500
3,800
7,500
8,200
12,000
13,000
30,000
33,000
42,000
45,000
81,000
88,000
Although none of the sectors covered by
EPA refers specifically to residential
and commercial buildings, the sector
called ‘‘area sources’’ would be a
reasonable proxy for residential and
commercial buildings.150 The EPA
document provides high and low
estimates for 2025 and 2030 at 3- and 7percent discount rates.151 DOE used the
same linear interpolation and
extrapolation as it did with the values
for electricity generation.
DOE multiplied the site emissions
reduction (in tons) in each year by the
associated $/ton values, and then
discounted each series using discount
rates of 3 percent and 7 percent as
appropriate.
due to a unit reduction in demand for
a given end use. These coefficients are
multiplied by the stream of electricity
savings calculated in the NIA to provide
estimates of selected utility impacts of
potential new or amended energy
conservation standards.
DOE notes that the utility impact
analysis as applied to electric utilities
only estimates the change to capacity
and generation as a result of a standard,
as modeled in NEMS, and there is no
gas utility analog. DOE further notes
that the impact to natural gas utility
sales is equivalent to the natural gas
saved by the proposed standard and
includes those results in chapter 15 of
the NOPR TSD
M. Utility Impact Analysis
The utility impact analysis estimates
the changes in installed electrical
capacity and generation projected to
result for each considered TSL. The
analysis is based on published output
from the NEMS associated with AEO
2023. NEMS produces the AEO
Reference case, as well as a number of
side cases, that estimate the economywide impacts of changes to energy
supply and demand. For the current
analysis, impacts are quantified by
comparing the levels of electricity sector
generation, installed capacity, fuel
consumption, and emissions in the AEO
2023 Reference case and various side
cases. Details of the methodology are
provided in the appendices to chapters
13 and 15 of the NOPR TSD.
The output of this analysis is a set of
time-dependent coefficients that capture
the change in electricity generation,
primary fuel consumption, installed
capacity, and power sector emissions
N. Employment Impact Analysis
DOE considers employment impacts
in the domestic economy as one factor
in selecting a proposed standard.
Employment impacts from new or
amended energy conservation standards
include both 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 net jobs created
or eliminated in the national economy,
other than in the manufacturing sector
being regulated, caused by: (1) reduced
spending by consumers on energy; (2)
reduced spending on new energy supply
by the utility industry; (3) increased
consumer spending on the products to
which the new standards apply and
other goods and services, 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
pm25-pm25-precursors-and-ozone-precursors) (Last
accessed May 3, 2023).
150 ‘‘Area sources’’ represents all emission sources
for which States do not have exact (point) locations
in their emissions inventories. Because exact
locations would tend to be associated with larger
sources, ‘‘area sources’’ would be fairly
representative of small, dispersed sources like
homes and businesses.
151 ‘‘Area sources’’ are a category in the 2018
document from EPA, but are not used in the latest
document cited above. See: www.epa.gov/sites/
default/files/2018-02/documents/
sourceapportionmentbpttsd_2018.pdf.
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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.152 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, the BLS data
suggest that net national employment
may increase due to shifts in economic
activity resulting from energy
conservation standards.
DOE estimated indirect national
employment impacts for the standard
levels considered in this NOPR using an
input/output model of the U.S. economy
called Impact of Sector Energy
Technologies version 4 (ImSET).153
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 187
sectors most relevant to industrial,
commercial, and residential building
energy use.
DOE notes that ImSET is not a general
equilibrium forecasting model, and that
there are uncertainties involved in
projecting employment impacts,
especially changes in the later years of
the analysis. Because ImSET does not
incorporate price changes, the
employment effects predicted by ImSET
may over-estimate actual job impacts
over the long run for this rule.
Therefore, DOE used ImSET only to
generate results for near-term
timeframes (2030–2035), where these
uncertainties are reduced. For more
details on the employment impact
analysis, see chapter 16 of the NOPR
TSD.
V. Analytical Results and Conclusions
The following section addresses the
results from DOE’s analyses with
respect to the considered energy
conservation standards for consumer
boilers. It addresses the TSLs examined
by DOE, the projected impacts of each
of these levels if adopted as energy
conservation standards for consumer
boilers, and the standards levels that
DOE is proposing to adopt in this
NOPR. Additional details regarding
DOE’s analyses are contained in the
NOPR TSD supporting this document.
A. Trial Standard Levels
In general, DOE typically evaluates
potential new or amended standards for
products and equipment by grouping
individual efficiency levels for each
class into TSLs. Use of TSLs allows DOE
to identify and consider manufacturer
cost interactions between the product
classes, to the extent that there are such
interactions, and market cross-elasticity
from consumer purchasing decisions
that may change when different
standard levels are set.
In the analysis conducted for this
NOPR, DOE analyzed the benefits and
burdens of four TSLs for consumer
boilers. DOE developed TSLs that
combine efficiency levels for each
analyzed product class. DOE presents
the results for the TSLs in this
document, while the results for all
efficiency levels that DOE analyzed are
in the NOPR TSD.
Table V.1 presents the TSLs and the
corresponding efficiency levels that
DOE has identified for potential
amended energy conservation standards
for consumer boilers. TSL 4 represents
the maximum technologically feasible
(‘‘max-tech’’) energy efficiency for all
product classes. TSL 3 represents the
max-tech energy efficiency for oil-fired
hot water and steam boilers, condensing
technology for gas-fired hot water
boilers (but not max-tech), and baseline
energy efficiency for gas-fired steam
boilers. TSL 3 represents the highest
efficiency level for each product class
with a positive NPV at both 3 percent
and 7 percent discount rate. TSL 2
represents baseline energy efficiency for
gas-fired and oil-fired steam boilers and
an intermediate energy efficiency for
gas-fired and oil-fired hot water boilers.
At TSL 2, gas-fired hot water boilers still
require condensing technology. TSL 1
represents baseline energy efficiency for
gas-fired and oil-fired steam boilers and
the minimum improvement in energy
efficiency for gas-fired and oil-fired hot
water boilers.
TABLE V.1—TRIAL STANDARD LEVELS FOR CONSUMER BOILERS
Trial standard level
Product class
1
2
3
4
Efficiency level
ddrumheller on DSK120RN23PROD with PROPOSALS2
Gas-fired Hot Water .........................................................................................
Gas-fired Steam ...............................................................................................
Oil-fired Hot Water ...........................................................................................
Oil-fired Steam .................................................................................................
1
Baseline
1
Baseline
2
Baseline
1
Baseline
3
Baseline
2
1
4
1
2
1
DOE constructed the TSLs for this
NOPR to include ELs representative of
ELs with similar characteristics (i.e.,
using similar technologies and/or
efficiencies, and having roughly
comparable equipment availability). The
use of representative ELs provided for
greater distinction between the TSLs.
While representative ELs were included
in the TSLs, DOE considered all
efficiency levels as part of its
analysis.154
152 See U.S. Department of Commerce–Bureau of
Economic Analysis, Regional Multipliers: A User
Handbook for the Regional Input-Output Modeling
System (RIMS II) (1997) U.S. Government Printing
Office: Washington, DC (Available at:
searchworks.stanford.edu/view/8436340) (Last
accessed Jan. 3, 2023).
153 Livingston, O.V., S.R. Bender, M.J. Scott, and
R.W. Schultz, ImSET 4.0: Impact of Sector Energy
Technologies Model Description and User Guide
(2015) Pacific Northwest National Laboratory:
Richland, WA. PNNL–24563.
154 Efficiency levels that were analyzed for this
NOPR are discussed in section IV.C.1 of this
document. Results by efficiency level are presented
in chapters 8, 10, and 12 of the NOPR TSD.
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B. Economic Justification and Energy
Savings
1. Economic Impacts on Individual
Consumers
DOE analyzed the economic impacts
on consumer boiler consumers by
looking at the effects that potential
amended standards at each TSL would
have on the LCC and PBP. DOE also
examined the impacts of potential
standards on selected consumer
subgroups. These analyses are discussed
in the following sections.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency products
affect consumers in two ways: (1)
purchase price increases and (2) annual
operating costs decrease. Inputs used for
calculating the LCC and PBP include
total installed costs (i.e., product price
plus installation costs), and operating
costs (i.e., annual energy use, energy
prices, energy price trends, repair costs,
and maintenance costs). The LCC
calculation also uses product lifetime
and a discount rate. Chapter 8 of the
NOPR TSD provides detailed
information on the LCC and PBP
analyses.
Table V.2 through Table V.9 show the
LCC and PBP results for the TSLs
considered for each product class. In the
first of each pair of tables, the simple
payback is measured relative to the
baseline product. In the second table,
55185
impacts are measured relative to the
efficiency distribution in the no-newstandards case in the compliance year
(see section IV.F.8 of this document).
Because some consumers purchase
products with higher efficiency in the
no-new-standards case, the average
savings are less than the difference
between the average LCC of the baseline
product and the average LCC at each
TSL. The savings refer only to
consumers who are affected by a
standard at a given TSL. Those who
already purchase a product with
efficiency at or above a given TSL are
not affected. Consumers for whom the
LCC increases at a given TSL experience
a net cost.
TABLE V.2—AVERAGE LCC AND PBP RESULTS FOR GAS-FIRED HOT WATER BOILERS
Average costs (2022$)
Efficiency
level
TSL
................................................................
1 .............................................................
2 .............................................................
3 .............................................................
4 .............................................................
Installed
cost
Baseline .......
1 ...................
2 ...................
3 ...................
4 ...................
6,214
6,483
6,482
6,543
7,506
First year’s
operating
cost
1,344
1,335
1,265
1,221
1,214
Lifetime
operating
cost
Simple
payback
(years)
LCC
22,808
22,659
21,676
20,956
20,842
29,023
29,141
28,159
27,499
28,348
Average
lifetime
(years)
....................
29.2
3.4
2.7
9.9
26.9
26.9
26.9
26.9
26.9
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative
to the baseline product.
TABLE V.3—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR GAS-FIRED HOT WATER
BOILERS
Life-cycle cost savings
TSL
1
2
3
4
Efficiency level
.......................................................................................................
.......................................................................................................
.......................................................................................................
.......................................................................................................
Average LCC savings *
(2022$)
1
2
3
4
Percentage of consumers that
experience net cost
(193)
275
768
(526)
11
13
11
78
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative (¥) values.
TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR GAS-FIRED STEAM BOILERS
Average costs
(2022$)
Efficiency
level
ddrumheller on DSK120RN23PROD with PROPOSALS2
TSL
1,2,3 .......................................................
4 .............................................................
Installed
cost
Baseline .......
1 ...................
6,008
6,192
First year’s
operating
cost
1,078
1,069
Lifetime
operating
cost
16,872
16,738
LCC
22,881
22,930
Simple
payback
(years)
....................
20.4
Average
lifetime
(years)
23.7
23.7
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative
to the baseline product.
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TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR GAS-FIRED STEAM BOILERS
Life-cycle cost savings
TSL
Efficiency level
Average LCC savings *
(2022$)
Percentage of consumers that
experience net cost
4 .......................................................................................................
1
(53)
56
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative (¥) values.
TABLE V.6—AVERAGE LCC AND PBP RESULTS FOR OIL-FIRED HOT WATER BOILERS
Average Costs (2022$)
Efficiency
level
TSL
1,2 ..........................................................
3,4 ..........................................................
Installed
cost
Baseline .......
1 ...................
2 ...................
First year’s
operating
cost
6,945
7,042
7,137
Lifetime
operating
cost
2,783
2,753
2,724
Simple
payback
(years)
LCC
44,601
44,129
43,667
51,546
51,171
50,804
Average
lifetime
(years)
....................
3.3
3.3
25.6
25.6
25.6
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative
to the baseline product.
TABLE V.7—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR OIL-FIRED HOT WATER BOILERS
Life-cycle cost savings
TSL
Efficiency level
1,2 ....................................................................................................
3,4 ....................................................................................................
Average LCC savings *
(2022$)
1
2
Percentage of consumers that
experience net cost
374
666
4
4
* The savings represent the average LCC for affected consumers.
TABLE V.8—AVERAGE LCC AND PBP RESULTS FOR OIL-FIRED STEAM BOILERS
Average Costs
(2022$)
TSL
1,2 ....................
3,4 ....................
Baseline ...........
1 .......................
Average
lifetime
(years)
Simple payback
(years)
Efficiency level
Installed cost
First year’s
operating cost
Lifetime
operating cost
LCC
6,977 ................
7,202 ................
2,726 ................
2,685 ................
36,398 ..............
35,860 ..............
43,374 ..............
43,062 ..............
— .....................
5.5 ....................
19.6
19.6
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative
to the baseline product.
TABLE V.9—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR OIL-FIRED STEAM BOILERS
Life-cycle cost savings
TSL
Efficiency level
Average LCC savings *
(2022$)
Percentage of consumers that
experience net cost
3,4 ....................................................................................................
1
310
14
* The savings represent the average LCC for affected consumers.
ddrumheller on DSK120RN23PROD with PROPOSALS2
b. Consumer Subgroup Analysis
In the consumer subgroup analysis,
DOE estimated the impact of the
considered TSLs on low-income
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households, senior-only households,
and small business. Table V.10 through
Table V.13 compares the average LCC
savings and PBP at each efficiency level
for the consumer subgroups with similar
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metrics for the entire consumer sample
for each product class of consumer
boilers. Chapter 11 of the NOPR TSD
presents the complete LCC and PBP
results for the subgroups.
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TABLE V.10—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS; GAS-FIRED
HOT WATER BOILERS
Low-income
households
TSL
Senior-only
households
Small
businesses
All
households
Average LCC Savings (2022$)
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
(100)
326
643
(161)
(267)
190
545
(559)
(34)
530
777
(541)
(193)
275
768
(526)
29.1
0.8
0.9
7.4
41.5
1.5
1.6
11.5
12.8
1.6
1.4
4.4
29.2
3.4
2.7
9.9
11
13
21
31
9
14
25
18
5
5
17
8
12
14
29
15
7
10
9
34
14
14
13
70
4
6
6
83
11
13
11
78
Payback Period (years)
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
Consumers with Net Benefit (%)
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
Consumers with Net Cost (%)
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
TABLE V.11—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS; GAS-FIRED
STEAM BOILERS
Low-income
households
TSL
Senior-only
households
Small
businesses
All
households
Average LCC Savings (2022$)
1,2,3 .................................................................................................................
4 .......................................................................................................................
NA
14
NA
(69)
NA
26
NA
(53)
NA
14.7
NA
25.8
NA
7.3
NA
20.4
NA
37
NA
25
NA
64
NA
29
NA
25
NA
58
NA
19
NA
56
Payback Period (years)
1,2,3 .................................................................................................................
4 .......................................................................................................................
Consumers with Net Benefit (%)
1,2,3 .................................................................................................................
4 .......................................................................................................................
Consumers with Net Cost (%)
1,2,3 .................................................................................................................
4 .......................................................................................................................
ddrumheller on DSK120RN23PROD with PROPOSALS2
TABLE V.12—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS; OIL-FIRED
HOT WATER BOILERS
Low-income
households
TSL
Senior-only
households
Small
businesses
All
households
Average LCC Savings (2022$)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
334
603
324
569
438
771
374
666
1.3
2.9
1.8
3.3
Payback Period (years)
1,2 ....................................................................................................................
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TABLE V.12—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS; OIL-FIRED
HOT WATER BOILERS—Continued
Low-income
households
TSL
3,4 ....................................................................................................................
Senior-only
households
Small
businesses
All
households
1.3
2.9
1.8
3.3
70
85
71
89
61
74
70
86
1
1
2
2
15
19
4
4
Consumers with Net Benefit (%)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
Consumers with Net Cost (%)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
TABLE V.13—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS; OIL-FIRED
STEAM BOILERS
Low-income
households
TSL
Senior-only
households
Small
businesses
All
households
Average LCC Savings (2022$)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
NA
279
NA
284
NA
468
NA
310
NA
3.2
NA
4.7
NA
3
NA
5.5
NA
77
NA
83
NA
65
NA
80
NA
5
NA
10
NA
30
NA
14
Payback Period (years)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
Consumers with Net Benefit (%)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
Consumers with Net Cost (%)
1,2 ....................................................................................................................
3,4 ....................................................................................................................
c. Rebuttable Presumption Payback
As discussed in section III.G.2 of this
document, EPCA establishes a
rebuttable presumption that 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. In calculating a rebuttable
presumption payback period for each of
the considered TSLs, DOE used discrete
values, and, as required by EPCA, based
the energy use calculation on the DOE
test procedure for consumer boilers. In
contrast, the PBPs presented in section
V.B.1.a of this document were
calculated using distributions that
reflect the range of energy use in the
field.
Table V.14 presents the rebuttablepresumption payback periods for the
considered TSLs for consumer boilers.
While DOE examined the rebuttablepresumption criterion, it assessed
whether the standard levels considered
for the NOPR are economically justified
through a more detailed analysis of the
economic impacts of those levels,
pursuant to 42 U.S.C. 6295(o)(2)(B)(i),
that considers the full range of impacts
to the consumer, manufacturer, Nation,
and environment. The results of that
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.
ddrumheller on DSK120RN23PROD with PROPOSALS2
TABLE V.14—REBUTTABLE-PRESUMPTION PAYBACK PERIODS
Gas-fired
hot water
TSL
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
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4.0
2.7
9.7
Gas-fired
steam
........................
........................
........................
13.3
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2.2
2.2
2.2
2.2
Oil-fired
steam
........................
........................
5.1
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Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate
the impact of amended energy
conservation standards on
manufacturers of consumer boilers. The
following section describes the expected
impacts on manufacturers at each
considered TSL. Chapter 12 of the
NOPR TSD explains the analysis in
further detail.
a. Industry Cash-Flow Analysis Results
In this section, DOE provides GRIM
results from the analysis, which
examines changes in the industry that
would result from a potential standard.
The following tables summarize the
estimated financial impacts (represented
by changes in INPV) of potential
amended energy conservation standards
on manufacturers of consumer boilers,
as well as the conversion costs that DOE
estimates manufacturers of consumer
boilers would incur at each TSL. To
evaluate the range of cash-flow impacts
on the consumer boiler industry, DOE
analyzed two scenarios using different
assumptions that correspond to the
range of anticipated market responses to
amended energy conservation
standards: (1) the preservation of gross
margin percentage scenario; and (2) the
preservation of operating profit
scenario. These are discussed in further
detail in section IV.J.2.d of this
document.
The preservation of gross margin
percentage scenario applies a ‘‘gross
margin percentage’’ of 29 percent for all
product classes and all efficiency
levels.155 This scenario assumes that a
manufacturer’s per-unit dollar profit
would increase as MPCs increase in the
standards cases and represents the
likely upper-bound to industry
profitability under potential amended
energy conservation standards.
The preservation of operating profit
scenario reflects manufacturers’
concerns about their inability to
maintain margins as MPCs increase to
reach more-stringent efficiency levels.
In this scenario, while manufacturers
make the necessary investments
required to convert their facilities to
produce compliant products, operating
profit does not change in absolute
dollars and decreases as a percentage of
revenue. The preservation of operating
profit scenario represents the likely
lower (or more severe) bound to
financial impacts of potential amended
standards on industry.
Each of the modeled scenario’s results
in a unique set of cash flows and
corresponding INPV for each TSL for
consumer boiler manufacturers. INPV is
the sum of the discounted cash flows to
the industry from the base year through
the end of the analysis period (2023–
2059). The ‘‘change in INPV’’ results
refer to the difference in industry value
between the no-new-standards case and
standards case at each TSL. To provide
perspective on the short-run cash-flow
impact, DOE includes a comparison of
free cash flow between the no-newstandards case and the standards case at
each TSL in the year before amended
standards would take effect. This figure
55189
provides an understanding of the
magnitude of the required conversion
costs relative to the cash flow generated
by the industry in the no-new-standards
case.
Conversion costs are one-time
investments for manufacturers to bring
their manufacturing facilities (i.e.,
capital conversion costs) and product
designs (i.e., product conversion costs)
into compliance with potential
amended standards. As described in
section IV.J.2.c of this document,
conversion cost investments occur
between the year of publication of the
final rule and the year by which
manufacturers must comply with a new
or amended standard. The conversion
costs can have a significant impact on
the short-term cash flow on the industry
and generally result in lower free cash
flow in the period between the
publication of the final rule and the
compliance date of potential amended
standards. Conversion costs are
independent of the manufacturer
markup scenarios and are not presented
as a range in this analysis.
Table V.15 presents the overall
estimated industry MIA results at each
analyzed TSL. Table V.16, Table V.17,
Table V.18, and Table V.19 present the
estimated MIA results at each analyzed
TSL for gas-fired hot water, gas-fired
steam, oil-fired hot water, and oil-fired
steam product classes, respectively. See
chapter 12 of the NOPR TSD for a
discussion of cash-flow analysis results
by product class.
TABLE V.15—MANUFACTURER IMPACT ANALYSIS OF CONSUMER BOILER INDUSTRY RESULTS
INPV ...................................................
Change in INPV * ...............................
Free Cash Flow (2029) * ....................
Change in Free Cash Flow (2029) * ..
Capital Conversion Costs ..................
Product Conversion Costs .................
Total Conversion Costs .....................
Unit
No-newstandards
case
TSL 1
TSL 2
TSL 3
TSL 4
2022$ millions .....
2022$ millions .....
% .........................
2022$ millions .....
% .........................
2022$ millions .....
2022$ millions .....
2022$ millions .....
532.0
........................
........................
47.2
........................
........................
........................
........................
514.1 to 517.1
(17.9) to (14.9)
(3.4) to (2.8)
34.6
(26.7)
12.7
19.6
32.3
487.0 to 504.8
(45.0) to (27.2)
(8.5) to (5.1)
17.4
(63.2)
55.1
14.4
69.5
469.7 to 491.2
(62.2) to (40.7)
(11.7) to (7.7)
5.5
(88.4)
74.5
23.5
98.0
411.9 to 527.6
(120.0) to (4.3)
(22.6) to (0.8)
(22.2)
(147.0)
98.6
71.5
170.1
* Parentheses denote negative (-) values.
ddrumheller on DSK120RN23PROD with PROPOSALS2
TABLE V.16—MANUFACTURER IMPACT ANALYSIS OF GAS-FIRED HOT WATER CONSUMER BOILER INDUSTRY RESULTS
INPV ...................................................
Change in INPV * ...............................
Capital Conversion Costs ..................
Product Conversion Costs .................
Unit
No-newstandards
case
TSL 1
TSL 2
TSL 3
TSL 4
2022$ millions .....
2022$ millions .....
% .........................
2022$ millions .....
2022$ millions .....
409.4
........................
........................
........................
........................
399.1 to 401.5
(10.3) to (8.0)
(2.5) to (1.9)
8.1
9.9
371.9 to 389.0
(37.5) to (20.4)
(9.2) to (5.0)
50.5
4.7
364.6 to 384.4
(44.9) to (25.0)
(11.0) to (6.1)
62.2
3.1
316.7 to 428.9
(92.8) to 19.5
(22.7) to 4.8
77.9
39.5
155 The gross margin percentage of 29 percent is
based on a manufacturer markup of 1.41.
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Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
TABLE V.16—MANUFACTURER IMPACT ANALYSIS OF GAS-FIRED HOT WATER CONSUMER BOILER INDUSTRY RESULTS—
Continued
Total Conversion Costs .....................
Unit
No-newstandards
case
2022$ millions .....
........................
TSL 1
TSL 2
17.9
TSL 3
55.1
TSL 4
65.2
117.4
* Parentheses denote negative (-) values.
TABLE V.17—MANUFACTURER IMPACT ANALYSIS OF GAS-FIRED STEAM CONSUMER BOILER INDUSTRY RESULTS
INPV ...................................................
Change in INPV * ...............................
Capital Conversion Costs ..................
Product Conversion Costs .................
Total Conversion Costs .....................
Unit
No-newstandards
case
TSL 1
TSL 2
TSL 3
TSL 4
2022$ millions .....
2022$ millions .....
% .........................
2022$ millions .....
2022$ millions .....
2022$ millions .....
41.7
........................
........................
........................
........................
........................
41.7
........................
........................
........................
........................
........................
41.7
........................
........................
........................
........................
........................
41.7
........................
........................
........................
........................
........................
30.8 to 32.5
(10.9) to (9.3)
(26.2) to (22.2)
8.4
11.5
19.9
* Parentheses denote negative (-) values.
TABLE V.18—MANUFACTURER IMPACT ANALYSIS OF OIL-FIRED HOT WATER CONSUMER BOILER INDUSTRY RESULTS
INPV ...................................................
Change in INPV * ...............................
Capital Conversion Costs ..................
Product Conversion Costs .................
Total Conversion Costs .....................
Unit
No-newstandards
case
TSL 1
TSL 2
TSL 3
TSL 4
2022$ millions .....
2022$ millions .....
% .........................
2022$ millions .....
2022$ millions .....
2022$ millions .....
73.5
........................
........................
........................
........................
........................
65.9 to 66.6
(7.6) to (6.9)
(10.3) to (9.4)
4.7
9.7
14.4
65.9 to 66.6
(7.6) to (6.9)
(10.3) to (9.4)
4.7
9.7
14.4
60.0 to 61.4
(13.6) to (12.1)
(18.4) to (16.4)
8.4
17.2
25.6
60.0 to 61.4
(13.6) to (12.1)
(18.4) to (16.4)
8.4
17.2
25.6
* Parentheses denote negative (-) values.
TABLE V.19—MANUFACTURER IMPACT ANALYSIS OF OIL-FIRED STEAM CONSUMER BOILER INDUSTRY RESULTS
INPV ...................................................
Change in INPV * ...............................
Capital Conversion Costs ..................
Product Conversion Costs .................
Total Conversion Costs .....................
Unit
No-newstandards
case
TSL 1
TSL 2
TSL 3
TSL 4
2022$ millions .....
2022$ millions .....
% .........................
2022$ millions .....
2022$ millions .....
2022$ millions .....
7.5
........................
........................
........................
........................
........................
7.5
........................
........................
........................
........................
........................
7.5
........................
........................
........................
........................
........................
3.4 to 3.6
(4.1) to (4.0)
(54.6) to (52.7)
3.9
3.3
7.2
3.4 to 3.6
(4.1) to (4.0)
(54.6) to (52.7)
3.9
3.3
7.2
ddrumheller on DSK120RN23PROD with PROPOSALS2
* Parentheses denote negative (-) values.
At TSL 4, the standard represents the
max-tech efficiencies for all boiler
product classes. At this level, DOE
estimates the change in INPV would
range from –22.6 to –0.8 percent. At TSL
4, free cash flow is estimated to decrease
to ¥$22.0 million, which represents a
decrease of approximately 147.0 percent
compared to the no-new-standards case
value of $47.2 million in the year 2029,
the year before the anticipated
compliance date. DOE’s shipments
analysis estimates approximately 10
percent of current shipments meet this
level. DOE estimates capital conversion
costs of $98.6 million and product
conversion of costs of $71.5 million.
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Industry conversion costs total $170.1
million.
At TSL 4, the large conversion costs
result in a free cash flow dropping
below zero in the years before the
standards year. The negative free cash
flow calculation indicates
manufacturers may need to access cash
reserves or outside capital to finance
conversion efforts.
At TSL 4, the shipment-weighted
average MPC for all consumer boilers is
expected to increase by 41.4 percent
relative to the no-new-standards case
shipment-weighted average MPC for all
consumer boilers in 2030. In the
preservation of gross margin percentage
scenario (in which manufacturers can
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fully pass along this cost increase), the
increase in cashflow from the higher
MSP is outweighed by the $170.1
million in conversion costs, causing a
slightly negative change in INPV at TSL
4 under this scenario. Under the
preservation of operating profit
scenario, the manufacturer markup
decreases in 2031, the year after the
anticipated compliance date. This
reduction in the manufacturer markup
and the $170.1 million in conversion
costs incurred by manufacturers cause a
large negative change in INPV at TSL 4
under the preservation of operating
profit scenario.
The design options analyzed at TSL 4
for gas-fired hot water boilers, which
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Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
accounts for approximately 75 percent
of industry shipments, included
implementing a condensing stainlesssteel heat exchanger with increased heat
exchanger surface area and
improvements in geometry as compared
to the designs analyzed at TSL 3 (95
percent AFUE) and a premix,
modulating burner.
Out of the 24 gas-fired hot water
boiler OEMs, only six OEMs offer
models that meet the efficiencies
required by TSL 4. At this level, all gasfired hot water boilers must transition to
the max-tech condensing technology.
This is a significant technological shift
and may be challenging for many
manufacturers. Less than 5 percent of
gas-fired hot water model listings can
meet the 96-percent AFUE required. At
this level, DOE estimates the change in
INPV for the gas-fired hot water boiler
industry would range from –2.5 to 1.9
percent.
With approximately 95 percent of all
model offerings currently on the market
rendered obsolete, all 24 manufacturers
would need to re-evaluate and redesign
their portfolio of gas-fired hot water
product offerings. Many OEMs that have
extensive condensing gas-fired hot
water product offerings do not have any
models that can meet max-tech. Even
OEMs that offer some max-tech models
today would need to allocate extensive
technical resources to provide max-tech
offerings across the full range of
capacities to serve their customers.
Manufacturers that are heavily invested
in the non-condensing market would
likely need to re-orient their role in the
market and determine how to compete
in a marketplace where there is only one
efficiency level.
Traditionally, manufacturers have
designed their product lines to support
a range of models with varying input
capacities, and the efficiency has varied
between models within the line. In
reviewing available models, DOE found
that manufacturers generally only have
one or two input capacities optimized to
achieve 96-percent AFUE within each
product line, while the remaining input
capacities are at a lower AFUE. This
suggests that manufacturers may have to
individually redesign each model
within product lines to ensure all
models can achieve the max-tech level.
A model-by-model redesign would
necessitate a significant increase in
design effort for manufacturers.
Additionally, in confidential interviews,
some manufacturers who source
condensing heat exchangers expressed
concern that the relatively lower
shipment volumes of boilers in the U.S.
market—compared to international
markets for boilers—could make it
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difficult to find suppliers willing to
produce heat exchanger designs that
would allow all models within their gasfired hot water product lines to meet 96percent AFUE, as each heat exchanger
design would need to be optimized for
a given input capacity. DOE estimates
gas-fired hot water boiler product
conversion costs of $3.1 million. The
push toward new product designs
would also require changes to the
manufacturing facilities. Manufacturers
would need to extend or add additional
assembly lines to accommodate the
growth in condensing gas-fired hot
water boiler sales. Furthermore,
manufacturers that are heavily invested
in the non-condensing market would
likely have need to make the most
significant capital investments, such as
new production lines and updates to the
factory floor. DOE estimates gas-fired
hot water boiler capital conversion costs
of $65.2 million.
For the remaining product classes
(gas-fired steam, oil-fired hot water, oilfired steam), the design options
analyzed mainly included increasing
heat exchanger surface area relative to
lower efficiency levels. The max-tech
efficiency level at TSL 4 for these three
product classes does not require a shift
to condensing designs and does not
dramatically alter the manufacturing
process. Gas-fired steam shipments
account for approximately 10 percent of
current industry shipments. Oil-fired
hot water shipments account for
approximately 14 percent of current
industry shipments. Oil-fired steam
shipments account for approximately 1
percent of current industry shipments.
All four gas-fired steam boiler OEMs
offer some models that meet the maxtech efficiencies. However, only 8
percent of gas-fired steam model listings
meet the efficiencies required by TSL 4.
At this level, DOE estimates the change
in INPV for the gas-fired steam boiler
industry would range from –26.2
percent and –22.2 percent. DOE
estimates gas-fired steam boiler capital
conversion costs of $8.4 million and
gas-fired steam boiler product
conversion of costs of $11.5 million.
Out of the 11 oil-fired hot water boiler
OEMs, only two OEMs offer models that
meet the max-tech efficiencies.
Approximately 3 percent of oil-fired hot
water model listings currently meet the
TSL 4 efficiencies. At this level, DOE
estimates the change in INPV for the oilfired hot water boiler industry would
range from –18.4 percent and –16.4
percent. DOE estimates oil-fired hot
water boiler capital conversion costs of
$8.4 million and oil-fired hot water
boiler product conversion of costs of
$17.2 million.
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Out of the four oil-fired steam boiler
OEMs, two OEMs offer models that meet
the max-tech efficiencies.
Approximately 22 percent of oil-fired
steam model listings currently meet the
TSL 4 efficiencies. At this level, DOE
estimates the change in INPV for the oilfired steam industry would range from
–54.6 percent and –52.7 percent. DOE
estimates oil-fired steam boiler capital
conversion costs of $3.9 million and oilfired steam boiler product conversion of
costs of $3.3 million.
The design options available to
increase the efficiency of gas-fired
steam, oil-fired hot water, and oil-fired
steam boilers are similar. Manufacturers
may be able to meet max-tech efficiency
for some models by adding additional
heat exchanger sections. However,
where additional sections are not
sufficient, manufacturers may need to
invest in the more time-intensive
process of redesigning of the heat
exchanger and in new castings and
tooling to achieve max-tech efficiencies.
At TSL 3, the standard represents EL
3 for gas-fired hot water boilers, baseline
efficiency for gas-fired steam boilers, EL
2 for oil-fired hot water boilers, and EL
1 for oil-fired steam boiler. At this level,
DOE estimates the change in INPV
would range from ¥11.7 to ¥7.7
percent. At TSL 3, free cash flow is
estimated to decrease to ¥$5.5 million,
which represents a decrease of
approximately 88.4 percent compared to
the no-new-standards case value of
$47.2 million in the year 2029, the year
before the anticipated compliance year.
DOE’s shipments analysis estimates
approximately 57 percent of current
shipments meet this level.
The decrease in industry conversion
costs compared to TSL 4 is entirely
driven by the lower efficiencies required
for gas-fired hot water and gas-fired
steam boilers. As with TSL 4,
manufacturers heavily invested in noncondensing gas-fired hot water boilers
would need to develop or expand their
condensing production capacity.
However, unlike TSL 4, most
manufacturers currently offer products
that meet the 95 percent AFUE required
at this TSL. DOE estimates capital
conversion costs of $74.5 million and
product conversion of costs of $23.5
million. Conversion costs total $98.0
million.
At TSL 3, the large conversion costs
result in a free cash flow dropping
below zero in the years before the
standards year. The negative free cash
flow calculation indicates
manufacturers may need to access cash
reserves or outside capital to finance
conversion efforts.
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At TSL 3, the shipment-weighted
average MPC for all consumer boilers is
expected to increase by 8.0 percent
relative to the no-new-standards case
shipment-weighted average MPC for all
consumer boilers in 2030. In the
preservation of gross margin percentage
scenario, the increase in cashflow from
the higher MSP is outweighed by the
$98.0 million in conversion costs,
causing a negative change in INPV at
TSL 3 under this scenario. Under the
preservation of operating profit
scenario, the manufacturer markup
decreases in 2031, the year after the
anticipated compliance date. This
reduction in the manufacturer markup
and the $98.0 million in conversion
costs incurred by manufacturers cause a
negative change in INPV at TSL 3 under
the preservation of operating profit
scenario.
The design options analyzed at TSL 3
for gas-fired hot water boilers included
implementing a condensing stainlesssteel heat exchanger with a premix
modulating burner. Out of the 24 gasfired hot water boiler OEMs, 18 OEMs
offer models that meet the efficiencies
required by TSL 3 (95-percent AFUE).
Approximately 40 percent of gas-fired
hot water model listings currently meet
TSL 3 efficiencies. At this level, DOE
estimates the change in INPV for the
gas-fired hot water industry would
range from ¥11.0 percent and ¥6.1
percent. DOE estimates gas-fired hot
water boiler capital conversion costs of
$62.2 million and gas-fired hot water
boiler product conversion of costs of
$3.1 million. As with TSL 4,
manufacturers heavily invested in noncondensing gas-fired hot water boilers
would need to develop or expand their
condensing production capacity, which
would necessitate new production lines
and updates to the factory floor.
However, unlike TSL 4, most
manufacturers currently offer products
that meet the 95-percent AFUE required.
Additionally, TSL 3 reduces the need to
redesign by optimizing design at the
individual model level to meet amended
standards.
For gas-fired steam boilers, TSL 3
corresponds to the baseline efficiency
level (82 percent AFUE). As a result,
when evaluating this product class in
isolation, DOE expects that the gas-fired
steam industry would incur zero
conversion costs. For oil-fired hot water
and oil-fired steam boilers, the
efficiency level required at TSL 3 is the
same as TSL 4. As a result, DOE expects
that the estimated changes in INPV and
associated capital and product
conversion costs for oil-fired hot water
and oil-fired steam boilers at TSL 3
would be the same as TSL 4.
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At TSL 2, the standard represents EL
2 for gas-fired hot water boilers, baseline
efficiency for gas-fired steam boilers, EL
1 for oil-fired hot water boilers, and
baseline efficiency for oil-fired steam
boilers. At this level, DOE estimates the
change in INPV would range from ¥8.5
to ¥5.1 percent. At TSL 2, free cash
flow is estimated to decrease to $17.4
million, which represents a decrease of
approximately 63.2 percent compared to
the no-new-standards case value of
$47.2 million in the year 2029, the year
before the anticipated compliance date.
DOE’s shipments analysis estimates
approximately 70 percent of current
shipments meet this level.
The decrease in conversion costs
compared to TSL 3 is entirely driven by
the lower efficiencies required for gasfired hot water, oil-fired hot water, and
oil-fired steam boilers, which all
together account for 90 percent of
current industry shipments. As with
TSL 3 and TSL 4, manufacturers heavily
invested in non-condensing gas-fired
hot water boilers would need to develop
or expand their condensing production
capacity. However, at TSL 2, more
manufacturers currently offer products
that meet the 90-percent AFUE required.
DOE estimates capital conversion costs
of $55.1 million and product conversion
of costs of $14.4 million. Conversion
costs total $69.5 million.
At TSL 2, the shipment-weighted
average MPC for all consumer boilers is
expected to increase by 6.8 percent
relative to the no-new-standards case
shipment-weighted average MPC for all
consumer boilers in 2030. In the
preservation of gross margin percentage
scenario, the increase in cashflow from
the higher MSP is slightly outweighed
by the $69.5 million in conversion costs,
causing a negative change in INPV at
TSL 2 under this scenario. Under the
preservation of operating profit
scenario, the manufacturer markup
decreases in 2031, the year after the
anticipated compliance date. This
reduction in the manufacturer markup
and the $69.5 million in conversion
costs incurred by manufacturers cause a
negative change in INPV at TSL 2 under
the preservation of operating profit
scenario.
The design options analyzed at TSL 2
for gas-fired hot water boilers included
implementing a condensing cast
aluminum or stainless-steel heat
exchanger and modulating burner. Out
of the 24 gas-fired hot water boiler
OEMs, 21 OEMs offer models that meet
the efficiencies required by TSL 2.
Approximately 54 percent of gas-fired
hot water model listings currently meet
TSL 2 efficiencies. At this level, DOE
estimates the change in INPV for the
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gas-fired hot water industry would
range from ¥9.2 percent to ¥5.0
percent. DOE estimates gas-fired hot
water boiler capital conversion costs of
$50.5 million and gas-fired hot water
boiler product conversion of costs of
$4.7 million. As with TSL 3 and TSL 4,
manufacturers heavily invested in noncondensing gas-fired hot water boilers
would need to develop or expand their
condensing production capacity.
However, at TSL 2, more manufacturers
currently offer products that meet the
90-percent AFUE required. Product
conversion costs would be driven by the
development and testing necessary to
develop compliant, cost-competitive
products.
For gas-fired steam boilers and oilfired steam boilers, TSL 2 corresponds
to the baseline efficiency levels (82
percent AFUE and 85 percent AFUE,
respectively). As a result, when
evaluating these product classes in
isolation, DOE expects that the gas-fired
steam and oil-fired steam industries
would incur zero conversion costs.
For oil-fired hot water boilers, TSL 2
corresponds to EL 1 (87 percent AFUE).
The design options analyzed for oilfired hot water boilers included
increasing the heat exchanger surface
area beyond what was analyzed at
baseline but less than what was
analyzed at max-tech (EL 2). Out of the
11 oil-fired hot water boiler OEMs, 10
OEMs offer models that meet the
efficiencies required. Approximately 44
percent of oil-fired hot water model
listings currently meet TSL 2
efficiencies. At this level, DOE estimates
the change in INPV for the oil-fired hot
water industry would range from ¥10.3
percent to ¥9.4 percent. DOE estimates
oil-fired hot water boiler capital
conversion costs of $4.7 million and oilfired hot water boiler product
conversion of costs of $9.7 million. DOE
expects that some manufacturers would
need to invest in new casting designs
and tooling to meet TSL 2 efficiencies.
At TSL 1, the standard represents EL
1 for gas-fired hot water boilers, baseline
efficiency for gas-fired steam boilers, EL
1 for oil-fired hot water boilers, and
baseline efficiency for oil-fired steam
boilers. At this level, DOE estimates the
change in INPV would range from ¥3.4
to ¥2.8 percent. At TSL 1, free cash
flow is estimated to decrease to $34.6
million, which represents a decrease of
approximately 26.7 percent compared to
the no-new-standards case value of
$47.2 million in the year 2029, the year
before the anticipated compliance date.
DOE’s shipments analysis estimates
approximately 73 percent of current
shipments meet this level.
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The decrease in conversion costs
compared to TSL 2 is entirely driven by
the lower efficiency required for gasfired hot water boilers, which accounts
for 75 percent of current industry
shipments. DOE estimates industry
capital conversion costs of $12.7 million
and product conversion of costs of $19.6
million. Conversion costs total $32.3
million.
At TSL 1, the shipment-weighted
average MPC for all consumer boilers is
expected to increase by 1.2 percent
relative to the no-new-standards case
shipment-weighted average MPC for all
consumer boilers in 2030. In the
preservation of gross margin percentage
scenario, the increase in cashflow from
the higher MSP is slightly outweighed
by the $32.3 million in conversion costs,
causing a slightly negative change in
INPV at TSL 1 under this scenario.
Under the preservation of operating
profit scenario, the manufacturer
markup decreases in 2031, the year after
the anticipated compliance date. This
reduction in the manufacturer markup
and the $32.3 million in conversion
costs incurred by manufacturers cause a
slightly negative change in INPV at TSL
1 under the preservation of operating
profit scenario.
The design options analyzed for gasfired hot water boilers included
increasing heat exchanger surface area
beyond what was analyzed at the
baseline efficiency. For gas-fired hot
water boilers, TSL 1 corresponds to EL
1 (85 percent AFUE). Out of the 24 gasfired hot water OEMs, 23 offer models
that meet the TSL 1 efficiencies.
Approximately 67 percent of gas-fired
hot water model listings currently meet
TSL 1 efficiencies. At this level, DOE
estimates the change in INPV for the
gas-fired hot water industry would
range from ¥2.5 percent to ¥1.9
percent. DOE estimates gas-fired hot
water boiler capital conversion costs of
$8.1 million and gas-fired hot water
boiler product conversion of costs of
$9.9 million.
For gas-fired steam boilers and oilfired steam boilers, TSL 1 corresponds
to the baseline efficiency levels (82
percent AFUE and 85 percent AFUE,
respectively). As a result, when
evaluating these product classes in
isolation, DOE expects that the gas-fired
steam and oil-fired steam industries
would incur zero conversion costs.
For oil-fired hot water boilers, the
efficiency level required at TSL 1 is the
same as TSL 2. As a result, DOE expects
that the estimated changes in INPV and
associated capital and product
conversion costs for oil-fired hot water
boilers at TSL 1 would be the same as
TSL 2.
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DOE seeks comments, information,
and data on the capital conversion costs
and product conversion costs estimated
for each TSL.
b. Direct Impacts on Employment
To quantitatively assess the potential
impacts of amended energy
conservation standards on direct
employment in the consumer boiler
industry, DOE used the GRIM to
estimate the domestic labor
expenditures and number of direct
employees in the no-new-standards case
and in each of the standards cases (i.e.,
TSLs) during the analysis period. DOE
calculated these values using statistical
data from the 2021 ASM,156 BLS
employee compensation data,157 results
of the engineering analysis, DOE’s CCD,
and manufacturer interviews.
Labor expenditures related to product
manufacturing depend on the labor
intensity of the product, the sales
volume, and an assumption that wages
remain fixed in real terms over time.
The labor expenditures in each year are
calculated by multiplying the total
MPCs by the labor percentage of the
MPCs. The labor expenditures in the
GRIM were then converted to
production employment levels by
dividing production labor expenditures
by the average fully-burdened wage
multiplied by the average number of
hours worked per year per production
worker. To do this, DOE relied on the
ASM inputs: Production Workers
Annual Wages, Production Workers
Annual Hours, Production Workers for
Pay Period, and Number of Employees.
DOE also relied on the BLS employee
compensation data to determine the
fully-burdened wage ratio. The fullyburdened wage ratio factors in paid
leave, supplemental pay, insurance,
retirement and savings, and legallyrequired benefits.
The number of production employees
is then multiplied by the U.S. labor
percentage to convert production
employment to domestic production
employment. The U.S. labor percentage
represents the industry fraction of
domestic manufacturing production
capacity for the covered product. This
value is derived from manufacturer
interviews, product database analysis,
and publicly-available information.
Research indicates that over 90 percent
156 U.S. Census Bureau, Annual Survey of
Manufactures, ‘‘Summary Statistics for Industry
Groups and Industries in the U.S. (2021),’’
(Available at: www.census.gov/data/tables/timeseries/econ/asm/2018-2021-asm.html) (Last
accessed Feb. 14, 2023).
157 U.S. Bureau of Labor Statistics ‘‘Employer
Costs for Employee Compensation,’’ (December 15,
2022) (Available at: www.bls.gov/news.release/pdf/
ecec.pdf) (Last accessed Feb. 14, 2023).
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55193
of non-condensing gas-fired hot water,
gas-fired steam, oil-fired hot water, and
oil-fired steam boilers are manufactured
in the United States. Research indicates
that approximately 60 percent of
condensing gas-fired hot water boilers
are manufactured in the United States.
Therefore, overall, DOE estimates that
75 percent of covered consumer boilers
are produced domestically.
In addition to where the boiler is
physically assembled, DOE considers
whether the principal components (e.g.,
the heat exchanger) are produced inhouse and in the United States. For noncondensing gas-fired hot water, gas-fired
steam, oil-fired hot water, and oil-fired
steam boilers, DOE estimates that over
90 percent of the heat exchangers are
produced in the United States.
However, DOE determined that nearly
all condensing gas-fired hot water heat
exchangers are purchased from overseas
manufacturers. Therefore, the domestic
labor associated with condensing heat
exchangers is significantly less than the
domestic labor associated with noncondensing heat exchangers.
The domestic production employees
estimate covers production line
workers, including line supervisors,
who are directly involved in fabricating
and assembling products within the
OEM facility. Workers performing
services that are closely associated with
production operations, such as materials
handling tasks using forklifts, are also
included as production labor.158 DOE’s
estimates only account for production
workers who manufacture the specific
products covered by this proposed
rulemaking.
Non-production workers account for
the remainder of the direct employment
figure. The non-production employees
estimate covers domestic workers who
are not directly involved in the
production process, such as sales,
engineering, human resources, and
management.159 Using the number of
domestic production workers calculated
above, non-production domestic
employees are extrapolated by
multiplying the ratio of non-production
workers in the industry compared to
production employees. DOE assumes
that this employee distribution ratio
remains constant between the no-newstandards case and standards cases.
Using the GRIM, DOE estimates that
in the absence of new energy
158 U.S. Census Bureau’s Annual Survey of
Manufactures, ‘‘Definitions and Instructions for the
Annual Survey of Manufactures, MA–10000’’
(Available at: www2.census.gov/programs-surveys/
asm/technical-documentation/questionnaire/2021/
instructions/MA_10000_Instructions.pdf) (Last
accessed March 5, 2023).
159 Id.
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conservation standards, there would be
526 domestic workers for consumer
boilers in 2030. Table V.20 shows the
range of the impacts of energy
conservation standards on U.S.
manufacturing employment in the
consumer boiler industry. The following
discussion provides a qualitative
evaluation of the range of potential
impacts presented in Table V.20.
TABLE V.20—DOMESTIC DIRECT EMPLOYMENT IMPACTS FOR CONSUMER BOILER MANUFACTURERS IN 2030
No-newstandards
case
Direct Employment (Domestic Production Workers + Domestic Non-Production Workers) .....................................
Potential Changes in Direct Employment Workers* ............
TSL 1
526
........................
TSL 2
521
(5)
453 to 511
(15) to (73)
TSL 3
450 to 497
(29) to (76)
TSL 4
464 to 541
15 to (62)
ddrumheller on DSK120RN23PROD with PROPOSALS2
*DOE presents a range of potential direct employment impacts.
Note: Parentheses indicate negative (¥) values.
The direct employment impacts
shown in Table V.20 represent the
potential domestic employment changes
that could result following the
compliance date of amended energy
conservation standards for the consumer
boilers covered in this proposal. The
upper bound estimate corresponds to a
change in the number of domestic
workers that results from amended
energy conservation standards if
manufacturers continue to produce the
same scope of covered products within
the United States after compliance is
required. Under a condensing gas-fired
hot water boiler standard (i.e., TSL 2
through TSL 4), manufacturers would
likely shift away from in-house
production of heat exchangers, which
results in a decrease in direct
employment at TSL 2 and TSL 3. TSL
4 shows potential positive impacts on
domestic direct employment levels as
max-tech boilers (96-percent AFUE) are
more complex to manufacturer and
require significant additional
production labor.
Manufacturers could choose to
relocate production facilities outside of
the United States where conversion
costs and production costs are lower;
however, DOE does not expect
manufacturers to move production to
foreign locations as a result of amended
energy conservation standards due to
shipping considerations. Alternatively,
some manufacturers could choose not to
make the necessary investments to meet
the amended energy conservation
standards across all product classes. To
avoid underestimating the potential job
losses that could result from an
amended energy conservation standard,
DOE’s lower bound scenario assumes
domestic manufacturers do not expand
their condensing production capacity in
the standards cases and are only able to
maintain current sales levels of
condensing boilers in the standards
cases.
At TSLs that do not require
condensing technology (i.e., TSL 1),
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DOE does not expect that there would
be significant changes in production
employment as a direct result of
amended conservation standards, as
manufacturers would likely continue to
produce a similar scope of noncondensing heat exchangers and
consumer boilers in the United States.
However, under a condensing standard
(i.e., TSL 2 through TSL 4),
manufacturers would shift from
sourcing or producing non-condensing
heat exchangers for gas-fired hot water
boilers, which are typically
manufactured in U.S. facilities, to
sourcing condensing heat exchangers
that are typically manufactured in
foreign countries.
Additional detail on the analysis of
direct employment can be found in
chapter 12 of the NOPR TSD. DOE notes
that the direct employment impacts
discussed in this section are
independent of the indirect employment
impacts from the broader U.S. economy,
which are documented in chapter 16 of
the NOPR TSD.
DOE seeks comments, information,
and data on the potential direct
employment impacts estimated for each
TSL.
c. Impacts on Manufacturing Capacity
Nearly all consumer boiler OEMs
currently offer some gas-fired hot water
boiler models that meet the TSL 3
condensing level proposed (95-percent
AFUE). At TSL 3, 19 out of the 25 gasfired hot water boiler OEMs currently
offer models that meet the proposed
level or required efficiency. DOE
interviewed manufacturers representing
approximately 45 percent of industry
shipments. In interviews, manufacturers
heavily invested in non-condensing gasfired hot water boilers stated that they
would need to expand their condensing
production capacity, which would
necessitate new production lines and
updates to the factory floor. However,
most manufacturers would be able to
add capacity and adjust product designs
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in the 5-year period between the
announcement year of the amended
standard and the compliance year of the
amended standard.
At max-tech, only 9 percent of gasfired hot water boiler shipments
currently meet the efficiency required.
In interviews, most manufacturers
stated that they would likely need to
work with component manufacturers to
develop new heat exchanger designs to
consistently meet the max-tech
efficiencies. Some manufacturers
expressed concern that the 5-year
conversion period would be insufficient
to develop a cost-competitive heat
exchanger that could reliably achieve
96-percent AFUE.
DOE seeks comment on whether
manufacturers expect that
manufacturing capacity or engineering
resource constraints would limit
product availability to consumers in the
timeframe of the amended standards
compliance date (2030).
d. Impacts on Subgroups of
Manufacturers
Using average cost assumptions to
develop industry cash-flow estimates
may not capture the differential impacts
among subgroups of manufacturers.
Small manufacturers, niche players, or
manufacturers exhibiting a cost
structure that differs substantially from
the industry average could be affected
disproportionately. DOE investigated
small businesses as a manufacturer
subgroup that could be
disproportionally impacted by amended
energy conservation standards and
could merit additional analysis. DOE
also identified OEMs that own cast-iron
foundries specializing in consumer
boiler castings as a potential
manufacturer subgroup that could be
adversely impacted by amended energy
conservation standards based on the
results of the industry characterization.
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Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
Small Businesses
DOE analyzes the impacts on small
businesses in a separate analysis in
section VI.B of this document as part of
the Regulatory Flexibility Analysis. In
summary, the SBA defines a ‘‘small
business’’ as having 500 employees or
less for North American Industry
Classification System (NAICS) 333414,
‘‘Heating Equipment (except Warm Air
Furnaces) Manufacturing.’’ Based on
this classification, DOE identified three
domestic OEMs that qualify as a small
business. For a discussion of the
impacts on the small business
manufacturer subgroup, see the
Regulatory Flexibility Analysis in
section VI.B of this document and
chapter 12 of the NOPR TSD.
ddrumheller on DSK120RN23PROD with PROPOSALS2
Manufacturers That Own Domestic
Foundries
In addition to the small business
subgroup, DOE identified verticallyintegrated OEMs that own domestic
foundries specializing in consumer
boiler castings as a subgroup that may
experience differential impacts under a
condensing gas-fired hot water standard
(i.e., TSL 2 through TSL 4).
Research indicates that most noncondensing boilers use cast-iron heat
exchangers. Based on manufacturer
interviews, the engineering analysis,
and the database of consumer boilers
developed as part of the market
assessment, DOE estimates that nearly
all non-condensing cast-iron heat
exchangers are made in U.S. foundries.
Furthermore, DOE understands that
nearly all condensing heat exchangers
are manufactured overseas. Under a
condensing standard, there will be a
significant reduction in demand for
consumer boiler cast-iron heat
exchangers as gas-fired hot water boilers
account for approximately 45 percent of
the non-condensing consumer boiler
shipments.
Most consumer boiler manufacturers
currently rely on third-party foundries
for their consumer boiler castings. Based
on a review of public data and
information gathered during
confidential interviews, DOE found that
most boiler OEMs source their
consumer boiler castings from one thirdparty foundry in Waupaca, Wisconsin.
DOE tentatively concluded that this
foundry’s operations would not be
impacted by the reduction in cast-iron
heat exchanger production since
consumer boilers account for a minimal
part of their casting portfolio. However,
foundries owned by consumer boiler
OEMs typically specialize in consumer
and commercial boiler casting and
would be impacted by the reduction in
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cast-iron heat exchanger production.
DOE believes that 15 to 25 percent of all
consumer boilers are produced by OEMs
that own foundry assets. For the
purpose of this subgroup analysis, DOE
modeled 20 percent of all consumer
boilers being manufactured by OEMs
that own foundry assets.
In response to the May 2022
Preliminary Analysis, stakeholders
asserted that cast-iron foundries
producing heat exchangers for noncondensing boilers have large, fixed
costs that could no longer be amortized
across gas-fired hot water consumer
boilers sales under a condensing
standard. Stakeholders noted that castiron boiler manufacturers, particularly
those that own a foundry, could face a
range of potential negative impacts of
more-stringent consumer boiler
standards, including: (1) increases in
cast-iron prices in other boiler types; (2)
stranded assets; (3) potential job losses
associated with foundry operation,
casting, and assembly, which could lead
to a reduction in domestic
manufacturing employment; and (4)
possible foundry closures.
DOE used the subgroup analysis
GRIM to assess the potential financial
impacts of a condensing standard on
boiler OEMs with foundries. In its
analysis, DOE evaluated the financial
viability of these OEMs if the foundries
remained operational but at reduced
output due to the shift away from castiron heat exchangers under a
condensing standard for gas-fired hot
water consumer boilers. DOE also
evaluated potential increases in castiron MPCs for gas-fired steam, oil-fired
hot water, and oil-fired steam products,
reduced profitability for those products,
and stranded assets associated with gasfired hot water products in the subgroup
analysis GRIM. Additionally, DOE
analyzed potential job losses associated
with foundry operation, casting, and
assembly in section V.B.2.b of this
document.
DOE relied on the engineering
analysis and the shipments analysis to
estimate the potential reallocation of
fixed foundry overhead to the remaining
cast-iron shipments under a condensing
standard. For foundry owners, DOE
estimated a potential reallocation of $20
per-unit to gas-fired steam, oil-fired hot
water, and oil-fired steam shipments
under a condensing standard. DOE also
asked manufacturers during confidential
interviews to estimate the potential
reallocation costs but did not receive
sufficient quantitative feedback to
inform the analysis.
To derive the $20 reallocation cost,
DOE first used the engineering analysis
to estimate the average per-unit
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55195
overhead and depreciation costs
associated with gas-fired hot water castiron heat exchangers. To avoid
underestimating the fixed foundry costs,
DOE considered all the heat exchanger
overhead and depreciation as fixed
costs. DOE estimates that the average
per-unit overhead and depreciation
costs associated with gas-fired hot water
cast-iron heat exchangers is
approximately $24. DOE then used the
reference year shipments distribution by
product class from the shipments
analysis, foundry market share
assumptions, and the product database
to calculate the cumulative foundry
overhead and depreciation costs
associated with gas-fired hot water castiron heat exchangers and reallocated
those cumulative costs evenly across the
remaining cast-iron product class
shipments (i.e., gas-fired steam, oil-fired
hot water, and oil-fired steam). In the
subgroup analysis GRIM, this $20
reallocation cost was added to the MPCs
for gas-fired steam, oil-fired hot water,
and oil-fired steam in the standards
cases where gas-fired hot water boilers
would need to meet a condensing level.
DOE requests comment on the $20
per-unit reallocation cost for gas-fired
steam, oil-fired hot water, and oil-fired
steam boilers under a condensing
standard for gas-fired hot water boilers,
as well as the methodology used to
derive the estimate.
As discussed in section IV.J.2.d of this
document, the industry GRIM included
two manufacturer markup scenarios to
represent uncertainty regarding the
potential impacts on prices and
profitability for manufacturers following
the implementation of amended energy
conservation standards: (1) a
preservation of gross margin percentage
scenario; and (2) a preservation of
operating profit scenario. For the
subgroup analysis GRIM, DOE
customized these scenarios to account
for the additional price and profitability
impacts for foundry owners under a
condensing standard.
To establish an upper-bound to
industry profitability under potential
amended standards, DOE maintained
the same scenario, the preservation of
gross margin percentage scenario, as
modeled in the industry GRIM. The
preservation of gross margin percentage
applies a ‘‘gross margin percentage’’ of
29 percent for all product classes and all
efficiency levels.160 This scenario
assumes that a foundry owner’s per-unit
dollar profit would increase as MPCs
increase in the standards cases. Under a
condensing standard, foundry owner’s
160 The gross margin percentage of 29 percent is
based on a manufacturer markup of 1.41.
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dollar profit for a cast-iron unit (e.g., oilfired hot water boiler) would increase
relative to non-foundry owners due to
the $20 increase in MPC.
DOE modeled the preservation of
market MSP scenario to establish the
conservative lower (or more severe)
bound to foundry owner profitability.
To develop this scenario, DOE used the
manufacturer markups from the
preservation of operating profit scenario
developed in the industry GRIM as a
starting point. As discussed in section
IV.J.2.d of this document, the
preservation of operating profit scenario
reflects manufacturers’ concerns about
their inability to maintain margins as
MPCs increase to reach more-stringent
efficiency levels. For the subgroup
analysis GRIM, as foundry owners’ cost
of production goes up for gas-fired
steam, oil-fired hot water, and oil-fired
steam product classes, foundry owners
reduce their manufacturer markups to a
level that maintains the industry
average MSPs calibrated under the
preservation of operating profit
scenario. In essence, foundry owners
cannot charge more than their
competitors that do not have foundry
assets, and consequently, they have
reduced profit on each unit sold. DOE
implemented this scenario in the
subgroup analysis GRIM by lowering the
manufacturer markups for gas-fired
steam, oil-fired hot water, and oil-fired
steam product classes at TSL 2 through
TSL 4 to yield approximately the same
MSP in the standards case as in the
standards case in the industry GRIM.
The implicit assumptions behind this
are that foundry owners cannot raise
their MSP to offset price increases that
are a result of the loss of cast-iron gasfired hot water sales and have reduced
operating profit in absolute dollars after
the amended standard takes effect.
These modeling assumptions are
intended to reflect manufacturer
comments a condensing standard for
gas-fired hot water boilers would results
in increases in cast-iron prices in other
boiler types.
TABLE V.21—MANUFACTURER IMPACT ANALYSIS CONSUMER BOILER SUBGROUP RESULTS
INPV ...................................................
Change in INPV * ...............................
Free Cash Flow (2029) * ....................
Change in Free Cash Flow (2029) * ..
Capital Conversion Costs ..................
Product Conversion Costs .................
Total Conversion Costs .....................
Unit
No-newstandards
case
TSL 1
TSL 2
TSL 3
TSL 4
2022$ millions .....
2022$ millions .....
% .........................
2022$ millions .....
% .........................
2022$ millions .....
2022$ millions .....
2022$ millions .....
101.2
........................
........................
8.8
........................
........................
........................
........................
097.6 to 098.2
(3.6) to (3.0)
(3.5) to (3.0)
6.2
(28.8)
2.5
3.9
6.5
089.5 to 094.3
(9.0) to (4.2)
(9.2) to (4.3)
2.6
(70.0)
11.0
2.9
13.9
086.2 to 091.7
(12.3) to (6.9)
(12.5) to (7.0)
0.2
(98.0)
14.9
4.7
19.6
074.9 to 098.2
(23.7) to (0.3)
(24.0) to (0.3)
(5.4)
(162.9)
19.7
14.3
34.0
* Note: Parentheses indicate negative (¥) values.
ddrumheller on DSK120RN23PROD with PROPOSALS2
The subgroup analysis results indicate
that manufacturers that own domestic
foundries would fare worse than
competitors that do not own domestic
foundries under amended standards that
require condensing levels for gas-fired
hot water boilers. This occurs because
manufacturers that own domestic
foundries must recover foundry
investments over smaller number of
sales, given that gas-fired hot water
boilers currently account for 45 percent
of cast-iron boilers covered under this
rulemaking. That cost recovery takes the
form of MPC increases for gas-fired
steam, oil-fired hot water, and oil-fired
steam boilers. Manufacturers that own
foundries face reduced profitability, as
DOE assumes they cannot pass the
foundry-related MPC increases onto
their customers. However, even with
these additional cost increases, DOE’s
modeling suggests that manufacturers
that own foundries would be able to
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continue to operate, albeit with reduced
profitability and at reduced INPV
relative to the overall industry.
DOE requests comment on the
potential impacts on consumer boiler
manufacturers that own domestic
foundry assets including impacts but
not limited to those vital to national
security or critical infrastructure at the
TSLs analyzed in this NOPR analysis.
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer
burden involves looking at the
cumulative impact of multiple DOE
standards and the product-specific
regulatory actions of other Federal
agencies that affect the manufacturers of
a covered product or equipment. While
any one regulation may not impose a
significant burden on manufacturers,
the combined effects of several existing
or impending regulations may have
serious consequences for some
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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.
DOE evaluates product-specific
regulations that will take effect
approximately three years before or after
the estimated 2030 compliance date of
any amended energy conservation
standards for consumer boilers. This
information is presented in Table V.22.
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TABLE V.22—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION
STANDARDS AFFECTING CONSUMER BOILER ORIGINAL EQUIPMENT MANUFACTURERS
Number of
OEMs *
Federal energy conservation standard
Commercial Water Heating Equipment† 87 FR 30610(May 19,
2022) ......................................................................................
Consumer Furnaces † 87 FR 40590 (July 7, 2022) ..................
Consumer Clothes Dryers † 87 FR 51734 (August 23, 2022) ..
Consumer Conventional Cooking Products 88 FR 6818 †
(February 1, 2023) .................................................................
Residential Clothes Washers † 88 FR 13520 (March 3, 2023)
Refrigerators, Freezers, and Refrigerator-Freezers † 88 FR
12452 (February 27, 2023) ....................................................
Room Air Conditioners 88 FR 34298 (May 26, 2023) ..............
Microwave Ovens 88 FR 39912 (June 20, 2023) .....................
Miscellaneous Refrigeration Products † 88 FR 19382 (March
31, 2023) ................................................................................
Dishwashers † 88 FR 32514 (May 19, 2023) ............................
Consumer Pool Heaters 88 FR 34624 (May 30, 2023) ............
Number of
OEMs
affected by
today’s rule **
Approx.
standards
compliance
year
Industry
conversion
costs
(millions $)
Industry
conversion
costs/product
revenue ***
(%)
14
15
15
11
4
1
2026
2029
2027
$34.60 (2020$)
150.6 (2020$)
149.7(2020$)
4.7
1.4
1.8
34
19
1
1
2027
2027
183.4 (2021$)
690.8 (2021$)
1.2
5.2
49
8
18
1
1
1
2027
2026
2026
1,323.6 (2021$)
24.8 (2021$)
46.1 (2021$)
3.8
0.4
0.7
38
22
20
1
1
3
2029
2027
2028
126.9 (2021$)
125.6 (2021$)
48.4 (2021$)
3.1
2.1
1.5
* This column presents the total number of OEMs identified in the energy conservation standard rule that is contributing to cumulative regulatory burden.
** This column presents the number of OEMs producing consumer boilers that are also listed as OEMs in the identified energy conservation
standard that is contributing to cumulative regulatory burden.
*** This column presents industry conversion costs as a percentage of product revenue during the conversion period. Industry conversion costs
are the upfront investments manufacturers must make to sell compliant products/equipment. The revenue used for this calculation is the revenue
from just the covered product/equipment associated with each row. The conversion period is the time frame over which conversion costs are
made and lasts from the publication year of the final rule to the compliance year of the energy conservation standard. The conversion period
typically ranges from 3 to 5 years, depending on the rulemaking.
† These rulemakings are at the NOPR stage, and all values are subject to change until finalized through publication of a final rule.
DOE requests information regarding
the impact of cumulative regulatory
burden on manufacturers of consumer
boilers associated with multiple DOE
standards or product-specific regulatory
actions of other Federal agencies in
addition to state or local regulations.
3. National Impact Analysis
This section presents DOE’s estimates
of the national energy savings and the
NPV of consumer benefits that would
result from each of the TSLs considered
as potential amended standards.
a. Significance of Energy Savings
To estimate the energy savings
attributable to potential amended
standards for consumer boilers, DOE
compared their energy consumption
under the no-new-standards case to
their anticipated energy consumption
under each TSL. The savings are
measured over the entire lifetime of
products purchased in the 30-year
period that begins in the year of
anticipated compliance with amended
standards (2030–2059). Table V.19
presents DOE’s projections of the
national energy savings for each TSL
considered for consumer boilers. The
savings were calculated using the
approach described in section IV.H.2 of
this document.
TABLE V.23—CUMULATIVE NATIONAL ENERGY SAVINGS FOR CONSUMER BOILERS; 30 YEARS OF SHIPMENTS
[2030–2059]
Trial standard level
1
2
3
4
(quads)
ddrumheller on DSK120RN23PROD with PROPOSALS2
Primary energy ................................................................................................
FFC energy ......................................................................................................
OMB Circular A–4 161 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
161 U.S. Office of Management and Budget,
Circular A–4: Regulatory Analysis (Sept. 17, 2003)
(Available at: www.whitehouse.gov/wp-content/
uploads/legacy_drupal_files/omb/circulars/A4/a4.pdf) (Last accessed March 7, 2023).
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to consider the variability of key
elements underlying the estimates of
benefits and costs. For this rulemaking,
DOE undertook a sensitivity analysis
using 9 years, rather than 30 years, of
product shipments. The choice of a 9year 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
PO 00000
0.31
0.36
0.61
0.68
0.73
0.83
revised standards.162 The review
162 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
Continued
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timeframe established in EPCA is
generally not synchronized with the
product lifetime, product manufacturing
cycles, or other factors specific to
consumer boilers. Thus, such results are
presented for informational purposes
only and are not indicative of any
change in DOE’s analytical
methodology. The NES sensitivity
analysis results based on a 9-year
analytical period are presented in Table
V.24. The impacts are counted over the
lifetime of consumer boilers purchased
in 2030–2038.
TABLE V.24—CUMULATIVE NATIONAL ENERGY SAVINGS FOR CONSUMER BOILERS; 9 YEARS OF SHIPMENTS
[2030–2038]
Trial standard level
1
2
3
4
(quads)
Primary energy ................................................................................................
FFC energy ......................................................................................................
b. Net Present Value of Consumer Costs
and Benefits
DOE estimated the cumulative NPV of
the total costs and savings for
0.02
0.03
consumers that would result from the
TSLs considered for consumer boilers.
In accordance with OMB’s guidelines on
regulatory analysis,163 DOE calculated
NPV using both a 7-percent and a 3-
0.13
0.15
0.24
0.27
0.27
0.30
percent real discount rate. Table V.21
shows the consumer NPV results with
impacts counted over the lifetime of
products purchased in 2030–2059.
TABLE V.25—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR CONSUMER BOILERS; 30 YEARS OF
SHIPMENTS
[2030–2059]
Trial standard level
Discount rate
1
2
3
4
(billion 2022$)
3 percent ..........................................................................................................
7 percent ..........................................................................................................
The NPV results based on the
aforementioned 9-year analytical period
are presented in Table V.22. The
impacts are counted over the lifetime of
0.16
0.01
products purchased in 2030–2038. As
mentioned previously, such results are
presented for informational purposes
only and are not indicative of any
0.73
0.19
2.27
0.72
(2.15)
(1.55)
change in DOE’s analytical methodology
or decision criteria.
TABLE V.26—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR CONSUMER BOILERS; 9 YEARS OF
SHIPMENTS
[2030–2038]
Trial standard level
Discount rate
1
2
3
4
(billion 2022$)
ddrumheller on DSK120RN23PROD with PROPOSALS2
3 percent ..........................................................................................................
7 percent ..........................................................................................................
0.11
0.01
0.47
0.15
1.22
0.47
(0.41)
(0.72)
The previous results reflect the use of
a default trend to estimate the change in
price for consumer boilers over the
analysis period (see section IV.F.1 of
this document). DOE also conducted a
sensitivity analysis that considered one
scenario with a lower rate of price
decline than the reference case and one
scenario with a higher rate of price
decline than the reference case. The
results of these alternative cases are
presented in appendix 10C of the NOPR
TSD. In the high-price-decline case, the
NPV of consumer benefits is higher than
in the default case. In the low-pricedecline case, the NPV of consumer
benefits is lower than in the default
case.
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 products, the compliance
period is 5 years rather than 3 years.
163 U.S. Office of Management and Budget,
Circular A–4: Regulatory Analysis (Sept. 17, 2003)
(Available at: www.whitehouse.gov/wp-content/
uploads/legacy_drupal_files/omb/circulars/A4/a4.pdf) (Last accessed March 7, 2023).
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c. Indirect Impacts on Employment
It is estimated that that amended
energy conservation standards for
consumer boilers would reduce energy
expenditures for consumers of those
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products, with the resulting net savings
being redirected to other forms of
economic activity. These expected shifts
in spending and economic activity
could affect the demand for labor. As
described in section IV.N of this
document, DOE used an input/output
model of the U.S. economy to estimate
indirect employment impacts of the
TSLs that DOE considered. There are
uncertainties involved in projecting
employment impacts, especially
changes in the later years of the
analysis. Therefore, DOE generated
results for near-term timeframes (2030–
2035), where these uncertainties are
reduced.
The results suggest that the proposed
standards would be likely to have a
negligible impact on the net demand for
labor in the economy. The net change in
jobs is so small that it would be
imperceptible in national labor statistics
and might be offset by other,
unanticipated effects on employment.
Chapter 16 of the NOPR TSD presents
detailed results regarding anticipated
indirect employment impacts.
4. Impact on Utility or Performance of
Products
As discussed in section III.G.1.d of
this document, DOE has tentatively
concluded that the standards proposed
in this NOPR would not lessen the
utility or performance of the consumer
boilers under consideration in this
proposed rulemaking. Manufacturers of
these products currently offer units that
meet or exceed the proposed standards.
5. Impact of Any Lessening of
Competition
DOE considered any lessening of
competition that would be likely to
result from new or amended standards.
As discussed in section III.G.1.e of this
document, the Attorney General
determines the impact, if any, of any
lessening of competition likely to result
from a proposed standard, and transmits
such determination in writing to the
Secretary, together with an analysis of
the nature and extent of such impact. To
assist the Attorney General in making
this determination, DOE has provided
DOJ with copies of this NOPR and the
accompanying TSD for review. DOE will
consider DOJ’s comments on the
proposed rule in determining whether
to proceed to a final rule. DOE will
publish and respond to DOJ’s comments
in that document.
DOE invites comment from the public
regarding the competitive impacts that
are likely to result from this proposed
rule. In addition, stakeholders may also
provide comments separately to DOJ
55199
regarding these potential impacts. See
the ADDRESSES section for information
regarding how to send comments to
DOJ.
6. Need of the Nation To Conserve
Energy
Enhanced energy efficiency, where
economically justified, improves the
Nation’s energy security, strengthens the
economy, and reduces the
environmental impacts (costs) of energy
production. Chapter 15 in the NOPR
TSD presents the estimated impacts on
electricity generating capacity, relative
to the no-new-standards case, for the
TSLs that DOE considered in this
rulemaking.
Energy conservation resulting from
potential energy conservation standards
for consume boilers is expected to yield
environmental benefits in the form of
reduced emissions of certain air
pollutants and greenhouse gases. Table
V.27 provides DOE’s estimate of
cumulative emissions reductions
expected to result from the TSLs
considered in this rulemaking. The
emissions were calculated using the
multipliers discussed in section IV.K of
this document. DOE reports annual
emissions reductions for each TSL in
chapter 13 of the NOPR TSD.
TABLE V.27—CUMULATIVE EMISSIONS REDUCTION FOR CONSUMER BOILERS SHIPPED IN 2030–2059
Trial standard level
1
2
3
4
Power Sector Emissions
CO2 (million metric tons) .................................................................................
CH4 (thousand tons) ........................................................................................
N2O (thousand tons) ........................................................................................
NOX (thousand tons) .......................................................................................
SO2 (thousand tons) ........................................................................................
Hg (tons) ..........................................................................................................
3.7
0.10
0.05
3.3
1.1
(0.0002)
18
0.38
0.07
16
1.0
(0.001)
34
0.75
0.16
30
2.6
(0.001)
41
0.89
0.17
36
2.6
(0.001)
0.6
30
0.00
7.8
0.1
0.00001
3
241
0.01
40
0.1
0.000003
5
437
0.01
75
0.2
0.00001
6
531
0.02
89
0.2
0.00001
4.3
30
0.05
11
1.2
(0.0002)
21
241
0.08
57
1.1
(0.001)
39
438
0.17
105
2.7
(0.001)
47
532
0.19
126
2.8
(0.001)
Upstream Emissions
CO2 (million metric tons) .................................................................................
CH4 (thousand tons) ........................................................................................
N2O (thousand tons) ........................................................................................
NOX (thousand tons) .......................................................................................
SO2 (thousand tons) ........................................................................................
Hg (tons) ..........................................................................................................
ddrumheller on DSK120RN23PROD with PROPOSALS2
Total FFC Emissions
CO2 (million metric tons) .................................................................................
CH4 (thousand tons) ........................................................................................
N2O (thousand tons) ........................................................................................
NOX (thousand tons) .......................................................................................
SO2 (thousand tons) ........................................................................................
Hg (tons) ..........................................................................................................
Note: Negative values in parentheses refer to an increase in emissions.
As part of the analysis for this
proposed rulemaking, DOE estimated
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monetary benefits likely to result from
the reduced emissions of CO2 that DOE
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estimated for each of the considered
TSLs for consumer boilers. Section IV.L
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of this document discusses the SC–CO2
values that DOE used. Table V.28
presents the value of CO2 emissions
reduction at each TSL for each of the
SC–CO2 cases. The time-series of annual
values is presented for the proposed
TSL in chapter 14 of the NOPR TSD.
TABLE V.28—PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR CONSUMER BOILERS SHIPPED IN 2030–2059
SC–CO2 case
Discount rate and statistics
TSL
5%
3%
2.5%
3%
Average
Average
Average
95th percentile
(million 2022$)
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
As discussed in section IV.L.1.b of
this document, DOE estimated the
climate benefits likely to result from the
reduced emissions of methane and N2O
that DOE estimated for each of the
39
184
332
407
considered TSLs for consumer boilers.
Table V.29 presents the value of the CH4
emissions reduction at each TSL, and
Table V.30 presents the value of the N2O
emissions reduction at each TSL. The
172
814
1,482
1,800
270
1,284
2,343
2,840
522
2,467
4,489
5,457
time-series of annual values is presented
for the proposed TSL in chapter 14 of
the NOPR TSD.
TABLE V.29—PRESENT VALUE OF METHANE EMISSIONS REDUCTION FOR CONSUMER BOILERS SHIPPED IN 2030–2059
SC–CH4 case
Discount rate and statistics
TSL
5%
3%
2.5%
3%
Average
Average
Average
95th percentile
(million 2022$)
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
13
99
174
217
40
306
544
671
56
431
767
944
106
811
1,438
1,778
TABLE V.30—PRESENT VALUE OF NITROUS OXIDE EMISSIONS REDUCTION FOR CONSUMER BOILERS SHIPPED IN 2030–
2059
SC–N2O case
Discount rate and statistics
TSL
5%
3%
2.5%
3%
Average
Average
Average
95th percentile
(million 2022$)
ddrumheller on DSK120RN23PROD with PROPOSALS2
1
2
3
4
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
DOE is well aware that scientific and
economic knowledge about the
contribution of CO2 and other GHG
emissions to changes in the future
global climate and the potential
resulting damages to the global and U.S.
economy continues to evolve rapidly.
DOE, together with other Federal
agencies, will continue to review
methodologies for estimating the
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0.3
0.6
0.6
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. DOE notes that
the proposed standards would be
economically justified even without
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1.1
2.3
2.6
1.1
1.7
3.7
4.0
1.8
2.9
6.2
6.9
inclusion of monetized benefits of
reduced GHG emissions.
DOE also estimated the monetary
value of the health benefits associated
with NOX and SO2 emissions reductions
anticipated to result from the
considered TSLs for consumer boilers.
The dollar-per-ton values that DOE used
are discussed in section IV.L of this
document. Table V.31 presents the
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present value for NOX emissions
reduction for each TSL calculated using
7-percent and 3-percent discount rates,
and Table V.32 presents similar results
for SO2 emissions reductions. The
results in these tables reflect application
of EPA’s low dollar-per-ton values,
which DOE used to be conservative. The
time-series of annual values is presented
for the proposed TSL in chapter 14 of
the NOPR TSD.
TABLE V.31—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR CONSUMER BOILERS SHIPPED IN 2030–2059
TSL
7% Discount rate
3% Discount rate
(million 2022$)
1
2
3
4
...............................................................................................................................................................
...............................................................................................................................................................
...............................................................................................................................................................
...............................................................................................................................................................
132
625
1,102
1,389
359
1,791
3,251
3,967
TABLE V.32—PRESENT VALUE OF SO2 EMISSIONS REDUCTION FOR CONSUMER BOILERS SHIPPED IN 2030–2059
TSL
7% Discount rate
3% Discount rate
(million 2022$)
1
2
3
4
...............................................................................................................................................................
...............................................................................................................................................................
...............................................................................................................................................................
...............................................................................................................................................................
Not all the public health and
environmental benefits from the
reduction of greenhouse gases, NOX,
and SO2 are captured in the values
above, and additional unquantified
benefits from the reductions of those
pollutants as well as from the reduction
of direct PM and other co-pollutants
may be significant. DOE has not
included monetary benefits of the
reduction of Hg emissions because the
amount of reduction is very small.
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)(VII)) No other factors
were considered in this analysis.
8. Summary of Economic Impacts
Table V.33 presents the NPV values
that result from adding the estimates of
the potential economic benefits
resulting from reduced GHG, NOX, and
14
12
34
35
41
34
94
98
SO2 emissions to the NPV of consumer
benefits calculated for each TSL
considered in this rulemaking. The
consumer benefits are domestic U.S.
monetary savings that occur as a result
of purchasing the covered consumer
boilers, and are measured for the
lifetime of products shipped in 2030–
2059. The climate benefits associated
with reduced GHG emissions resulting
from the adopted standards are global
benefits, and are also calculated based
on the lifetime of consumer boilers
shipped in 2030–2059.
TABLE V.33—CONSUMER NPV COMBINED WITH PRESENT VALUE OF CLIMATE BENEFITS AND HEALTH BENEFITS
Category
TSL 1
TSL 2
TSL 3
TSL 4
Using 3% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
5% Average SC–GHG case ............................................................................
3% Average SC–GHG case ............................................................................
2.5% Average SC–GHG case .........................................................................
3% 95th percentile SC–GHG case ..................................................................
0.6
0.8
0.9
1.2
2.8
3.7
4.3
5.8
6.1
7.6
8.7
11.5
2.5
4.4
5.7
9.2
2.4
3.9
5.0
7.8
0.5
2.3
3.7
7.1
Using 7% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
ddrumheller on DSK120RN23PROD with PROPOSALS2
5% Average SC–GHG case ............................................................................
3% Average SC–GHG case ............................................................................
2.5% Average SC–GHG case .........................................................................
3% 95th percentile SC–GHG case ..................................................................
C. Conclusion
When considering new or amended
energy conservation standards, the
standards that DOE adopts for any type
(or class) of covered product must be
designed to achieve the maximum
improvement in energy efficiency that
the Secretary determines is
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0.4
0.5
0.8
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.
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1.1
2.0
2.5
4.1
(42 U.S.C. 6295(o)(2)(B)(i)) The new or
amended standard must also result in
significant conservation of energy. (42
U.S.C. 6295(o)(3)(B))
For this NOPR, DOE considered the
impacts of amended standards for
consumer boilers at each TSL, beginning
with the maximum technologically
feasible level, to determine whether that
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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. DOE refers
to this process as the ‘‘walk-down’’
analysis.
To aid the reader as DOE discusses
the benefits and/or burdens of each TSL,
tables in this section present a summary
of the results of DOE’s quantitative
analysis for each TSL. 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.
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 or informational
asymmetries; (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,
between renters and owners, or builders
and purchasers, or between current and
subsequent owners). Having less than
perfect foresight and a high degree of
uncertainty about the future, consumers
may trade off these types of investments
at a higher-than-expected rate between
current consumption and uncertain
future energy cost savings.
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 the purchase of a
product in the standards case, this
decreases sales for product
manufacturers, and the impact on
manufacturers attributed to lost revenue
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 shipments
and changes in the volume of product
purchases in chapter 9 of the NOPR
TSD. However, DOE’s current analysis
does not explicitly control for
heterogeneity in consumer preferences,
preferences across subcategories of
products or specific features, or
consumer price sensitivity variation
according to household income.164
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 energy
conservation standards, and potential
enhancements to the methodology by
which these impacts are defined and
estimated in the regulatory process.165
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 in
future rulemakings.
1. Benefits and Burdens of TSLs
Considered for Consumer Boiler
Standards
Table V.34 and Table V.35 summarize
the quantitative impacts estimated for
each TSL for consumer boilers. The
national impacts are measured over the
lifetime of consumer boilers purchased
in the 30-year period that begins in the
anticipated year of compliance with
amended standards (2030–2059). The
energy savings, emissions reductions,
and value of emissions reductions refer
to full-fuel-cycle results. DOE is
presenting monetized benefits in
accordance with the applicable
Executive Orders, and DOE would reach
the same conclusion presented in this
notice of proposed rulemaking in the
absence of the social cost of greenhouse
gases, including the Interim Estimates
presented by the Interagency Working
Group. The efficiency levels contained
in each TSL are described in section
V.A of this document.
TABLE V.34—SUMMARY OF ANALYTICAL RESULTS FOR CONSUMER BOILERS TSLS: NATIONAL IMPACTS
Category
TSL 1
TSL 2
TSL 3
TSL 4
Cumulative FFC National Energy Savings
Quads ..............................................................................................................
0.06
0.36
0.68
0.83
21
241
0.08
57
1.1
(0.0013)
39
438
0.17
105
2.7
(0.0010)
47
532
0.19
126
2.8
(0.0009)
3.1
3.7
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Cumulative FFC Emissions Reduction
CO2 (million metric tons) .................................................................................
CH4 (thousand tons) ........................................................................................
N2O (thousand tons) ........................................................................................
NOX (thousand tons) .......................................................................................
SO2 (thousand tons) ........................................................................................
Hg (tons) ..........................................................................................................
4
30
0.05
11
1.2
(0.0002)
Present Value of Monetized Benefits and Costs (3% discount rate, billion 2022$)
Consumer Operating Cost Savings .................................................................
164 P.C. Reiss and M.W. White. Household
Electricity Demand, Revisited. Review of Economic
Studies. 2005. 72(3): pp. 853–883. doi: 10.1111/
0034–6527.00354.
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0.5
165 Sanstad, A.H., Notes on the Economics of
Household Energy Consumption and Technology
Choice (2010) Lawrence Berkeley National
Laboratory (Available at: www1.eere.energy.gov/
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TABLE V.34—SUMMARY OF ANALYTICAL RESULTS FOR CONSUMER BOILERS TSLS: NATIONAL IMPACTS—Continued
Category
TSL 1
Climate Benefits * .............................................................................................
Health Benefits ** .............................................................................................
Total Monetized Benefits † ..............................................................................
Consumer Incremental Product Costs ‡ ..........................................................
Consumer Net Benefits ...................................................................................
Total Net Monetized Benefits ..........................................................................
TSL 2
0.2
0.4
1.1
0.34
0.16
0.78
TSL 3
1.1
1.8
4.3
0.62
0.73
3.7
TSL 4
2.0
3.3
8.5
0.82
2.3
7.6
2.5
4.1
10.3
5.9
(2.2)
4.4
1.1
2.0
1.1
4.3
0.43
0.72
3.9
1.4
2.5
1.4
5.3
2.9
(1.6)
2.3
Present Value of Monetized Benefits and Costs (7% discount rate, billion 2022$)
Consumer Operating Cost Savings .................................................................
Climate Benefits * .............................................................................................
Health Benefits ** .............................................................................................
Total Monetized Benefits † ..............................................................................
Consumer Incremental Product Costs ‡ ..........................................................
Consumer Net Benefits ...................................................................................
Total Net Monetized Benefits ..........................................................................
0.19
0.21
0.15
0.55
0.18
0.01
0.37
0.51
1.1
0.64
2.3
0.32
0.19
2.0
Note: This table presents the present value (in 2022) of costs and benefits associated with consumer boilers shipped in 2030–2059. These results include benefits which accrue after 2059 from the products shipped in 2030–2059.
* Climate benefits are calculated using four different estimates of the SC–CO2, SC–CH4 and SC–N2O. Together, these represent the global
SC–GHG. For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are
shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. To
monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support Document: Social
Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for NOX and SO2) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as
health benefits from reductions in direct PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details.
† Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total and net benefits for both the 3-percent
and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department does not have a single central
SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates.
‡ Costs include incremental equipment costs as well as installation costs.
TABLE V.35—SUMMARY OF ANALYTICAL RESULTS FOR CONSUMER BOILERS TSLS: MANUFACTURER AND CONSUMER
IMPACTS
Category
TSL 1 *
TSL 2 *
TSL 3 *
TSL 4 *
371.9 to 389.0
41.7
65.9 to 66.6
7.5
487.0 to 504.8
364.6 to 384.4
41.7
60.0 to 61.4
3.4 to 3.6
469.7 to 491.2
316.7 to 428.9
30.8 to 32.5
60.0 to 61.4
3.4 to 3.6
411.9 to 527.6
(9.2) to (5.0)
0.0
(10.3) to (9.4)
0.0
(8.5) to (5.1)
(11.0) to (6.1)
0.0
(18.4) to (16.4)
(54.6) to (52.7)
(11.7) to (7.7)
(22.7) to 4.8
(26.2) to (22.2)
(18.4) to (16.4)
(54.6) to (52.7)
(22.6) to (0.8)
275
NA
374
NA
296
768
NA
666
310
737
(526)
(53)
666
310
(380)
3.4
NA
3.3
NA
2.9
2.7
NA
3.3
5.5
2.4
9.9
20.4
3.3
5.5
9.7
13
11
78
Manufacturer Impacts: INPV (million 2022$)
GHW (No-new-standards case INPV = 409.4) ...............................................
GST (No-new-standards case INPV = 41.7) ...................................................
OHW (No-new-standards case INPV = 73.5) .................................................
OST (No-new-standards case INPV = 7.5) .....................................................
Total INPV (No-new-standards case INPV = 532.0) .......................................
399.1 to 401.5
41.7
65.9 to 66.6
7.5
514.1 to 517.1
Manufacturer Impacts: INPV (% change)
GHW ................................................................................................................
GST ..................................................................................................................
OHW ................................................................................................................
OST ..................................................................................................................
Total INPV .......................................................................................................
(2.5) to (1.9)
0.0
(10.3) to (9.4)
0.0
(3.4) to (2.8)
Consumer Average LCC Savings (2022$)
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GHW ................................................................................................................
GST ..................................................................................................................
OHW ................................................................................................................
OST ..................................................................................................................
Shipment-Weighted Average * .........................................................................
(193)
NA
374
NA
(50)
Consumer Simple PBP (years)
GHW ................................................................................................................
GSTs ................................................................................................................
OHW ................................................................................................................
OST ..................................................................................................................
Shipment-Weighted Average * .........................................................................
29.2
NA
3.3
NA
22.9
Percent of Consumers that Experience a Net Cost
GHW ................................................................................................................
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TABLE V.35—SUMMARY OF ANALYTICAL RESULTS FOR CONSUMER BOILERS TSLS: MANUFACTURER AND CONSUMER
IMPACTS—Continued
Category
TSL 1 *
GST ..................................................................................................................
OHW ................................................................................................................
OST ..................................................................................................................
Shipment-Weighted Average * .........................................................................
TSL 2 *
NA
4
NA
9
TSL 3 *
NA
4
NA
10
TSL 4 *
NA
4
14
9
56
4
14
66
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Note: Parentheses indicate negative (¥) values. The entry ‘‘n.a.’’ means not applicable because there is no change in the standard at certain
TSLs (i.e., standard remains at the baseline).
* Weighted by shares of each product class in total projected shipments in 2030.
DOE first considered TSL 4, which
represents the max-tech efficiency levels
for all product classes. These levels
include 96-percent AFUE for consumer
gas-fired hot water boilers (representing
condensing operation), 83-percent
AFUE for consumer gas-fired steam
boilers, 88-percent AFUE for consumer
oil-fired hot water boilers, and 86percent AFUE for consumer oil-fired
steam boilers. Gas-fired hot water, gasfired steam, oil-fired hot water, and oilfired steam boilers account for
approximately 78 percent, 8 percent, 13
percent, and 1 percent of current
industry shipments, respectively. At
this TSL, the Secretary has determined
that the benefits are outweighed by the
burdens, as discussed in detail in the
following paragraphs.
TSL 4 would save an estimated 0.83
quads of energy, an amount DOE
considers significant, primarily driven
by the savings associated with
condensing operation for gas-fired hot
water boilers, the largest product class
of consumer boilers. Consumer gas-fired
hot water boilers save an estimated 0.73
quads. Consumer gas-fired steam boilers
save an estimated 0.02 quads. Consumer
oil-fired hot water boilers save an
estimate 0.08 quads of energy.
Consumer oil-fired steam boilers save an
estimate 0.003 quads of energy.
Under TSL 4, the NPV is negative,
indicating that consumer costs exceed
consumer benefits. The NPV would be
¥$1.55 billion using a discount rate of
7 percent, and ¥$2.15 billion using a
discount rate of 3 percent. Much of the
consumer costs are driven by consumer
gas-fired boilers, which have the largest
share of shipments and a significant
increase in total installed costs at the
max-tech efficiency level to
accommodate 96-percent AFUE
compared to other product classes. The
NPV for consumer gas-fired hot water
boilers would be ¥$1.76 billion using a
7-percent discount rate, and ¥$2.80
billion using a 3-percent discount rate.
The NPV for consumer gas-fired steam
boilers would be ¥$0.02 billion using a
7-percent discount rate, and ¥$0.02
billion using a 3-percent discount rate.
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For consumer oil-fired boilers, the NPV
is positive, indicating that consumer
benefits exceed consumer costs. The
NPV for consumer oil-fired hot water
boilers would be $0.22 billion at a 7percent discount rate and $0.65 billion
at a 3-percent discount rate. The NPV
for consumer oil-fired boilers (hot water
and steam) would be $0.01 billion at a
7-percent discount rate and $0.02
billion at a 3-percent discount rate.
The cumulative emissions reductions
at TSL 4 are 47 million metric tons of
CO2, 532 thousand tons of CH4, 0.19
thousand tons of N2O, and 126 thousand
tons of NOX, 2.8 thousand tons of SO2,
and an increase of 0.001 tons of Hg due
to slightly higher electricity
consumption. The estimated monetary
value of the climate benefits from
reduced GHG emissions (associated
with the average SC–GHG at a 3-percent
discount rate) at TSL 4 is $2.5 billion.
The estimated monetary value of the
health benefits from reduced NOX and
SO2 emissions at TSL 4 is $1.4 billion
using a 7-percent discount rate and $4.1
billion using a 3-percent discount rate.
Using a 7-percent discount rate for
consumer benefits and costs, health
benefits from reduced SO2 and NOX
emissions, and the 3-percent discount
rate case for climate benefits from
reduced GHG emissions, the estimated
total NPV at TSL 4 is $2.3 billion. Using
a 3-percent discount rate for all benefits
and costs, the estimated total NPV at
TSL 4 is $4.4 billion. The estimated
total NPV is provided for additional
information; however, DOE primarily
relies upon the NPV of consumer
benefits when determining whether a
proposed standard level is economically
justified.
At TSL 4, the average LCC impact is
a cost of $526 for consumer gas-fired hot
water boilers, a cost of $53 for consumer
gas-fired steam boilers, a savings of $666
for consumer oil-fired hot water boilers,
and a savings of $310 for consumer oilfired steam boilers. The average
consumer costs exceed the benefits for
gas-fired boilers and the average
consumer benefits exceed the costs for
oil-fired boilers at TSL 4. For example,
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the average total installed costs for gasfired hot water boilers are $1,292 higher
at max-tech compared to the baseline
efficiency level, with only a
corresponding savings of $130 in firstyear operating costs. In contrast, the
average total installed costs for oil-fired
hot water boilers are only $192 higher
at max-tech compared to the baseline
efficiency level, with a corresponding
savings of $59 in first-year operating
costs. The fraction of consumers
experiencing a net LCC cost is 78
percent for consumer gas-fired hot water
boilers, 56 percent for consumer gasfired steam boilers, 4 percent for
consumer oil-fired hot water boilers,
and 14 percent for consumer oil-fired
steam boilers. For a majority of gas-fired
boiler consumers, the costs exceed the
benefits.
At TSL 4, the projected change in
INPV ranges from a decrease of $120.0
million to a decrease of $4.3 million,
which corresponds to decreases of 22.6
percent and 4.3 percent, respectively.
Industry conversion costs could reach
$170.1 million as gas-fired hot water
boiler manufacturers develop or expand
their production capacity for
condensing models and work with
suppliers to develop new condensing
heat exchangers that can meet the maxtech efficiency of 96-percent AFUE, and
as manufacturers of other product
classes invest in higher-efficiency noncondensing designs.
At TSL 4, all gas-fired hot water
boilers must transition to the max-tech
condensing technology. This is a
significant technological shift and may
be challenging for many manufacturers.
Out of the 24 gas-fired hot water boiler
OEMs, only six OEMs offer models that
meet the efficiencies required by TSL 4.
Less than 5 percent of gas-fired hot
water model listings can meet the 96percent AFUE required. The projected
change in INPV for the gas-fired hot
water industry ranges from a decrease of
$92.8 million to an increase of $19.5
million, which correspond to ¥22.7
percent and 4.8 percent, respectively.
The lower bound is driven by the
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industry conversion costs of $117.4
million.
With 95 percent of all model offerings
now on the market rendered obsolete,
all 24 manufacturers would need to reevaluate and redesign their portfolio of
product offerings. Many OEMs that have
extensive condensing gas-fired hot
water product offerings do not have any
models that can meet max-tech. Even
OEMs that offer some max-tech models
today would need to allocate extensive
technical resources to provide max-tech
offerings across the full range of
capacities to serve their customers.
Manufacturers that are heavily invested
in the non-condensing market would
likely need to re-orient their role in the
market and determine how to compete
in a marketplace where there is only one
efficiency level.
Traditionally, manufacturers have
designed their product lines to support
a range of models with varying input
capacities, and the efficiency has varied
between models within the line. In
reviewing available models, DOE found
that manufacturers generally only have
one or two input capacities optimized to
achieve 96-percent AFUE within
product lines, while the remaining
input capacities are at a lower AFUE.
This suggests that manufacturers would
have to individually redesign each
model within product lines to ensure all
models can achieve the max-tech level.
Redesign by individual model would
necessitate a significant increase in
design effort for manufacturers.
Additionally, for manufacturers who
source condensing heat exchangers
(which is the majority of OEMs
producing condensing boilers), there is
concern that the relatively lower
shipment volumes of boilers in the U.S.
market (relative to international markets
for boilers) will make it difficult to find
suppliers willing to produce heat
exchanger designs that would allow all
models within their gas-fired hot water
product lines to meet 96-percent AFUE,
as each heat exchanger design would
need to be optimized for a given input
capacity. The need for gas-fired hot
water manufacturers to invest heavily in
redesign drives the industry’s product
conversion costs to $39.5 million.
The push toward new product designs
would also require changes to the
manufacturing facilities. While most
manufacturer offer some condensing
models today, a max-tech standard
would accelerate the market shift to
condensing products, and all
manufacturers would likely need to
make capital investments to extend or
add production lines for gas-fired hot
water boilers. Industry capital
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conversion costs could reach $77.9
million.
Gas-fired steam shipments account for
approximately 10 percent of current
industry shipments. Oil-fired hot water
shipments account for approximately 14
percent of current industry shipments.
Oil-fired steam shipments account for
approximately 1 percent of current
industry shipments. The technology
options to improve efficiency are similar
across the three product classes. The
max-tech efficiency level at TSL 4 for
these three product classes does not
require a shift to condensing designs
and does not dramatically alter the
manufacturing process.
All four gas-fired steam boiler OEMs
offer at least one model that meets maxtech. However, only 8 percent of gasfired steam model listings meet the
efficiencies required by TSL 4. The
projected change in INPV for the gasfired steam industry ranges from a
decrease of $10.9 million to a decrease
of $9.3 million, which correspond to
¥22.6 percent and ¥22.2 percent,
respectively. The potential losses in
INPV are driven by the industry
conversion costs of $19.9 million.
Out of the 11 oil-fired hot water boiler
OEMs, two OEMs offer models that can
meet max-tech. Approximately 3
percent of oil-fired hot water model
listings are at max-tech. The projected
change in INPV for the oil-fired hot
water industry ranges from a decrease of
$13.6 million to a decrease of $12.1
million, which correspond to ¥18.4
percent and ¥16.4 percent,
respectively. The decrease in INPV is
driven by the industry conversion costs
of $25.6 million.
Of the four oil-fired steam boiler
OEMs, two OEMs offer max-tech
models. Approximately 22 percent of
oil-fired steam model listings can meet
TSL 4. The projected change in INPV for
the oil-fired steam industry ranges from
a decrease of $4.1 million to a decrease
of $4.0 million, which correspond to
¥54.6 percent and ¥52.7 percent,
respectively. The decrease in INPV is
driven by the industry conversion costs
of $7.2 million.
The design options available to
increase the efficiency of gas-fired
steam, oil-fired hot water, and oil-fired
steam boilers are similar. Manufacturers
may be able to meet max-tech efficiency
for some models by adding additional
heat exchanger sections. However,
where additional sections are not
sufficient, manufacturers may need to
invest in the more time-intensive
process of redesigning of the heat
exchanger and in new castings and
tooling to achieve max-tech efficiencies.
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The Secretary tentatively concludes
that at TSL 4 for consumer boilers, the
benefits of energy savings, positive NPV
of consumer benefits for the oil-fired
boiler product classes, emission
reductions, and the estimated monetary
value of the emissions reductions would
be outweighed by the economic burden
on some consumers (particularly the
majority of gas-fired boiler consumers)
and the impacts on manufacturers of
gas-fired hot water boilers, including the
potentials for large conversion costs, for
reduced product availability, and for
substantial reductions in INPV. In
particular, DOE notes that TSL 4 could
lead to substantial upfront investments
for the gas-fired hot water products,
which account for the largest portion of
shipments by product class. At maxtech, 95 percent of all model offerings
would be made obsolete. All 24
manufacturers would need to reevaluate and redesign their portfolio of
product lines. Although the max-tech
efficiency level has been demonstrated
to be achievable for a wide range of
input capacities, most product lines
only have one or two models meeting
the max-tech level, while the remaining
input capacities are at a lower AFUE
level. This suggests that even
manufacturers who currently offer maxtech models would have to individually
redesign each model within product
lines to ensure all models can achieve
the max-tech level. Additionally,
manufactures would need to ramp up
production capacity of max-tech
condensing units, through expansion of
existing production lines or addition of
new lines. Furthermore, manufacturer
raised concerns about their ability to
source the custom heat exchangers
necessary to optimize models at every
input capacity to meet a standard set at
96-percent AFUE. The average LCC
impact is negative for consumer gasfired hot water and steam boilers,
indicating that the consumer costs
exceed the benefits. Consequently, the
Secretary has tentatively concluded that
the current record does not provide a
clear and convincing basis to conclude
that TSL 4 is economically justified.
DOE then considered TSL 3, which
represents the max-tech efficiency levels
for consumer oil-fired boilers, 95percent AFUE for consumer gas-fired
hot water boilers (representing
condensing operation), and baseline
efficiency levels (which would result in
no amendment to the energy
conservation standard) for consumer
gas-fired steam boilers.
TSL 3 would save an estimated 0.69
quads of energy, an amount DOE
considers significant, primarily driven
by the savings associated with
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condensing operation for gas-fired hot
water boilers, which are the largest
product class of consumer boilers.
Consumer gas-fired hot water boilers
save an estimated 0.61 quads. Consumer
oil-fired hot water boilers save an
estimated 0.08 quads of energy.
Consumer oil-fired steam boilers save an
estimated 0.003 quads of energy. There
are no savings from consumer gas-fired
steam boilers at TSL 3, as DOE is not
considering amendments to the energy
conservation standard at this TSL.
Under TSL 3, the NPV is positive,
indicating that consumer benefits
exceed consumer costs across all
product classes. The NPV would be
$0.72 billion using a discount rate of 7
percent, and $2.27 billion using a
discount rate of 3 percent. The NPV for
consumer gas-fired hot water boilers
would be $0.49 billion using a 7-percent
discount rate, and $1.60 billion using a
3-percent discount rate. The NPV for
consumer oil-fired hot water boilers
would be $0.22 billion at a 7-percent
discount rate and $0.65 billion at a 3percent discount rate. The NPV for
consumer oil-fired boilers (hot water
and steam) would be $0.01 billion at a
7-percent discount rate and $0.02
billion at a 3-percent discount rate.
The cumulative emissions reductions
at TSL 3 are 39 million metric tons of
CO2, 438 thousand tons of CH4, 0.17
thousand tons of N2O, 105 thousand
tons of NOX, and 2.7 thousand tons of
SO2, and an increase of 0.001 tons of Hg
due to slightly higher electricity
consumption. The estimated monetary
value of the climate benefits from
reduced GHG emissions (associated
with the average SC–GHG at a 3-percent
discount rate) at TSL 3 is $2.0 billion.
The estimated monetary value of the
health benefits from reduced NOX and
SO2 emissions at TSL 3 is $1.1 billion
using a 7-percent discount rate and $3.3
billion using a 3-percent discount rate.
Using a 7-percent discount rate for
consumer benefits and costs, health
benefits from reduced SO2 and NOX
emissions, and the 3-percent discount
rate case for climate benefits from
reduced GHG emissions, the estimated
total NPV at TSL 3 is $3.9 billion. Using
a 3-percent discount rate for all benefits
and costs, the estimated total NPV at
TSL 3 is $7.6 billion. The estimated
total NPV is provided for additional
information; however, DOE primarily
relies upon the NPV of consumer
benefits when determining whether a
proposed standard level is economically
justified.
At TSL 3, the average LCC impact is
a savings of $768 for consumer gas-fired
hot water boilers, a savings of $666 for
consumer oil-fired hot water boilers,
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and a savings of $310 for consumer oilfired steam boilers. The average
consumer benefits exceed the costs for
these impacted product classes at TSL 3.
There is no LCC impact for consumer
gas-fired steam boilers at TSL 3, as the
energy conservation standard is not
being amended. The fraction of
consumers experiencing a net LCC cost
is 11 percent for consumer gas-fired hot
water boilers, 4 percent for consumer
oil-fired hot water boilers, and 14
percent for consumer oil-fired steam
boilers. For a majority of boiler
consumers of these impacted product
classes, the benefits exceed the costs.
There are no consumers with a net LCC
cost for consumer gas-fired steam
boilers at TSL 3, as the energy
conservation standard is not being
amended. Low-income consumers are
not disproportionately impacted, as
many are renters that either do not pay
for equipment costs or energy costs. As
such, the proportion of low-income
consumers that are not impacted or who
experience a net benefit are higher than
in the main LCC analysis. Specifically,
the fraction of low-income consumers
experiencing a net LCC cost is 6 percent
for consumer gas-fired hot water boilers,
1 percent for consumer oil-fired hot
water boilers, and 4 percent for
consumer oil-fired steam boilers. For a
majority of low-income boiler
consumers of these impacted product
classes, the benefits exceed the costs.
There are no low-income consumers
with a net LCC cost for consumer gasfired steam boilers at TSL 3, as the
energy conservation standard is not
being amended.
At TSL 3, the projected change in
INPV ranges from a decrease of $62.2
million to a decrease of $40.7 million,
which correspond to decreases of 11.7
percent and 7.7 percent, respectively.
Industry conversion costs could reach
$98.0 million. Gas-fired hot water boiler
manufacturers develop or expand their
production capacity for condensing
models; however, DOE expects
significantly lower product conversion
costs than would be required at TSL 4.
Manufacturers of oil-fired hot water and
oil-fired steam boilers would need to
invest in higher-efficiency noncondensing designs.
Out of the 24 gas-fired hot water
OEMs, 18 OEMs offer products that
meet the 95-percent AFUE required.
Approximately 40 percent of gas-fired
hot water model listings can meet TSL
3. The projected change in INPV for the
gas-fired hot water industry ranges from
a decrease of $44.9 million to a decrease
of $25.0 million, which correspond to
¥11.0 percent and ¥6.1 percent,
respectively. The lower bound is driven
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by the industry conversion costs of
$65.2 million. The design options
analyzed at TSL 3 for gas-fired hot water
boilers included implementing a
condensing stainless-steel heat
exchanger with a premix modulating
burner. As with TSL 4, manufacturers
heavily invested in non-condensing gasfired hot water boilers would need to
develop or expand their condensing
production capacity, which would
necessitate new production lines and
updates to the factory floor. However,
unlike TSL 4, most manufacturers
currently offer products that meet the
95-percent AFUE required.
Additionally, TSL 3 reduces the need to
redesign by optimizing design at the
individual model level to meet amended
standards. At TSL 3, industry product
conversion costs decrease to $3.1
million.
At TSL 3, the efficiency level for gasfired steam boilers is the baseline
efficiency (82-percent AFUE). Therefore,
all gas-fired steam shipments can meet
TSL 3. When evaluating this product
class in isolation, DOE expects minimal
change in INPV for the gas-fired steam
industry and zero conversion costs.
At TSL 3, the efficiency level for oilfired hot water and oil-fired steam
boilers is identical to TSL 4. The
projected change in INPV for the oilfired hot water industry ranges from a
decrease of $13.6 million to a decrease
of $12.1 million, which correspond to
¥18.4 percent and ¥16.4 percent,
respectively. The decrease in INPV is
driven by the industry conversion costs
of $25.6 million. At TSL 3, the
efficiency level for oil-fired steam
boilers identical to TSL 4. The projected
change in INPV for the oil-fired steam
industry ranges from a decrease of $4.1
million to a decrease of $4.0 million,
which correspond to ¥54.6 percent and
¥52.7 percent, respectively. The
decrease in INPV is driven by the
industry conversion costs of $7.2
million.
Oil-fired hot water and oil-fired steam
manufacturers would need to redesign a
large portion of their products.
However, the redesign would rely on
existing technologies. DOE expect
manufactures to meet max-tech
efficiency for some models by adding
additional heat exchanger sections and
vent dampers. However, where
additional sections are not sufficient,
manufacturers may need to invest in the
more time-intensive process of
redesigning the heat exchanger and in
new castings and tooling to achieve
max-tech efficiencies.
After considering the analysis and
weighing the benefits and burdens, the
Secretary tentatively concludes that a
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standard set at TSL 3 for consumer
boilers would be economically justified.
At this TSL, the average LCC savings for
consumer gas-fired hot water boilers,
consumer oil-fired hot water boilers,
and consumer oil-fired steam boilers are
positive. The FFC national energy
savings are significant. The NPV of
consumer benefits is positive for each
impacted product classes using both a 3percent and 7-percent discount rate.
Notably, the benefits to consumers
substantially outweigh the cost to
manufacturers. At TSL 3, with regard to
gas-fired hot water boilers, which
account for approximately 75 percent of
current industry shipments, most
manufacturers offer a range of models
that meet the efficiency level required.
Out of the 24 gas-fired hot water OEMs,
18 OEMs offer around 252 models
(accounting for 40 percent of gas-fired
hot water model listings) that meet the
95-percent AFUE required. At TSL 3,
the NPV of consumer benefits, even
measured at the more conservative
discount rate of 7 percent, is more than
900 percent higher than the maximum
of manufacturers’ loss in INPV. The
positive average LCC savings—a
different way of quantifying consumer
benefits—reinforces this conclusion.
The economic justification for TSL 3 is
clear and convincing even without
weighing the estimated monetary value
of emissions reductions. When those
emissions reductions are included—
representing $2.0 billion in climate
benefits (associated with the average
SC–GHG at a 3-percent discount rate),
and $3.3 billion (using a 3-percent
discount rate) or $1.1 billion (using a 7percent discount rate) in health
benefits—the rationale becomes stronger
still.
As stated, DOE conducts the walkdown analysis to determine the TSL that
represents the maximum improvement
in energy efficiency that is
technologically feasible and
economically justified, as required
under EPCA. Although DOE has not
conducted a comparative analysis to
select the amended energy conservation
standards, DOE notes that at TSL 3, the
efficiency levels result in the largest
LCC savings for each product class and
the largest NPV for each product class
compared to any other efficiency level.
Additionally, the conversion costs for
gas-fired hot water and gas-fired steam
boiler at substantially lower at TSL 3.
Although DOE considered proposed
amended standard levels for consumer
boilers by grouping the efficiency levels
for each product class into TSLs, DOE
evaluates all analyzed efficiency levels
for all product classes in its analysis.
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For consumer gas-fired hot water
boilers, TSL 3 includes an efficiency
level (i.e., EL 3) that is one level below
the max-tech efficiency level. As
discussed previously, at the max-tech
efficiency level for gas-fired hot water
boilers, there is an average LCC cost of
$526 and a majority of consumers (78
percent) with a net LCC cost.
Furthermore, for low-income consumers
of gas-fired hot water boilers, there is an
average LCC cost of $161 and 34 percent
with a net LCC cost at the max-tech
efficiency level. Additionally,
conversion costs could reach $117.4
million for industry. At EL 4 (i.e., the
max-tech efficiency level for gas-fired
hot water boilers), less than 5 percent of
industry models would meet the
amended standard. However, at EL 3
(i.e., the efficiency level below maxtech), approximately 40 percent of
industry models would meet the
standard. Furthermore, redesign efforts
for gas-fired hot water boilers would be
significantly less at EL 3, as
manufacturer would not need to
optimize performance for every product
line and input capacity individually to
achieve the proposed efficiency level.
This difference in redesign effort is the
primary driver that reduces conversion
costs down from $117.4 million at maxtech to $65.2 million at EL 3. The
benefits of the max-tech efficiency level
for consumer gas-fired hot water boilers
do not outweigh the negative impacts to
consumers and manufacturers.
Therefore, DOE tentatively concludes
that the max-tech efficiency level is not
justified for consumer gas-fired hot
water boilers. In contrast, EL 3 for
consumer gas-fired hot water boilers
results in positive average LCC savings
of $768 and a minority of consumers (11
percent) with a net LCC cost. Similarly,
for low-income consumers, the
efficiency level below max-tech for
consumer gas-fired hot water boilers
results in positive average LCC savings
of $643 and 9 percent with a net LCC
cost. Additionally, greater than 50
percent of the shipments for consumer
gas-fired hot water boilers is at or above
EL 3, clearly supporting the viability of
products at this efficiency level in the
market. At this level, industry
conversion costs are significantly lower
at 65.2 million. Therefore, DOE
tentatively concludes that EL 3 is
justified for consumer gas-fired hot
water boilers.
For consumer gas-fired steam boilers,
TSL 3 includes the baseline efficiency
level. The only efficiency level above
baseline that was analyzed for consumer
gas-fired steam boilers is the max-tech
efficiency level, which results in an
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average LCC cost and a majority of
consumers with a net LCC costs. The
benefits of the max-tech efficiency level
for consumer gas-fired steam boilers do
not outweigh the negative impacts to
consumers and manufacturers.
Therefore, DOE tentatively concludes
that the max-tech efficiency level is not
justified and is not proposing to amend
the energy conservation standard for
consumer gas-fired steam boilers.
For consumer oil-fired hot water
boilers, TSL 3 includes the max-tech
efficiency level, which is the maximum
level determined to be technologically
feasible. The max-tech efficiency level
for consumer oil-fired hot water boilers
results in an average LCC savings of
$666 and a minority of consumers (4
percent) with a net LCC cost. Similarly,
for low-income consumers, the
efficiency level below max-tech for
consumer oil-fired hot water boilers
results in positive average LCC savings
of $603 and 1 percent with a net LCC
cost. The benefits of max-tech efficiency
levels for consumer oil-fired hot water
boilers outweigh the negative impacts to
consumers and manufacturers.
Therefore, DOE tentatively concludes
that the max-tech efficiency level is
justified for consumer oil-fired hot
water boilers.
For consumer oil-fired steam boilers,
TSL 3 includes the max-tech efficiency
level, which is the maximum level
determined to be technologically
feasible. The max-tech efficiency level
for consumer oil-fired steam boilers
results in an average LCC savings of
$310 and a minority of consumers (14
percent) with a net LCC cost. Similarly,
for low-income consumers, the
efficiency level below max-tech for
consumer oil-fired steam boilers results
in positive average LCC savings of $279
and 5 percent with a net LCC cost. The
benefits of max-tech efficiency levels for
consumer oil-fired hot water and steam
boilers outweigh the negative impacts to
consumers and manufacturers.
Therefore, DOE tentatively concludes
that the max-tech efficiency level is
justified for consumer oil-fired hot
water and steam boilers.
Therefore, based on the previous
considerations, DOE proposes amended
energy conservation standards for
consumer boilers at TSL 3. The
amended energy conservation standards
for consumer boilers, which are
expressed as an annual fuel utilization
efficiency, are shown in Table V.32 of
this document.
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TABLE V.36—PROPOSED AMENDED 2022$) of the benefits from operating
ENERGY CONSERVATION STANDARDS products that meet the proposed
standards (consisting primarily of
FOR CONSUMER BOILERS
operating cost savings from using less
energy, minus increases in product
Product class
purchase costs), and (2) the annualized
monetary value of the climate and
Gas-fired Hot Water .............
95 health benefits from emission
Gas-fired Steam ...................
82 reductions. Table V.37 shows the
Oil-fired Hot Water ................
88
annualized values for consumer boilers
Oil-fired Steam ......................
86
under TSL 3, expressed in 2022$. The
results under the primary estimate are
2. Annualized Benefits and Costs of the
as follows.
Proposed Standards
Using a 7-percent discount rate for
The benefits and costs of the proposed consumer benefits and costs and health
standards can also be expressed in terms benefits from reduced NOX and SO2
of annualized values. The annualized
emissions, and the 3-percent discount
net benefit is: (1) the annualized
rate case for climate benefits from
national economic value (expressed in
reduced GHG emissions, the estimated
AFUE
(%)
cost of the standards proposed in this
rule is $52 million per year in increased
equipment costs, while the estimated
annual benefits are $139 million in
reduced equipment operating costs,
$124 million in climate benefits, and
$137 million in health benefits. In this
case, the net benefit would amount to
$348 million per year.
Using a 3-percent discount rate for all
benefits and costs, the estimated cost of
the proposed standards is $50 million
per year in increased equipment costs,
while the estimated annual benefits are
$188 million in reduced operating costs,
$124 million in climate benefits, and
$204 million in health benefits. In this
case, the net benefit would amount to
$466 million per year.
TABLE V.37—ANNUALIZED MONETIZED BENEFITS AND COSTS OF PROPOSED ENERGY CONSERVATION STANDARDS FOR
CONSUMER BOILERS
[TSL 3]
Million 2022$/year
Primary
estimate
Low-netbenefits
estimate
High-netbenefits
estimate
3% discount rate
Consumer Operating Cost Savings .............................................................................................
Climate Benefits * .........................................................................................................................
Health Benefits ** .........................................................................................................................
Total Monetized Benefits † ..........................................................................................................
Consumer Incremental Product Costs ‡ ......................................................................................
Net Monetized Benefits ...............................................................................................................
Change in Producer Cashflow ‡‡ ................................................................................................
188
124
204
516
50
466
(6)¥(4)
175
121
200
496
58
438
(6)¥(4)
233
144
237
613
38
575
(6)¥(4)
139
124
137
400
52
348
(6)¥(4)
129
121
135
385
59
326
(6)¥(4)
169
144
158
470
41
430
(6)¥(4)
7% discount rate
ddrumheller on DSK120RN23PROD with PROPOSALS2
Consumer Operating Cost Savings .............................................................................................
Climate Benefits * (3% discount rate) ..........................................................................................
Health Benefits ** .........................................................................................................................
Total Monetized Benefits † ..........................................................................................................
Consumer Incremental Product Costs ‡ ......................................................................................
Net Monetized Benefits ...............................................................................................................
Change in Producer Cashflow ‡‡ ................................................................................................
Note: This table presents the present value (in 2022) of the costs and benefits associated with consumer boilers shipped in 2030–2059. These
results include benefits which accrue after 2059 from the products shipped in 2030–2059. The Primary, Low-Net-Benefits, and High-Net-Benefits
Estimates utilize projections of energy prices from the AEO 2022 Reference case, Low-Economic-Growth case, and High-Economic-Growth
case, respectively. In addition, incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the LowNet-Benefits Estimate, and a high decline rate in the High-Net-Benefits Estimate. The methods used to derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational
purposes of this table, the climate benefits associated with the average SC–GHG at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support Document: Social Cost of Carbon, Methane,
and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as
health benefits from reductions in direct PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details.
† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the
Department does not have a single central SC–GHG point estimate.
‡ Costs include incremental equipment costs, as well as installation costs.
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‡‡ Operating Cost Savings are calculated based on the life cycle costs analysis and national impact analysis as discussed in detail below. See
sections IV.F and IV.H of this document. DOE’s NIA includes all impacts (both costs and benefits) along the distribution chain beginning with the
increased costs to the manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE also
separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the detailed MIA, DOE
models manufacturers’ pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule’s expected impact on the INPV. The change in INPV is the present value of all changes in industry
cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized change in INPV is calculated using the industry weighted average cost of capital value of 9.7% that is estimated in the MIA (see chapter 12 of the NOPR TSD for a
complete description of the industry weighted average cost of capital). For consumer boilers, those values are ¥$6 million and ¥$4 million.
DOE accounts for that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C of this document. DOE is
presenting the range of impacts to the INPV under two markup scenarios: the Preservation of Gross Margin scenario, which is the manufacturer
markup scenario used in the calculation of Consumer Operating Cost Savings in this table, and the Preservation of Operating Profit Markup scenario, where DOE assumed manufacturers would not be able to increase per-unit operating profit in proportion to increases in manufacturer production costs. DOE includes the range of estimated annualized change in INPV in the above table, drawing on the MIA explained further in section IV.J of this document, to provide additional context for assessing the estimated impacts of this proposal to society, including potential
changes in production and consumption, which is consistent with OMB’s Circular A–4 and E.O. 12866. If DOE were to include the INPV into the
annualized net benefit calculation for this proposed rule, the annualized net benefits would range from $460 million to $462 million at 3-percent
discount rate and would range from $342 million to $344 million at 7-percent discount rate. DOE seeks comment on this approach.
D. Reporting, Certification, and
Sampling Plan
Manufacturers, including importers,
must use product-specific certification
templates to certify compliance to DOE.
For consumer boilers, the certification
template reflects the general
certification requirements specified at
10 CFR 429.12 and the product-specific
requirements specified at 10 CFR
429.18. As discussed in the previous
paragraphs, DOE is not proposing to
amend the product-specific certification
requirements for these products.
VI. Procedural Issues and Regulatory
Review
ddrumheller on DSK120RN23PROD with PROPOSALS2
A. Review Under Executive Orders
12866 and 13563
Executive Order (E.O.) 12866,
‘‘Regulatory Planning and Review,’’ 58
FR 51735 (Oct. 4, 1993), as
supplemented and reaffirmed by E.O.
13563, ‘‘Improving Regulation and
Regulatory Review,’’ 76 FR 3821 (Jan.
21, 2011), requires agencies, to the
extent permitted by law, 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
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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 E.O. 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
(OIRA) in the Office of Management and
Budget (OMB) 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, this proposed regulatory
action is consistent with these
principles.
Section 6(a) of E.O. 12866 also
requires agencies to submit ‘‘significant
regulatory actions’’ to OIRA for review.
OIRA has determined that this proposed
regulatory action constitutes a
‘‘significant regulatory action’’ under
section 3(f)(1) of E.O. 12866, as
amended by E.O. 14094. Accordingly,
pursuant to section 6(a)(3)(C) of E.O.
12866, DOE has provided to OIRA an
assessment, including the underlying
analysis, of benefits and costs
anticipated from the proposed
regulatory action, together with, to the
extent feasible, a quantification of those
costs; and an assessment, including the
underlying analysis, of costs and
benefits of potentially effective and
reasonably feasible alternatives to the
planned regulation, and an explanation
why the planned regulatory action is
preferable to the identified potential
alternatives. These assessments are
summarized in this preamble and
further detail can be found in the
technical support document for this
proposed rulemaking.
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B. Review Under the Regulatory
Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) requires preparation
of an initial regulatory flexibility
analysis (IRFA) and 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 E.O. 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 website (www.energy.gov/gc/
office-general-counsel). DOE reviewed
this proposed rule under the provisions
of the Regulatory Flexibility Act and the
policies and procedures published on
February 19. 2003.
DOE has prepared the following IRFA
for the products that are the subject of
this proposed energy conservation
standard rulemaking.
For manufacturers of consumer
boilers, 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. (See 13 CFR part 121.) The size
standards are listed by North American
Industry Classification System (NAICS)
code and industry description and are
available at www.sba.gov/document/
support—table-size-standards.
Manufacturing of consumer boilers is
classified under NAICS 333414,
‘‘Heating Equipment (except Warm Air
Furnaces) Manufacturing.’’ The SBA
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sets a threshold of 500 employees or
fewer for an entity to be considered as
a small business for this category. For
the products under review, the SBA
bases its small business definition on
the total number of employees for a
business, including the total number of
employees of its parent company and
any subsidiaries. An aggregated
business entity with fewer employees
than the listed limit is considered a
small business.
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1. Description of Reasons Why Action Is
Being Considered
DOE is proposing amended energy
conservation standards for consumer
boilers. In a final rule published in the
Federal Register on January 15, 2016
(January 2016 Final Rule), DOE
prescribed the current energy
conservation standards for consumer
boilers manufactured on and after
January 15, 2021. 81 FR 2320, 2416–
2417. EPCA provides that, not later than
six years after the issuance of any final
rule establishing or amending a
standard, DOE must publish either a
notice of determination that standards
for the product do not need to be
amended, or a NOPR including new
proposed energy conservation standards
(proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(1))
2. Objectives of, and Legal Basis for,
Rule
EPCA authorizes DOE to regulate the
energy efficiency of a number of
consumer products and certain
industrial equipment. Title III, Part B of
EPCA established the Energy
Conservation Program for Consumer
Products Other Than Automobiles.
These products include consumer
boilers, the subject of this document. (42
U.S.C. 6292(a)(5)) EPCA prescribed
energy conservation standards for these
products (42 U.S.C. 6295(f)(3)), and
directs DOE to conduct future
rulemakings to determine whether to
amend these standards. (42 U.S.C.
6295(f)(4)(C)) EPCA further provides
that, not later than six years after the
issuance of any final rule establishing or
amending a standard, DOE must publish
either a notice of determination that
standards for the product do not need to
be amended, or a NOPR including new
proposed energy conservation standards
(proceeding to a final rule, as
appropriate). (42 U.S.C. 6295(m)(1))
3. Description on Estimated Number of
Small Entities Regulated
DOE conducted a market survey to
identify potential small manufacturers
of consumer boilers. DOE began its
assessment by reviewing its Compliance
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Certification Database (CCD),166
supplemented by information in
California Energy Commission’s
Modernized Appliance Efficiency
Database System (MAEDbS),167 AHRI’s
Directory of Certified Product
Performance,168 U.S. Environmental
Protection Agency’s ENERGY STAR
product finder dataset,169 individual
company websites, and prior consumer
boiler rulemakings to identify
manufacturers of the covered product.
DOE then consulted publicly-available
data, such as manufacturer websites,
manufacturer specifications and product
literature, import/export logs (e.g., bills
of lading from Panjiva 170), and basic
model numbers, to identify original
equipment manufacturers (OEMs) of
covered consumer boilers. DOE further
relied on public data and subscriptionbased market research tools (e.g., Dun &
Bradstreet reports 171) to determine
company, location, headcount, and
annual revenue. DOE also asked
industry representatives if they were
aware of any small manufacturers
during manufacturer interviews. DOE
screened out companies that do not
offer products covered by this
rulemaking, do not meet the SBA’s
definition of a ‘‘small business,’’ or are
foreign-owned and operated.
DOE initially identified 24 OEMs that
sell consumer boilers in the United
States. Of the 24 OEMs identified, DOE
tentatively determined that three
companies qualify as small businesses
and are not foreign-owned and operated.
4. Description and Estimate of
Compliance Requirements Including
Differences in Cost, if Any, for Different
Groups of Small Entities
AHRI stated that small OEMs will be
impacted by this rulemaking, especially
with respect to cast-iron boilers. (AHRI,
No. 40 at p. 6)
Of the three small domestic OEMs
identified, DOE tentatively determined
166 U.S. Department of Energy’s Compliance
Certification Database is available at:
www.regulations.doe.gov/certification-data/
#q=Product_Group_s%3A* (Last accessed Jan. 3,
2023).
167 California Energy Commission’s Modernized
Appliance Efficiency Database System is available
at: cacertappliances.energy.ca.gov/Pages/
ApplianceSearch.aspx (Last accessed Jan. 3, 2023).
168 AHRI’s Directory of Certified Product
Performance is available at: www.ahridirectory.org/
Search/SearchHome (Last accessed Jan. 3, 2023).
169 U.S. Environmental Protection Agency’s
ENERGY STAR product finder dataset is available
at: www.energystar.gov/products/products_list (Last
accessed Dec. 27, 2022).
170 S&P Global. Panjiva Market Intelligence is
available at: panjiva.com/import-export/UnitedStates (Last accessed Feb. 28, 2023).
171 D&B Hoovers subscription login is accessible
at: app.dnbhoovers.com/ (Last accessed August 24,
2022).
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that all three OEMs manufacture both
gas-fired hot water and oil-fired hot
water boilers. DOE identified these
manufacturers through a review of
EPA’s ENERGY STAR dataset, prior
DOE consumer boiler rulemakings, and
DOE’s CCD.
The first small OEM (‘‘Manufacturer
A’’ in Table VI.1 and Table VI.2) offers
seven gas-fired hot water basic models
and five oil-fired hot water basic
models. DOE identified these models
through the company website and
available product literature. Of the
seven gas-fired hot water basic models,
five meet the efficiency required by TSL
3. Of the five oil-fired hot water basic
models, four meet the efficiency
required by TSL 3. Given the company’s
small market share in the U.S. consumer
boiler market and existing range of highefficiency boilers, this manufacturer
may choose to discontinue the noncompliant models. Alternatively, the
manufacturer may choose to redesign
models in order to maintain a
diversified portfolio with costcompetitive baseline models. To avoid
underestimating the conversion costs
this manufacturer could incur as a result
of amended standards, DOE assumed
this small business would choose to
redesign or replace the non-compliant
models. DOE used basic model counts
(i.e., the manufacturer’s proportion of
industry basic models) to scale the
industry conversion costs, described in
section IV.J.2.c of the proposed rule’s
notice of proposed rulemaking. Product
conversion costs are investments in
research, development, testing,
marketing, and other non-capitalized
costs necessary to make product designs
comply with amended energy
conservation standards. Product
conversion costs would be driven by the
development and testing necessary to
develop compliant products. Capital
conversion costs are investments in
property, plant, and equipment
necessary to adapt or change existing
production facilities such that new
compliant product designs can be
fabricated and assembled. For gas-fired
hot water boilers, the design options
analyzed at TSL 3 included
implementing a condensing stainlesssteel heat exchanger with a premix
modulating burner. This small
manufacturer may need to expand their
condensing production capacity, which
could necessitate updates to production
lines and the factory floor. For oil-fired
hot water boilers, DOE expects that
some manufacturers would need to
invest in new casting designs and
tooling to meet TSL 3 efficiencies. Based
on this manufacturer’s model share,
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DOE estimates product conversion costs
of $80,000 and capital conversion costs
of $370,000. For this small
manufacturer, total conversion costs are
approximately 1.0 percent of company
revenue over the 5-year conversion
period.172
The second small OEM
(‘‘Manufacturer B’’ in Table VI.1 and
Table VI.2) offers one gas-fired hot water
model and six oil-fired hot water
models based on their website
information. According to the
company’s website, they do not offer
any condensing gas-fired hot water
boilers or max-tech (88 percent AFUE)
oil-fired hot water boilers. Similarly, the
third small OEM (‘‘Manufacturer C’’ in
Table VI.1 and Table VI.2) offers three
gas-fired hot water models and 18 oilfired hot water models, does not have
any condensing gas-fired hot water
boilers or max-tech oil-fired hot water
boilers. Thus, neither small business
offers any models that meet the
efficiencies required by TSL 3. To offer
condensing gas-fired hot water boilers,
these small OEMs would have to decide
whether to develop their own
condensing heat exchanger production,
source heat exchangers from Europe or
Asia and assemble higher-efficiency
products, or leave the market entirely.
DOE believes both small OEMs
currently source their non-condensing
heat exchangers from third-party
foundries. Given the high upfront cost
of in-house development of condensing
heat exchangers, DOE expects these
small businesses will continue to source
their heat exchangers. These
manufacturers would need to develop
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their condensing production capacity,
which would necessitate updated
production lines. DOE used basic model
counts to scale the industry conversion
costs. DOE estimates that the second
small OEM, with seven consumer boiler
models, would incur product
conversion costs of $402,000 and capital
conversion costs of $360,000. For this
small manufacturer, total conversion
costs are approximately 3.4 percent of
company revenue over the 5-year
conversion period.173 DOE estimates
that the third small OEM, with 21
consumer boiler models, would incur
product conversion costs of $1.2 million
and capital conversion costs of $1.1
million. For this small manufacturer,
total conversion costs are approximately
13.8 percent of company revenue over
the 5-year conversion period.174
TABLE VI.1—POTENTIAL SMALL BUSINESS IMPACTS
[TSL 3]
Number of
unique basic
models
Company
Manufacturer A ....................................................................
Manufacturer B ....................................................................
Manufacturer C ....................................................................
Conversion
costs
($ millions)
12
7
21
Annual
revenue
($ millions)
0.45
0.76
2.29
Conversion
period
revenue
($ millions)
8.8
4.5
3.3
44.0
22.5
16.5
Conversion
costs as a %
of conversion
period revenue
1.0
3.4
13.8
TABLE VI.2—ESTIMATED SMALL BUSINESS CONVERSION COSTS BY PRODUCT CLASS
[TSL 3]
Company
Product class
Manufacturer A .......................................................................
Gas-fired Hot Water ...............
Oil-fired Hot Water .................
Gas-fired Hot Water ...............
Oil-fired Hot Water .................
Gas-fired Hot Water ...............
Oil-fired Hot Water .................
Manufacturer B .......................................................................
Manufacturer C .......................................................................
7
5
1
6
3
18
Product conversion costs
($ millions)
0.02
0.07
0.01
0.39
0.02
1.18
Capital
conversion
costs
($ millions)
0.34
0.03
0.17
0.19
0.50
0.58
5. 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 proposed rule.
The discussion in the previous
section analyzes impacts on small
businesses that would result from DOE’s
proposed rule, represented by TSL 3. In
reviewing alternatives to the proposed
rule, DOE examined energy
conservation standards set at lower
efficiency levels. While TSL 1 and TSL
2 would reduce impacts on small
business manufacturers, it would come
at the expense of a reduction in energy
savings. TSL 1 achieves 91 percent
lower energy savings compared to the
energy savings at TSL 3. TSL 2 achieves
48 percent lower energy savings
compared to energy savings at TSL 3.
Based on the presented discussion,
establishing standards at TSL 3 balances
the benefits of the energy savings at TSL
3 with the potential burdens place on
consumer boiler manufacturers,
including small business manufacturers.
Accordingly, DOE does not propose one
of the other TSLs considered in this
analysis, or the other policy alternatives
examined as part of the regulatory
172 According to D&B Hoovers, this small
business has an estimated annual revenue of $8.8
million. DOE calculated total conversion costs as a
percent of revenue over the 5-year conversion
period using the following calculation: ($370,000 +
$80,000)/(5 years × $8,800,000).
173 According to D&B Hoovers, this small
business has an estimated annual revenue of $4.5
million. DOE calculated total conversion costs as a
percent of revenue over the 5-year conversion
period using the following calculation: ($402,000 +
$360,000)/(5 years × $4,500,000).
174 According to D&B Hoovers, this small
business has an estimated annual revenue of $3.3
million. DOE calculated total conversion costs as a
percent of revenue over the 5-year conversion
period using the following calculation: ($1,200,000
+ $1,100,000)/(5 years × $3,300,000).
DOE seeks comments, information,
and data on the number of small
businesses in the industry, the names of
those small businesses, and their market
shares by product class. DOE also
requests comment on the potential
impacts of the proposed standards on
small manufacturers.
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Number of
unique basic
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6. Significant Alternatives to the Rule
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impact analysis and included in chapter
17 of the NOPR TSD.
Additional compliance flexibilities
may be available through other means.
EPCA provides that a manufacturer
whose annual gross revenue from all of
its operations does not exceed $8
million may apply for an exemption
from all or part of an energy
conservation standard for a period not
longer than 24 months after the effective
date of a final rule establishing the
standard. (42 U.S.C. 6295(t))
Additionally, manufacturers subject to
DOE’s energy efficiency standards may
apply to DOE’s Office of Hearings and
Appeals for exception relief under
certain circumstances. Manufacturers
should refer to 10 CFR part 430, subpart
E, and 10 CFR part 1003 for additional
details.
C. Review Under the Paperwork
Reduction Act of 1995
Manufacturers of consumer boilers
must certify to DOE that their products
comply with any applicable energy
conservation standards. In certifying
compliance, manufacturers must test
their products according to the DOE test
procedures for consumer boilers,
including any amendments adopted for
those test procedures. DOE has
established regulations for the
certification and recordkeeping
requirements for all covered consumer
products and commercial equipment,
including consumer boilers. (See
generally 10 CFR part 429). The
collection-of-information requirement
for the certification and recordkeeping
is subject to review and approval by
OMB under the Paperwork Reduction
Act (PRA). This requirement has been
approved by OMB under OMB control
number 1910–1400. Public reporting
burden for the certification is estimated
to average 35 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.
DOE is not proposing to amend the
certification or reporting requirements
for consumer boilers in this proposed
rulemaking. Instead, DOE may consider
proposals to amend the certification
requirements and reporting for
consumer boilers under a separate
rulemaking regarding appliance and
equipment certification. DOE will
address changes to OMB Control
Number 1910–1400 at that time as
necessary.
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
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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
DOE is analyzing this proposed
regulation in accordance with the
National Environmental Policy Act of
1969 (NEPA) and DOE’s NEPA
implementing regulations (10 CFR part
1021). DOE’s regulations include a
categorical exclusion for rulemakings
that establish energy conservation
standards for consumer products or
industrial equipment. 10 CFR part 1021,
subpart D, appendix B5.1. DOE
anticipates that this rulemaking
qualifies for categorical exclusion B5.1
because it is a rulemaking that
establishes energy conservation
standards for consumer products or
industrial equipment, none of the
exceptions identified in categorical
exclusion B5.1(b) apply, no
extraordinary circumstances exist that
require further environmental analysis,
and it otherwise meets the requirements
for application of a categorical
exclusion. See 10 CFR 1021.410.
Therefore, DOE has initially determined
that promulgation of this proposed rule
is not a major Federal action
significantly affecting the quality of the
human environment within the meaning
of NEPA, and does not require an
environmental assessment or an
environmental impact statement. DOE
will complete its NEPA review before
issuing the final rule.
E. Review Under Executive Order 13132
E.O. 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 proposed
rule and has tentatively determined that
it would not have a substantial direct
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effect on the States, on the relationship
between the national government and
the States, or on the distribution of
power and responsibilities among the
various levels of government. EPCA
governs and prescribes Federal
preemption of State regulations as to
energy conservation for the products
that are the subject of this proposed
rule. States can petition DOE for
exemption from such preemption to the
extent, and based on criteria, set forth in
EPCA. (42 U.S.C. 6297) Therefore, 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 E.O.
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 E.O. 12988
specifically requires that Executive
agencies make every reasonable effort to
ensure that the regulation: (1) clearly
specifies the preemptive effect, if any;
(2) clearly specifies any effect on
existing Federal law or regulation; (3)
provides a clear legal standard for
affected conduct while promoting
simplification and burden reduction; (4)
specifies the retroactive effect, if any; (5)
adequately defines key terms, and (6)
addresses other important issues
affecting clarity and general
draftsmanship under any guidelines
issued by the Attorney General. Section
3(c) of Executive Order 12988 requires
executive agencies to review regulations
in light of applicable standards in
section 3(a) and section 3(b) to
determine whether they are met or it is
unreasonable to meet one or more of
them. DOE has completed the required
review and determined that, to the
extent permitted by law, this proposed
rule meets the relevant standards of E.O.
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,
section 201 (codified at 2 U.S.C. 1531).
For a proposed regulatory action likely
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to result in a rule that may cause the
expenditure by State, local, and Tribal
governments, in the aggregate, or by the
private sector of $100 million or more
in any one year (adjusted annually for
inflation), section 202 of UMRA requires
a Federal agency to publish a written
statement that estimates the resulting
costs, benefits, and other effects on the
national economy. (2 U.S.C. 1532(a), (b))
The UMRA also requires a Federal
agency to develop an effective process
to permit timely input by elected
officers of State, local, and Tribal
governments on a proposed ‘‘significant
intergovernmental mandate,’’ and
requires an agency plan for giving notice
and opportunity for timely input to
potentially affected small governments
before establishing any requirements
that might significantly or uniquely
affect them. On March 18, 1997, DOE
published a statement of policy on its
process for intergovernmental
consultation under UMRA. 62 FR
12820. DOE’s policy statement is also
available at www.energy.gov/sites/prod/
files/gcprod/documents/umra_97.pdf.
Although this proposed rule does not
contain a Federal intergovernmental
mandate, it may require expenditures of
$100 million or more in any one year by
the private sector. Such expenditures
may include: (1) investment in research
and development and in capital
expenditures by consumer boilers
manufacturers in the years between the
final rule and the compliance date for
the newly amended standards and (2)
incremental additional expenditures by
consumers to purchase higher-efficiency
consumer boilers, starting at the
compliance date for the applicable
standard.
Section 202 of UMRA authorizes a
Federal agency to respond to the content
requirements of UMRA in any other
statement or analysis that accompanies
the proposed rule. (2 U.S.C. 1532(c))
The content requirements of section
202(b) of UMRA relevant to a private
sector mandate substantially overlap the
economic analysis requirements that
apply under section 325(o) of EPCA and
Executive Order 12866. The
SUPPLEMENTARY INFORMATION section of
this NOPR and the TSD for this
proposed rule respond to those
requirements.
Under section 205 of UMRA, the
Department is obligated to identify and
consider a reasonable number of
regulatory alternatives before
promulgating a rule for which a written
statement under section 202 is required.
(2 U.S.C. 1535(a)) DOE is required to
select from those alternatives the most
cost-effective and least burdensome
alternative that achieves the objectives
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of the proposed rule unless DOE
publishes an explanation for doing
otherwise, or the selection of such an
alternative is inconsistent with law. As
required by 42 U.S.C. 6295(m), this
proposed rule would establish amended
energy conservation standards for
consumer boilers that are designed to
achieve the maximum improvement in
energy efficiency that DOE has
determined to be both technologically
feasible and economically justified, as
required by 42 U.S.C. 6295(o)(2)(A) and
42 U.S.C. 6295(o)(3)(B). A full
discussion of the alternatives
considered by DOE is presented in
chapter 17 of the TSD for this proposed
rule.
55213
Guidelines%20Dec%202019.pdf. DOE
has reviewed this NOPR under the OMB
and DOE guidelines and has concluded
that it is consistent with applicable
policies in those guidelines.
I. Review Under Executive Order 12630
Pursuant to E.O. 12630,
‘‘Governmental Actions and Interference
with Constitutionally Protected Property
Rights,’’ 53 FR 8859 (March 18, 1988),
DOE has determined that this proposed
rule would not result in any takings that
might require compensation under the
Fifth Amendment to the U.S.
Constitution.
K. Review Under Executive Order 13211
E.O. 13211, ‘‘Actions Concerning
Regulations That Significantly Affect
Energy Supply, Distribution, or Use,’’ 66
FR 28355 (May 22, 2001), requires
Federal agencies to prepare and submit
to OIRA at OMB, a Statement of Energy
Effects for any proposed significant
energy action. A ‘‘significant energy
action’’ is defined as any action by an
agency that promulgates or is expected
to lead to promulgation of a final rule,
and that: (1) is a significant regulatory
action under Executive Order 12866, or
any successor order; and (2) is likely to
have a significant adverse effect on the
supply, distribution, or use of energy, or
(3) is designated by the Administrator of
OIRA as a significant energy action. For
any proposed significant energy action,
the agency must give a detailed
statement of any adverse effects on
energy supply, distribution, or use
should the proposal be implemented,
and of reasonable alternatives to the
action and their expected benefits on
energy supply, distribution, and use.
DOE has tentatively concluded that
this regulatory action, which proposes
amended energy conservation standards
for consumer boilers, is not a significant
energy action because the proposed
standards are not likely to have a
significant adverse effect on the supply,
distribution, or use of energy, nor has it
been designated as such by the
Administrator at OIRA. Accordingly,
DOE has not prepared a Statement of
Energy Effects for this proposed rule.
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). Pursuant to
OMB Memorandum M–19–15,
‘‘Improving Implementation of the
Information Quality Act’’ (April 24,
2019), DOE published updated
guidelines which are available at
www.energy.gov/sites/prod/files/2019/
12/f70/DOE%20
Final%20Updated%20IQA%20
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
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
proposed 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.
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determine will have, or does have, a
clear and substantial impact on
important public policies or private
sector decisions.’’ Id. at 70 FR 2667.
In response to OMB’s Bulletin, DOE
conducted formal peer reviews of the
energy conservation standards
development process and the analyses
that are typically used and has prepared
a Peer Review report pertaining to the
energy conservation standards
rulemaking analyses.175 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. Because available data,
models, and technological
understanding have changed since 2007,
DOE has engaged with the National
Academy of Sciences to review DOE’s
analytical methodologies to ascertain
whether modifications are needed to
improve the Department’s analyses.
DOE is in the process of evaluating the
resulting December 2021 NAS report.176
VII. Public Participation
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A. Participation in the Public Meeting
Webinar
The time and date of the webinar
meeting are listed in the DATES section
at the beginning of this document.
Webinar registration information,
participant instructions, and
information about the capabilities
available to webinar participants will be
published on DOE’s
website:www.energyenergy.gov/eere/
buildings/public-meetings-andcomment-deadlines. Participants are
responsible for ensuring their systems
are compatible with the webinar
software.
B. Procedure for Submitting Prepared
General Statements for Distribution
Any person who has plans to present
a prepared general statement may
request that copies of his or her
statement be made available at the
public meeting. Such persons may
submit requests, along with an advance
electronic copy of their statement in
PDF (preferred), Microsoft Word or
175 The 2007 ‘‘Energy Conservation Standards
Rulemaking Peer Review Report’’ is available at the
following website: energy.gov/eere/buildings/
downloads/energy-conservation-standardsrulemaking-peer-review-report-0 (Last accessed Jan.
3, 2023).
176 The December 2021 NAS report is available at
www.nationalacademies.org/our-work/review-ofmethods-for-setting-building-and-equipmentperformance-standards (Last accessed Jan. 3, 2023).
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Excel, WordPerfect, or text (ASCII) file
format, to the appropriate address
shown in the ADDRESSES section at the
beginning of this document. The request
and advance copy of statements must be
received at least one week before the
public meeting and are to be emailed.
Please include a telephone number to
enable DOE staff to make follow-up
contact, if needed.
C. Conduct of the Webinar
DOE will designate a DOE official to
preside at the webinar and may also use
a professional facilitator to aid
discussion. The meeting will not be a
judicial or evidentiary-type public
hearing, but DOE will conduct it in
accordance with section 336 of EPCA
(42 U.S.C. 6306). A court reporter will
be present to record the proceedings and
prepare a transcript. DOE reserves the
right to schedule the order of
presentations and to establish the
procedures governing the conduct of the
webinar/public meeting. There shall not
be discussion of proprietary
information, costs or prices, market
share, or other commercial matters
regulated by U.S. anti-trust laws. After
the webinar and until the end of the
comment period, interested parties may
submit further comments on the
proceedings and any aspect of the
proposed rulemaking.
The webinar will be conducted in an
informal, conference style. DOE will
present a general overview of the topics
addressed in this proposed rulemaking,
allow time for prepared general
statements by participants, and
encourage all interested parties to share
their views on issues affecting this
proposed rulemaking. Each participant
will be allowed to make a general
statement (within time limits
determined by DOE), before the
discussion of specific topics. DOE will
permit, as time permits, other
participants to comment briefly on any
general statements.
At the end of all prepared statements
on a topic, DOE will permit participants
to clarify their statements briefly.
Participants should be prepared to
answer questions by DOE and by other
participants concerning these issues.
DOE representatives may also ask
questions of participants concerning
other matters relevant to this proposed
rulemaking. The official conducting the
webinar will accept additional
comments or questions from those
attending, as time permits. The
presiding official will announce any
further procedural rules or modification
of the above procedures that may be
needed for the proper conduct of the
webinar.
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A transcript of the webinar will be
included in the docket, which can be
viewed as described in the Docket
section at the beginning of this NOPR.
In addition, any person may buy a copy
of the transcript from the transcribing
reporter.
D. Submission of Comments
DOE will accept comments, data, and
information regarding this proposed
rule before or after the public meeting
webinar, but no later than the date
provided in the DATES section at the
beginning of this proposed rule.
Interested parties may submit
comments, data, and other information
using any of the methods described in
the ADDRESSES section at the beginning
of this document.
Submitting comments via
www.regulations.gov. The
www.regulations.gov web page will
require you to provide your name and
contact information. Your contact
information will be viewable to DOE
Building Technologies staff only. Your
contact information will not be publicly
viewable except for your first and last
names, organization name (if any), and
submitter representative name (if any).
If your comment is not processed
properly because of technical
difficulties, DOE will use this
information to contact you. If DOE
cannot read your comment due to
technical difficulties and cannot contact
you for clarification, DOE may not be
able to consider your comment.
However, your contact information
will be publicly viewable if you include
it in the comment itself or in any
documents attached to your comment.
Any information that you do not want
to be publicly viewable should not be
included in your comment, nor in any
document attached to your comment.
Otherwise, persons viewing comments
will see only first and last names,
organization names, correspondence
containing comments, and any
documents submitted with the
comments.
Do not submit to www.regulations.gov
information for which disclosure is
restricted by statute, such as trade
secrets and commercial or financial
information (hereinafter referred to as
Confidential Business Information
(CBI)). Comments submitted through
www.regulations.gov cannot be claimed
as CBI. Comments received through the
website will waive any CBI claims for
the information submitted. For
information on submitting CBI, see the
Confidential Business Information
section.
DOE processes submissions made
through www.regulations.gov before
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posting. Normally, comments will be
posted within a few days of being
submitted. However, if large volumes of
comments are being processed
simultaneously, your comment may not
be viewable for up to several weeks.
Please keep the comment tracking
number that www.regulations.gov
provides after you have successfully
uploaded your comment.
Submitting comments via email, hand
delivery/courier, or postal mail.
Comments and documents submitted
via email, hand delivery/courier, or
postal mail also will be posted to
www.regulations.gov. If you do not want
your personal contact information to be
publicly viewable, do not include it in
your comment or any accompanying
documents. Instead, provide your
contact information in a cover letter.
Include your first and last names, email
address, telephone number, and
optional mailing address. The cover
letter will not be publicly viewable as
long as it does not include any
comments.
Include contact information each time
you submit comments, data, documents,
and other information to DOE. If you
submit via postal mail or hand delivery/
courier, please provide all items on a
CD, if feasible, in which case it is not
necessary to submit printed copies. No
telefacsimiles (faxes) will be accepted.
Comments, data, and other
information submitted to DOE
electronically should be provided in
PDF (preferred), Microsoft Word or
Excel, WordPerfect, or text (ASCII) file
format. Provide documents that are not
secured, that are written in English, and
that are free of any defects or viruses.
Documents should not contain special
characters or any form of encryption,
and, if possible, they should carry the
electronic signature of the author.
Campaign form letters. Please submit
campaign form letters by the originating
organization in batches of between 50 to
500 form letters per PDF or as one form
letter with a list of supporters’ names
compiled into one or more PDFs. This
reduces comment processing and
posting time.
Confidential Business Information.
Pursuant to 10 CFR 1004.11, any person
submitting information that he or she
believes to be confidential and exempt
by law from public disclosure should
submit via email two well-marked
copies: one copy of the document
marked ‘‘confidential’’ including all the
information believed to be confidential,
and one copy of the document marked
‘‘non-confidential’’ with the information
believed to be confidential deleted. DOE
will make its own determination about
the confidential status of the
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information and treat it according to its
determination.
It is DOE’s policy that all comments
may be included in the public docket,
without change and as received,
including any personal information
provided in the comments (except
information deemed to be exempt from
public disclosure).
E. Issues on Which DOE Seeks Comment
Although DOE welcomes comments
on any aspect of this proposal, DOE is
particularly interested in receiving
comments and views of interested
parties concerning the following issues:
1. DOE requests comment on the
methodology used to present the change in
producer cashflow (INPV) in the monetized
benefits and cost tables I.3, I.4, and V.37 of
this document.
2. DOE requests information on the market
share of weatherized consumer boilers and
the typical jacket losses of such products.
3. DOE requests further information on the
potential future adoption of hydrogen-ready
consumer boilers in the United States and
any data demonstrating potential impacts of
these burner systems on AFUE.
4. DOE requests comment on the tentative
determination that condensing operation in
oil-fired hot water boilers, pulse combustion,
burner derating, low-pressure air-atomized
oil burners, and control relays for models
with BPM motors should be screened out
from further analysis.
5. DOE requests comment on whether an
increase in MPCs for gas-fired steam, oil-fired
hot water, and oil-fired steam boilers would
result from an amended standard requiring
condensing technology for gas-fired hot water
boilers and, if so, how much of an increase
would occur. DOE also requests comment on
whether the potential increase in cast-iron
boiler MPCs would only be applicable to
consumer boiler manufacturers that operate
their own foundries.
6. DOE requests comment on the costefficiency results in this engineering analysis.
DOE also seeks input on the design options
that would be implemented to achieve the
selected efficiency levels.
7. DOE requests comment on DOE’s space
heating and water heating energy use
methodology. DOE would also appreciate
feedback, information, and data on these
additional system types and processes that
use consumer boilers (such as snow melt
systems, pool or spa heating, or steam or hot
water production for industrial or
commercial processes).
8. DOE requests comment on DOE’s
methodology for determining the fraction of
consumer boilers used in commercial
buildings. DOE also seeks input regarding the
fraction of consumer boilers in commercial
buildings larger than 10,000 square feet.
9. DOE requests comments, information,
and data regarding the relationship between
boiler efficiency and return water
temperature.
10. DOE requests comment on DOE’s
updated methodology for determining energy
use for condensing boilers in different return
water temperature applications.
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11. DOE requests comments, information,
and data showing the relationship between
boiler efficiency and excess air during AFUE
testing and in the field.
12. DOE requests comments on the default
constant price trend for consumer boilers.
DOE seeks comments on how material prices
and technological advancement would be
expected to impact future prices of consumer
boilers.
13. DOE requests comments on its
approach for taking into account
electrification efforts in its shipment
analysis. DOE also requests comments on
other local, State, and Federal policies that
may impact the shipments projection of
consumer boilers.
14. DOE requests comments on its
approach for developing efficiency trends
beyond 2030.
15. DOE requests comments and any data
on the potential for direct rebound.
16. DOE requests comments on its
approach to monetizing the impact of the
rebound effect.
17. DOE seeks comments, information, and
data on the capital conversion costs and
product conversion costs estimated for each
TSL.
18. DOE seeks comments, information, and
data on the potential direct employment
impacts estimated for each TSL.
19. DOE seeks comment on whether
manufacturers expect that manufacturing
capacity or engineering resource constraints
would limit product availability to
consumers in the timeframe of the amended
standards compliance date (2030).
20. DOE requests comment on the $20 perunit reallocation cost for gas-fired steam, oilfired hot water, and oil-fired steam boilers
under a condensing standard for gas-fired hot
water boilers, as well as the methodology
used to derive the estimate.
21. DOE requests comment on the potential
impacts on consumer boiler manufacturers
that own domestic foundry assets including
impacts but not limited to those vital to
national security or critical infrastructure at
the TSLs analyzed in this NOPR analysis.
22. DOE requests information regarding the
impact of cumulative regulatory burden on
manufacturers of consumer boilers associated
with multiple DOE standards or productspecific regulatory actions of other Federal
agencies in addition to state or local
regulations.
23. DOE seeks comments, information, and
data on the number of small businesses in the
industry, the names of those small
businesses, and their market shares by
product class. DOE also requests comment on
the potential impacts of the proposed
standards on small manufacturers.
Additionally, DOE welcomes
comments on other issues relevant to
the conduct of this rulemaking that may
not specifically be identified in this
document.
VIII. Approval of the Office of the
Secretary
The Secretary of Energy has approved
publication of this notice of proposed
rulemaking and request for comment.
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Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
Register Liaison Officer has been
authorized to sign and submit the
document in electronic format for
publication, as an official document of
the Department of Energy. This
administrative process in no way alters
the legal effect of this document upon
publication in the Federal Register.
List of Subjects in 10 CFR Part 430
Administrative practice and
procedure, Confidential business
information, Energy conservation,
Household appliances, Imports,
Intergovernmental relations, Reporting
and recordkeeping requirements, Small
businesses.
Signing Authority
This document of the Department of
Energy was signed on July 27, 2023, by
Francisco Alejandro Moreno, Acting
Assistant Secretary for Energy Efficiency
and Renewable Energy, pursuant to
delegated authority from the Secretary
of Energy. That document with the
original signature and date is
maintained by DOE. For administrative
purposes only, and in compliance with
requirements of the Office of the Federal
Register, the undersigned DOE Federal
Signed in Washington, DC, on July 28,
2023.
Treena V. Garrett,
Federal Register Liaison Officer, U.S.
Department of Energy.
For the reasons set forth in the
preamble, DOE proposes to amend part
430 of chapter II, subchapter D, of title
10 of the Code of Federal Regulations,
as set forth below:
PART 430—ENERGY CONSERVATION
PROGRAM FOR CONSUMER
PRODUCTS
1. The authority citation for part 430
continues to read as follows:
■
Authority: 42 U.S.C. 6291–6309; 28 U.S.C.
2461 note.
2. Amend § 430.32 by revising
paragraph (e)(2) to read as follows:
■
§ 430.32 Energy and water conservation
standards and their compliance dates.
*
*
*
*
*
(e) * * *
(2) Boilers. (i) Except as provided in
paragraph (e)(2)(iii) of this section,
residential boilers manufactured on and
after January 15, 2021, and before [date
5 years after publication of the final rule
in the Federal Register], shall comply
with the requirements as follows:
TABLE 14 TO PARAGRAPH (e)(2)(i)
Product class
Minimum
AFUE1
(percent)
Maximum
PW,OFF3
(watts)
Maximum
PW,SB2
(watts)
Design requirements4
Gas-fired Hot Water ................
84
9
9
Gas-Fired Steam ....................
Oil-fired Hot Water ..................
82
86
8
11
8
11
Oil-fired Steam ........................
Electric Hot Water ...................
85
None
11
8
11
8
Electric Steam .........................
None
8
8
Constant-burning pilot not permitted. Automatic means for
adjusting water temperature required (except for boilers
equipped with tankless domestic water heating coils).
Constant-burning pilot not permitted.
Automatic means for adjusting temperature required (except
for boilers equipped with tankless domestic water heating
coils).
None.
Automatic means for adjusting temperature required (except
for boilers equipped with tankless domestic water heating
coils).
None.
1 Annual
Fuel Utilization Efficiency, as determined in § 430.23(n)(2) of this part.
2 Standby Mode Power Consumption, as determined in appendix EE to subpart B of this part.
3 Off Mode Power Consumption, as determined in appendix EE to subpart B of this part.
4 See paragraph (e)(2)(iv) of this section.
(ii) Except as provided in paragraph
(e)(2)(iii) of this section, residential
boilers manufactured on and after [date
five years after publication of the final
rule amending standards], shall comply
with the requirements as follows:
TABLE 15 TO PARAGRAPH (e)(2)(ii)
ddrumheller on DSK120RN23PROD with PROPOSALS2
Product class
Minimum
AFUE1
(percent)
Maximum
PW,SB2
(watts)
Maximum
PW,OFF3
(watts)
Design requirements4
Gas-fired Hot Water ................
95
9
9
Gas-Fired Steam ....................
Oil-fired Hot Water ..................
82
88
8
11
8
11
Oil-fired Steam ........................
Electric Hot Water ...................
86
None
11
8
11
8
Electric Steam .........................
None
8
8
Constant-burning pilot not permitted. Automatic means for
adjusting water temperature required (except for boilers
equipped with tankless domestic water heating coils).
Constant-burning pilot not permitted.
Automatic means for adjusting temperature required (except
for boilers equipped with tankless domestic water heating
coils).
None.
Automatic means for adjusting temperature required (except
for boilers equipped with tankless domestic water heating
coils).
None.
1 Annual
Fuel Utilization Efficiency, as determined in § 430.23(n)(2) of this part.
Mode Power Consumption, as determined in appendix EE to subpart B of this part.
Mode Power Consumption, as determined in appendix EE to subpart B of this part.
4 See paragraph (e)(2)(iv) of this section.
2 Standby
3 Off
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Federal Register / Vol. 88, No. 155 / Monday, August 14, 2023 / Proposed Rules
(iv) Automatic means for adjusting
water temperature. (A) The automatic
means for adjusting water temperature
as required under paragraphs (e)(2)(i)
and (2)(ii) of this section must
automatically adjust the temperature of
the water supplied by the boiler to
ensure that an incremental change in
inferred heat load produces a
corresponding incremental change in
TABLE 16 TO PARAGRAPH (e)(2)(iii)
the temperature of water supplied.
(B) For boilers that fire at a single
Minimum
Product class
AFUE1
input rate, the automatic means for
(percent)
adjusting water temperature
Gas-fired Steam ...................
75 requirement may be satisfied by
providing an automatic means that
Boilers Other Than Gas-fired
Steam ................................
80 allows the burner or heating element to
fire only when the means has
1 Annual Fuel Utilization Efficiency, as deterdetermined that the inferred heat load
mined in § 430.23(n)(2) of this part.
ddrumheller on DSK120RN23PROD with PROPOSALS2
(iii) A boiler that is manufactured to
operate without any need for electricity
or any electric connection, electric
gauges, electric pumps, electric wires, or
electric devices is not required to meet
the AFUE or design requirements in
paragraphs (e)(2)(i) or (2)(ii) of this
section, but must meet the following
requirements, as applicable:
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55217
cannot be met by the residual heat of the
water in the system.
(C) When there is no inferred heat
load with respect to a hot water boiler,
the automatic means described in this
paragraph shall limit the temperature of
the water in the boiler to not more than
140 degrees Fahrenheit.
(D) A boiler for which an automatic
means for adjusting water temperature
is required shall be operable only when
the automatic means is installed.
*
*
*
*
*
[FR Doc. 2023–16476 Filed 8–11–23; 8:45 am]
BILLING CODE 6450–01–P
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Agencies
[Federal Register Volume 88, Number 155 (Monday, August 14, 2023)]
[Proposed Rules]
[Pages 55128-55217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16476]
[[Page 55127]]
Vol. 88
Monday,
No. 155
August 14, 2023
Part II
Department of Energy
-----------------------------------------------------------------------
10 CFR Part 430
Energy Conservation Program: Energy Conservation Standards for Consumer
Boilers; Proposed Rule
Federal Register / Vol. 88 , No. 155 / Monday, August 14, 2023 /
Proposed Rules
[[Page 55128]]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
10 CFR Part 430
[EERE-2019-BT-STD-0036]
RIN 1904-AE82
Energy Conservation Program: Energy Conservation Standards for
Consumer Boilers
AGENCY: Office of Energy Efficiency and Renewable Energy, Department of
Energy.
ACTION: Notice of proposed rulemaking and announcement of public
meeting.
-----------------------------------------------------------------------
SUMMARY: The Energy Policy and Conservation Act, as amended (EPCA),
prescribes energy conservation standards for various consumer products
and certain commercial and industrial equipment, including consumer
boilers. EPCA also requires the U.S. Department of Energy (DOE or the
Department) to periodically determine whether more-stringent standards
would be technologically feasible and economically justified and would
result in significant energy savings. In this notice of proposed
rulemaking (NOPR), DOE proposes amended energy conservation standards
for consumer boilers, and also announces a public meeting to receive
comment on these proposed standards and associated analyses and
results.
DATES:
Comments: DOE will accept comments, data, and information regarding
this NOPR no later than October 13, 2023.
Meeting: DOE will hold a public meeting via webinar on Tuesday,
September 12, 2023 from 1:00 p.m. to 4:00 p.m. See section VII,
``Public Participation,'' for webinar registration information,
participant instructions and information about the capabilities
available to webinar participants.
Comments regarding the likely competitive impact of the proposed
standard should be sent to the Department of Justice contact listed in
the ADDRESSES section on or before September 13, 2023.
ADDRESSES: Interested persons are encouraged to submit comments using
the Federal eRulemaking Portal at www.regulations.gov under docket
number EERE-2019-BT-STD-0036. Follow the instructions for submitting
comments. Alternatively, interested persons may submit comments,
identified by docket number EERE-2019-BT-STD-0036 and/or RIN 1904-AE82,
by any of the following methods:
Email: [email protected]. Include the docket
number EERE-2019-BT-STD-0036 and/or RIN 1904-AE82 in the subject line
of the message.
Postal Mail: Appliance and Equipment Standards Program, U.S.
Department of Energy, Building Technologies Office, Mailstop EE-5B,
1000 Independence Avenue SW, Washington, DC 20585-0121. If possible,
please submit all items on a compact disc (CD), in which case it is not
necessary to include printed copies.
Hand Delivery/Courier: Appliance and Equipment Standards Program,
U.S. Department of Energy, Building Technologies Office, 950 L'Enfant
Plaza SW, 6th Floor, Washington, DC 20024. Telephone: (202) 287-1445.
If possible, please submit all items on a CD, in which case it is not
necessary to include printed copies.
No telefacsimiles (faxes) will be accepted. For detailed
instructions on submitting comments and additional information on this
process, see section VII (Public Participation) of this document.
Docket: The docket for this activity, which includes Federal
Register notices, 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.
The docket web page can be found at www.regulations.gov/docket/EERE-2019-BT-STD-0036. The docket web page contains instructions on how
to access all documents, including public comments, in the docket. See
section VII (Public Participation) of this document for information on
how to submit comments through www.regulations.gov.
EPCA requires the Attorney General to provide DOE a written
determination of whether the proposed standard is likely to lessen
competition. The U.S. Department of Justice Antitrust Division invites
input from market participants and other interested persons with views
on the likely competitive impact of the proposed standard for consumer
boilers. Interested persons may contact the Division at
[email protected] on or before the date specified in the DATES
section. Please indicate in the ``Subject'' line of your email the
title and Docket Number of this proposed rulemaking.
FOR FURTHER INFORMATION CONTACT:
Ms. Julia Hegarty, 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:
(240) 597-6737. Email: [email protected].
Mr. Eric Stas, U.S. Department of Energy, Office of the General
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121.
Telephone: (202) 586-5827. Email: [email protected].
For further information on how to submit a comment, review other
public comments and the docket, or participate in the public meeting
webinar, contact the Appliance and Equipment Standards Program staff at
(202) 287-1445 or by email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Synopsis of the Proposed 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 Consumer Boilers
C. Deviation From Appendix A
III. General Discussion
A. General Comments
B. Scope of Coverage
C. Test Procedure
D. Boilers Not Requiring Electricity
E. Technological Feasibility
1. General
2. Maximum Technologically Feasible Levels
F. Energy Savings
1. Determination of Savings
2. Significance of Savings
G. Economic Justification
1. Specific Criteria
a. Economic Impact on Manufacturers and Consumers
b. Savings in Operating Costs Compared To Increase in Price (LCC
and PBP)
c. Energy Savings
d. Lessening of Utility or Performance of Products
e. Impact of Any Lessening of Competition
f. Need for National Energy Conservation
g. Other Factors
2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
A. Market and Technology Assessment
1. Product Classes
a. Fossil Fuel-Fired Hot Water Boilers
b. Hydronic Heat Pump Boilers
2. Market Assessment
3. Technology Options
B. Screening Analysis
1. Screened-Out Technologies
2. Remaining Technologies
[[Page 55129]]
C. Engineering Analysis
1. Efficiency Analysis
a. Baseline Efficiency
b. Higher Efficiency Levels
2. Cost Analysis
3. Manufacturer Markup and Shipping Costs
4. Cost-Efficiency Results
D. Markups Analysis
E. Energy Use Analysis
1. Building Sample
2. Space Heating Energy Use
a. Heating Load Calculation
b. Impact of Return Water Temperature on Efficiency
c. Impact of Jacket Losses on Energy Use
d. Impact of Excess Air Adjustments
3. Water Heating Use
F. Life-Cycle Cost and Payback Period Analysis
1. Product Cost
2. Installation Cost
3. Annual Energy Consumption
4. Energy Prices
5. Maintenance and Repair Costs
6. Product Lifetime
7. Discount Rates
8. Energy Efficiency Distribution in the No-New-Standards Case
9. Payback Period Analysis
G. Shipments Analysis
H. National Impact Analysis
1. Product Efficiency Trends
2. National Energy Savings
3. Net Present Value Analysis
I. Consumer Subgroup Analysis
J. Manufacturer Impact Analysis
1. Overview
2. Government Regulatory Impact Model and Key Inputs
a. Manufacturer Production Costs
b. Shipments Projections
c. Product and Capital Conversion Costs
d. Manufacturer Markup Scenarios
3. Manufacturer Interviews
a. The Replacement Market
4. Discussion of MIA Comments
K. Emissions Analysis
1. Air Quality Regulations Incorporated in DOE's Analysis
L. Monetizing Emissions Impacts
1. Monetization of Greenhouse Gas Emissions
a. Social Cost of Carbon
b. Social Cost of Methane and Nitrous Oxide
2. Monetization of Other Emissions Impacts
M. Utility Impact Analysis
N. Employment Impact Analysis
V. Analytical Results and Conclusions
A. Trial Standard Levels
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
a. Life-Cycle Cost and Payback Period
b. Consumer Subgroup Analysis
c. Rebuttable Presumption Payback
2. Economic Impacts on Manufacturers
a. Industry Cash-Flow Analysis Results
b. Direct 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 Utility or Performance of Products
5. Impact of Any Lessening of Competition
6. Need of the Nation To Conserve Energy
7. Other Factors
8. Summary of Economic Impacts
C. Conclusion
1. Benefits and Burdens of TSLs Considered for Consumer Boiler
Standards
2. Annualized Benefits and Costs of the Proposed Standards
D. Reporting, Certification, and Sampling Plan
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act of 1995
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government
Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government
Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
VII. Public Participation
A. Participation in the Public Meeting Webinar
B. Procedure for Submitting Prepared General Statements for
Distribution
C. Conduct of the Webinar
D. Submission of Comments
E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary
I. Synopsis of the Proposed Rule
The Energy Policy and Conservation Act, as amended (EPCA),\1\
Public Law 94-163 (codified at 42 U.S.C. 6291-6317), authorizes DOE to
regulate the energy efficiency of a number of consumer products and
certain industrial equipment. (42 U.S.C. 6291-6317) Title III, Part B
\2\ of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products
include consumer boilers, the subject of this rulemaking. (42 U.S.C.
6292(a)(5)) \3\
---------------------------------------------------------------------------
\1\ All references to EPCA in this document refer to the statute
as amended through the Energy Act of 2020, Public Law 116-260 (Dec.
27, 2020), which reflect the last statutory amendments that impact
Parts A and A-1 of EPCA.
\2\ For editorial reasons, upon codification in the U.S. Code,
Part B was redesignated Part A.
\3\ DOE notes that consumer boilers are defined as a subcategory
of covered consumer furnaces (see 42 U.S.C. 6291(23)).
---------------------------------------------------------------------------
Pursuant to EPCA, any new or amended energy conservation standard
must be designed to achieve the maximum improvement in energy
efficiency that DOE determines is technologically feasible and
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new
or amended standard must result in a significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later
than six years after issuance of any final rule establishing or
amending a standard, DOE must publish either a notice of determination
that standards for the product do not need to be amended, or a notice
of proposed rulemaking including new proposed energy conservation
standards (proceeding to a final rule, as appropriate). (42 U.S.C.
6295(m)(1))
In accordance with these and other statutory provisions discussed
in this document, DOE analyzed the benefits and burdens of four trial
standard levels (TSLs) for consumer boilers. The TSLs and their
associated benefits and burdens are discussed in detail in sections
V.A-C of this document. As discussed in section V.C of this document,
DOE has tentatively determined that TSL 3 represents the maximum
improvement in energy efficiency that is technologically feasible and
economically justified. The proposed standards at TSL 3, which are
expressed in minimum annual fuel utilization efficiency (AFUE), standby
mode power consumption (PW,SB) and off mode power
consumption (PW,OFF), are shown in Table I.1. These proposed
standards, if adopted, would apply to all consumer boilers listed in
Table I.1 manufactured in, or imported into, the United States starting
on the date five years after the date of publication of the final rule
for this rulemaking. Specifically, DOE is proposing more-stringent AFUE
standards for gas-fired and oil-fired boilers while maintaining the
current standards for electric steam and hot water boilers.
Additionally, DOE is proposing to maintain the design requirements and
exceptions to the minimum AFUE requirements established by statute and
currently codified at 10 CFR 430.32(e)(2). (See 42 U.S.C.
6295(f)(3)(A)-(C))
[[Page 55130]]
Table I.1--Proposed Energy Conservation Standards for Consumer Boilers
----------------------------------------------------------------------------------------------------------------
PW,SB (W) * PW,OFF (W)
Product class AFUE (%) * * Design requirements *
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water..................... 95 9 9 Constant-burning pilot not
permitted. Automatic means for
adjusting water temperature
required (except for boilers
equipped with tankless
domestic water heating coils).
Gas-Fired Steam......................... 82 8 8 Constant-burning pilot not
permitted.
Oil-fired Hot Water..................... 88 11 11 Automatic means for adjusting
temperature required (except
for boilers equipped with
tankless domestic water
heating coils).
Oil-fired Steam......................... 86 11 11 None.
Electric Hot Water...................... None 8 8 Automatic means for adjusting
temperature required (except
for boilers equipped with
tankless domestic water
heating coils).
Electric Steam.......................... None 8 8 None.
----------------------------------------------------------------------------------------------------------------
* A boiler that is manufactured to operate without any need for electricity or any electric connection, electric
gauges, electric pumps, electric wires, or electric devices is not required to meet the AFUE, PW,SB, PW,OFF,
or design requirements, but must meet the requirements of 10 CFR 430.32(e)(2)(i) which include a minimum AFUE
of 75 percent for gas-fired steam boilers and a minimum AFUE of 80 percent for all other boilers.
A. Benefits and Costs to Consumers
Table I.2 presents DOE's evaluation of the economic impacts of the
proposed standards on consumers of consumer boilers, as measured by the
average life-cycle cost (LCC) savings and the simple payback period
(PBP).\4\ The average LCC savings are positive for all product classes,
and the PBP is less than the average lifetime of consumer boilers,
which is estimated to be 26.9 years for gas-fired hot water boilers,
23.7 years for gas-fired steam boilers, 25.6 years for oil-fired hot
water boilers, and 19.6 years for oil-fired steam boilers (see section
IV.F.6 of this document for further details).
---------------------------------------------------------------------------
\4\ The average LCC savings refer to consumers that are affected
by a standard and are measured relative to the distribution of
purchased boilers, and their associated energy efficiency, in the
no-new-standards case, which depicts the market in the compliance
year in the absence of new or amended standards (see section IV.F.8
of this document). The simple PBP, which is designed to compare
specific efficiency levels, is measured relative to the baseline
product (see section IV.C of this document).
Table I.2--Impacts of Proposed Energy Conservation Standards on
Consumers of Consumer Boilers
------------------------------------------------------------------------
Average LCC
Product class savings Simple payback
(2022$) period (years)
------------------------------------------------------------------------
Gas-fired Hot Water..................... 768 2.7
Gas-fired Steam......................... .............. ..............
Oil-fired Hot Water..................... 666 3.3
Oil-fired Steam......................... 310 5.5
------------------------------------------------------------------------
DOE's analysis of the impacts of the proposed standards on
consumers is described in section IV.F of this document.
B. Impact on Manufacturers 5
---------------------------------------------------------------------------
\5\ All monetary values in this document are expressed in 2022
dollars.
---------------------------------------------------------------------------
The industry net present value (INPV) is the sum of the discounted
cash flows starting from the publication year (2023) of the NOPR and
continuing through the 30-year period following the expected compliance
date of the standards (2023-2059). Using a real discount rate of 9.7
percent, DOE estimates that the INPV for manufacturers of consumer
boilers in the case without amended standards is $532.0 million. Under
the proposed standards, the change in INPV is estimated to range from -
11.7 percent to -7.7 percent, which is approximately -$62.2 million to
-$40.7 million. In order to bring products into compliance with amended
standards, it is estimated that the industry would incur total
conversion costs of $98.0 million.
DOE's analysis of the impacts of the proposed standards on
manufacturers is described in section IV.J of this document. The
analytic results of the manufacturer impact analysis (MIA) are
presented in section V.B.2 of this document.
C. National Benefits and Costs
DOE's analyses indicate that the proposed energy conservation
standards for consumer boilers would save a significant amount of
energy. Relative to the case without amended standards, the lifetime
energy savings for consumer boilers purchased in the 30-year period
that begins in the anticipated year of compliance with the amended
standards (2030-2059) amount to 0.7 quadrillion British thermal units
(Btu), or quads.\6\ This represents a savings of 2.3 percent relative
to the energy use of these products in the case without amended
standards (referred to as the ``no-new-standards case'' or as the
baseline).
---------------------------------------------------------------------------
\6\ The quantity refers to full-fuel-cycle (FFC) energy savings.
FFC energy savings 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. For more information on the
FFC metric, see section IV.H.1 of this document.
---------------------------------------------------------------------------
The cumulative net present value (NPV) of total consumer benefits
of the proposed standards for consumer boilers ranges from $0.72
billion (at a 7-percent discount rate) to $2.27 billion (at a 3-percent
discount rate). This NPV expresses the estimated total value of future
operating-cost savings minus the estimated increased product and
installation costs for consumer boilers purchased in 2030-2059 relative
to the baseline.
In addition, the proposed standards for consumer boilers are
projected to yield significant environmental benefits. DOE estimates
that the proposed standards would result in cumulative emission
reductions (over the same period as for energy savings) of 39 million
metric tons (Mt) \7\ of carbon dioxide (CO2), 438 thousand
tons of
[[Page 55131]]
methane (CH4), 0.17 thousand tons of nitrous oxide
(N2O), 105 thousand tons of nitrogen oxides
(NOX), and 2.7 thousand tons of sulfur dioxide
(SO2), and an increase of 0.001 tons of mercury (Hg) due to
slightly higher electricity consumption.\8\
---------------------------------------------------------------------------
\7\ A metric ton is equivalent to 1.1 short tons. Results for
emissions other than CO2 are presented in short tons.
\8\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy
Outlook 2023 (AEO 2023). AEO 2023 represents current Federal and
State legislation and final implementation of regulations as of the
time of its preparation. See section IV.K of this document for
further discussion of AEO2023 assumptions that effect air pollutant
emissions.
---------------------------------------------------------------------------
DOE estimates the value of climate benefits from a reduction in
greenhouse gases (GHG) using four different estimates of the social
cost of CO2 (SC-CO2), the social cost of methane
(SC-CH4), and the social cost of nitrous oxide (SC-
N2O). Together these represent the social cost of GHG (SC-
GHG). DOE used interim SC-GHG values developed by an Interagency
Working Group on the Social Cost of Greenhouse Gases (IWG).\9\ The
derivation of these values is discussed in section IV.L of this
document. For presentational purposes, the climate benefits associated
with the average SC-GHG at a 3-percent discount rate over the period of
analysis are estimated to be $2.0 billion. DOE does not have a single
central SC-GHG point estimate, and it emphasizes the importance and
value of considering the benefits calculated using all four sets of SC-
GHG estimates.
---------------------------------------------------------------------------
\9\ To monetize the benefits of reducing GHG emissions this
analysis uses the interim estimates presented in the Technical
Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide
Interim Estimates Under Executive Order 13990 published in February
2021 by the IWG. (``February 2021 SC-GHG TSD''). www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf.
---------------------------------------------------------------------------
DOE estimated the monetary health benefits of SO2 and
NOX emissions reductions using benefit per ton estimates
from the scientific literature, as discussed in section IV.L of this
document. DOE estimated the present value of the health benefits would
be $1.1 billion using a 7-percent discount rate, and $3.3 billion using
a 3-percent discount rate.\10\ DOE is currently only monetizing (for
SO2 and NOX) health benefits from changes in fine
particulate matter (PM2.5) precursors (SO2 and
NOX) and for changes in an ozone precursor (NOX),
but will continue to assess the ability to monetize other effects such
as health benefits from reductions in direct PM2.5
emissions.
---------------------------------------------------------------------------
\10\ DOE estimates the economic value of these emissions
reductions resulting from the considered trial standard levels
(TSLs) for the purpose of complying with the requirements of
Executive Order 12866.
---------------------------------------------------------------------------
Table I.3 summarizes the monetized benefits and costs expected to
result from the proposed standards for consumer boilers. There are
other important unquantified effects, including certain unquantified
climate benefits, unquantified public health benefits from the
reduction of toxic air pollutants and other emissions, unquantified
energy security benefits, and distributional effects, among others.
Table I.3--Present Value of Monetized Benefits and Costs of Proposed
Energy Conservation Standards for Consumer Boilers
[TSL 3]
------------------------------------------------------------------------
Billion 2022$
------------------------------------------------------------------------
3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings......................... 3.1
Climate Benefits *...................................... 2.0
Health Benefits **...................................... 3.3
Total Monetized Benefits [dagger]....................... 8.5
Consumer Incremental Product Costs [Dagger]............. 0.8
Net Monetized Benefits.................................. 7.6
Change in Producer Cashflow (INPV [Dagger][Dagger])..... (0.06)-(0.04)
------------------------------------------------------------------------
7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings......................... 1.1
Climate Benefits * (3% discount rate)................... 2.0
Health Benefits **...................................... 1.1
Total Monetized Benefits [dagger]....................... 4.3
Consumer Incremental Product Costs [Dagger]............. 0.4
Net Monetized Benefits.................................. 3.9
Change in Producer Cashflow (INPV [Dagger][Dagger])..... (0.06)-(0.04)
------------------------------------------------------------------------
Note: This table presents present value (in 2022$) of the costs and
benefits associated with consumer boilers shipped in 2030-2059. These
results include benefits which accrue after 2059 from the products
shipped in 2030-2059.
* Climate benefits are calculated using four different estimates of the
social cost of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide
(SC-N2O) (model average at 2.5-percent, 3-percent, and 5-percent
discount rates; 95th percentile at 3-percent discount rate) (see
section IV.L of this document). Together these represent the global SC-
GHG. For presentational purposes of this table, the climate benefits
associated with the average SC-GHG at a 3-percent discount rate are
shown; however, DOE emphasizes the importance and value of considering
the benefits calculated using all four sets of SC-GHG estimates. To
monetize the benefits of reducing GHG emissions, this analysis uses
the interim estimates presented in the Technical Support Document:
Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates
Under Executive Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX
and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
precursor health benefits and (for NOX) ozone precursor health
benefits, but will continue to assess the ability to monetize other
effects such as health benefits from reductions in direct PM2.5
emissions. See section IV.L of this document for more details.
[dagger] Total and net benefits include those consumer, climate, and
health benefits that can be quantified and monetized. For presentation
purposes, total and net benefits for both the 3-percent and 7-percent
cases are presented using the average SC-GHG with 3-percent discount
rate, but DOE does not have a single central SC-GHG point estimate.
DOE emphasizes the importance and value of considering the benefits
calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as
installation costs.
[[Page 55132]]
[Dagger][Dagger] Operating Cost Savings are calculated based on the life
cycle costs analysis and national impact analysis as discussed in
detail below. See sections IV.F and IV.H of this document. DOE's NIA
includes all impacts (both costs and benefits) along the distribution
chain beginning with the increased costs to the manufacturer to
manufacture the product and ending with the increase in price
experienced by the consumer. DOE also separately conducts a detailed
analysis on the impacts on manufacturers (the MIA). See section IV.J
of this document. In the detailed MIA, DOE models manufacturers'
pricing decisions based on assumptions regarding investments,
conversion costs, cashflow, and margins. The MIA produces a range of
impacts, which is the rule's expected impact on the INPV. The change
in INPV is the present value of all changes in industry cash flow,
including changes in production costs, capital expenditures, and
manufacturer profit margins. Change in INPV is calculated using the
industry weighted average cost of capital value of 9.7 percent that is
estimated in the manufacturer impact analysis (see chapter 12 of the
NOPR TSD for a complete description of the industry weighted average
cost of capital). For consumer boilers, those values are -$62 million
and -$41 million. DOE accounts for that range of likely impacts in
analyzing whether a TSL is economically justified. See section V.C of
this document. DOE is presenting the range of impacts to the INPV
under two markup scenarios: the Preservation of Gross Margin scenario,
which is the manufacturer markup scenario used in the calculation of
Consumer Operating Cost Savings in this table, and the Preservation of
Operating Profit Markup scenario, where DOE assumed manufacturers
would not be able to increase per-unit operating profit in proportion
to increases in manufacturer production costs. DOE includes the range
of estimated INPV in the above table, drawing on the MIA explained
further in section IV.J, to provide additional context for assessing
the estimated impacts of this proposal to society, including potential
changes in production and consumption, which is consistent with OMB's
Circular A-4 and E.O. 12866. If DOE were to include the INPV into the
net benefit calculation for this proposed rule, the net benefits would
range from $7.54 billion to $7.56 billion at 3-percent discount rate
and would range from $3.84 billion to $3.86 billion at 7-percent
discount rate. DOE seeks comment on this approach.
The benefits and costs of the proposed standards can also be
expressed in terms of annualized values. The monetary values for the
total annualized net benefits are: (1) the reduced consumer operating
costs, minus (2) the increase in product purchase prices and
installation costs, plus (3) the monetized value of climate and health
benefits of emission reductions, all annualized.\11\
---------------------------------------------------------------------------
\11\ To convert the time-series of costs and benefits into
annualized values, DOE calculated a present value in 2023, the year
used for discounting the NPV of total consumer costs and savings.
For the benefits, DOE calculated a present value associated with
each year's shipments in the year in which the shipments occur
(e.g., 2030), and then discounted the present value from each year
to 2023. Using the present value, DOE then calculated the fixed
annual payment over a 30-year period, starting in the compliance
year, that yields the same present value.
---------------------------------------------------------------------------
The national operating cost savings are domestic private U.S.
consumer monetary savings that occur as a result of purchasing the
covered products and are measured for the lifetime of consumer boilers
shipped in 2030-2059. The benefits associated with reduced emissions
achieved as a result of the proposed standards are also calculated
based on the lifetime of consumer boilers shipped in 2030-2059. Total
benefits for both the 3-percent and 7-percent cases are presented using
the average GHG social costs with 3-percent discount rate. Estimates of
SC-GHG values are presented for all four discount rates in section
IV.L.1 of this document.
Table I.4 presents the total estimated monetized benefits and costs
associated with the proposed standard, expressed in terms of annualized
values. The results under the primary estimate are as follows.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced NOX and SO2
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated monetized cost of the
standards proposed in this rule is $52 million per year in increased
equipment costs, while the estimated annual benefits are $139 million
in reduced equipment operating costs, $124 million in monetized climate
benefits, and $137 million in monetized health benefits. In this case,
the net monetized benefit would amount to $348 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated monetized cost of the proposed standards is $50 million per
year in increased equipment costs, while the estimated annual monetized
benefits are $188 million in reduced operating costs, $124 million in
monetized climate benefits, and $204 million in in monetized air
pollutant health benefits. In this case, the net benefit would amount
to $466 million per year.
Table I.4--Annualized Monetized Benefits and Costs of Proposed Energy
Conservation Standards for Consumer Boilers
[TSL 3]
------------------------------------------------------------------------
Million 2022$/year
--------------------------------------
Low-net- High-net-
Primary benefits benefits
estimate estimate estimate
------------------------------------------------------------------------
3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings.. 188 175 233
Climate Benefits *............... 124 121 144
Health Benefits **............... 204 200 237
Total Monetized Benefits [dagger] 516 496 613
Consumer Incremental Product 50 58 38
Costs [Dagger]..................
Net Monetized Benefits........... 466 438 575
Change in Producer Cashflow (INPV (6)-(4) (6)-(4) (6)-(4)
[Dagger][Dagger])...............
------------------------------------------------------------------------
7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings.. 139 129 169
Climate Benefits * (3% discount 124 121 144
rate)...........................
Health Benefits **............... 137 135 158
Total Monetized Benefits [dagger] 400 385 470
Consumer Incremental Product 52 59 41
Costs [Dagger]..................
Net Monetized Benefits........... 348 326 430
[[Page 55133]]
Change in Producer Cashflow (INPV (6)-(4) (6)-(4) (6)-(4)
[Dagger][Dagger])...............
------------------------------------------------------------------------
Note: This table presents the present value (in 2022$) of the costs and
benefits associated with consumer boilers shipped in 2030-2059. These
results include benefits which accrue after 2059 from the products
shipped in 2030-2059. The Primary, Low-Net-Benefits, and High-Net-
Benefits Estimates utilize projections of energy prices from the AEO
2023 Reference case, Low-Economic-Growth case, and High-Economic-
Growth case, respectively. In addition, incremental equipment costs
reflect a constant trend in the Primary Estimate, an increasing rate
in the Low-Net-Benefits Estimate, and a decreasing rate in the High-
Net-Benefits Estimate. The methods used to derive projected price
trends are explained in sections IV.F.1 and IV.H.3 of this document.
Note that the Benefits and Costs may not sum to the Net Benefits due
to rounding.
* Climate benefits are calculated using four different estimates of the
global SC-GHG (see section IV.L of this document). For presentational
purposes of this table, the climate benefits associated with the
average SC-GHG at a 3-percent discount rate are shown; however, DOE
emphasizes the importance and value of considering the benefits
calculated using all four sets of SC-GHG estimates. To monetize the
benefits of reducing GHG emissions, this analysis uses the interim
estimates presented in the Technical Support Document: Social Cost of
Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive
Order 13990 published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX
and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
precursor health benefits and (for NOX) ozone precursor health
benefits, but will continue to assess the ability to monetize other
effects such as health benefits from reductions in direct PM2.5
emissions. See section IV.L of this document for more details.
[dagger] Total benefits for both the 3-percent and 7-percent cases are
presented using the average SC-GHG with 3-percent discount rate, but
the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as
installation costs.
[Dagger][Dagger] Operating Cost Savings are calculated based on the life
cycle costs analysis and national impact analysis as discussed in
detail below. See sections IV.F and IV.H of this document. DOE's NIA
includes all impacts (both costs and benefits) along the distribution
chain beginning with the increased costs to the manufacturer to
manufacture the product and ending with the increase in price
experienced by the consumer. DOE also separately conducts a detailed
analysis on the impacts on manufacturers (the MIA). See section IV.J
of this document. In the detailed MIA, DOE models manufacturers'
pricing decisions based on assumptions regarding investments,
conversion costs, cashflow, and margins. The MIA produces a range of
impacts, which is the rule's expected impact on the INPV. The change
in INPV is the present value of all changes in industry cash flow,
including changes in production costs, capital expenditures, and
manufacturer profit margins. The annualized change in INPV is
calculated using the industry weighted average cost of capital value
of 9.7 percent that is estimated in the manufacturer impact analysis
(see chapter 12 of the NOPR TSD for a complete description of the
industry weighted average cost of capital). For consumer boilers,
those values are -$6 million and -$4 million. DOE accounts for that
range of likely impacts in analyzing whether a TSL is economically
justified. See section V.C of this document. DOE is presenting the
range of impacts to the INPV under two markup scenarios: the
Preservation of Gross Margin scenario, which is the manufacturer
markup scenario used in the calculation of Consumer Operating Cost
Savings in this table, and the Preservation of Operating Profit Markup
scenario, where DOE assumed manufacturers would not be able to
increase per-unit operating profit in proportion to increases in
manufacturer production costs. DOE includes the range of estimated
annualized change in INPV in the above table, drawing on the MIA
explained further in section IV.J of this document, to provide
additional context for assessing the estimated impacts of this
proposal to society, including potential changes in production and
consumption, which is consistent with OMB's Circular A-4 and E.O.
12866. If DOE were to include the INPV into the annualized net benefit
calculation for this proposed rule, the annualized net benefits would
range from $460 million to $462 million at 3-percent discount rate and
would range from $342 million to $344 million at 7-percent discount
rate. DOE seeks comment on this approach.
DOE's analysis of the national impacts of the proposed standards is
described in sections IV.H, IV.K and IV.L of this document.
D. Conclusion
DOE has tentatively concluded that the proposed standards represent
the maximum improvement in energy efficiency that is technologically
feasible and economically justified, and would result in the
significant conservation of energy. Specifically, with regards to
technological feasibility, products achieving these standard levels are
already commercially available for all product classes covered by this
proposal. As for economic justification, DOE's analysis shows that the
benefits of the proposed standard exceed, to a great extent, the
burdens of the proposed standards.
Using a 7-percent discount rate for consumer benefits and costs and
NOX and SO2 reduction benefits, and a 3-percent
discount rate case for GHG social costs, the estimated monetized cost
of the proposed standards for consumer boilers is $52 million per year
from increased consumer boiler costs, while the estimated annual
monetized benefits are $139 million in reduced consumer boiler
operating costs, $124 million in monetized climate benefits, and $137
million in monetized air pollutant health benefits. The net monetized
benefit amounts to $348 million per year.
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\12\ For
example, some covered products and equipment have substantial energy
consumption occur during periods of peak energy demand. The impacts of
these products on the energy infrastructure can be more pronounced than
products with relatively constant demand. Accordingly, DOE evaluates
the significance of energy savings on a case-by-case basis.
---------------------------------------------------------------------------
\12\ Procedures, Interpretations, and Policies for Consideration
in New or Revised Energy Conservation Standards and Test Procedures
for Consumer Products and Commercial/Industrial Equipment, 86 FR
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------
As previously mentioned, the proposed standards are projected to
result in estimated national energy savings of 0.7 quads full-fuel-
cycle (FFC), the equivalent of the primary annual energy use of 6.5
million homes, and NPV of total consumer benefits from $0.72 billion
(at a 7-percent discount rate) to $2.27 billion (at a 3-percent
discount rate) over the 30-year analysis period beginning with the
expected compliance year (2030-2059). In addition, they are projected
to reduce CO2 emissions by 44 Mt. Based on these findings,
DOE has initially determined the energy savings from the proposed
standard levels are ``significant'' within the meaning of 42 U.S.C.
6295(o)(3)(B). A more detailed discussion of the basis for these
tentative conclusions is contained in the remainder of this
[[Page 55134]]
document and the accompanying technical support document (TSD).\13\
---------------------------------------------------------------------------
\13\ The TSD is available in the docket for this rulemaking at:
www.regulations.gov/docket/EERE-2019-BT-STD-0036.
---------------------------------------------------------------------------
DOE also considered more-stringent energy efficiency levels as
potential standards, and is still considering them in this rulemaking.
However, DOE has tentatively concluded that the potential burdens of
the more-stringent energy efficiency levels would outweigh the
projected benefits.
Based on consideration of the public comments DOE receives in
response to this document and related information collected and
analyzed during the course of this rulemaking effort, DOE may adopt
energy efficiency levels presented in this document that are either
higher or lower than the proposed standards, or some combination of
level(s) that incorporate the proposed standards in part.
II. Introduction
The following section briefly discusses the statutory authority
underlying this proposed rule, as well as some of the relevant
historical background related to the establishment of standards for
consumer boilers.
A. Authority
EPCA, Public Law 94-163 (codified at 42 U.S.C. 6291-6317)
authorizes DOE to regulate the energy efficiency of a number of
consumer products and certain industrial equipment. Title III, Part B
of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. (42 U.S.C. 6291-6309) These products
include consumer boilers, the subject of this document. (42 U.S.C.
6292(a)(5))
EPCA prescribed energy conservation standards for these products
(42 U.S.C. 6295(f)(3)), and the statute directed DOE to conduct future
rulemakings to determine whether to amend these standards. (42 U.S.C.
6295(f)(4)(C)) EPCA further provides that, not later than six years
after the issuance of any final rule establishing or amending a
standard, DOE must publish either a notice of determination that
standards for the product do not need to be amended, or a NOPR
including new proposed energy conservation standards (proceeding to a
final rule, as appropriate). (42 U.S.C. 6295(m)(1))
Under EPCA, the energy conservation program consists essentially of
four parts: (1) testing, (2) labeling, (3) Federal energy conservation
standards, and (4) certification and enforcement procedures. Relevant
provisions of EPCA specifically include definitions (42 U.S.C. 6291),
test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294),
energy conservation standards (42 U.S.C. 6295), and the authority to
require information and reports from manufacturers (42 U.S.C. 6296).
Federal energy efficiency requirements for covered products
established under EPCA generally supersede State laws and regulations
concerning energy conservation testing, labeling, and standards. (42
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal
preemption in limited circumstances for particular State laws or
regulations, in accordance with the procedures and other provisions set
forth under EPCA. (See 42 U.S.C. 6297(d))
Subject to certain criteria and conditions, DOE is required to
develop test procedures to measure the energy efficiency, energy use,
or estimated annual operating cost of each covered product. (42 U.S.C.
6295(o)(3)(A) and 6295(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 42 U.S.C. 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 consumer boilers appear at title 10 of the Code of Federal
Regulations (CFR) part 430, subpart B, appendix EE.\14\
---------------------------------------------------------------------------
\14\ On March 13, 2023, DOE published a final rule in the
Federal Register amending the test procedure for consumer boilers
and moving this test procedure to a new appendix EE effective on
April 12, 2023. 88 FR 15510.
---------------------------------------------------------------------------
DOE must follow specific statutory criteria for prescribing new or
amended standards for covered products, including consumer boilers.
EPCA requires that any new or amended energy conservation standard for
a covered product must be designed to achieve the maximum improvement
in energy efficiency that the Secretary of Energy determines is
technologically feasible and economically justified. (42 U.S.C.
6295(o)(2)(A) and (o)(3)(B)) 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 consumer boilers, 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 proposed 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 statutory factors:
(1) The economic impact of the standard on manufacturer 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 of, initial charges for, 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))
Further, EPCA 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. (42 U.S.C. 6295(o)(2)(B)(iii))
EPCA also contains what is known as an ``anti-backsliding''
provision, which prevents the Secretary from prescribing any amended
standard that either increases the maximum allowable energy use or
decreases the minimum required energy efficiency of a covered product.
(42 U.S.C. 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 in 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))
[[Page 55135]]
Additionally, EPCA specifies requirements when promulgating an
energy conservation standard for a covered product that has two or more
subcategories. DOE must specify a different standard level for a type
or class of 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 the feature and
other factors DOE deems appropriate. Id. Any rule prescribing such a
standard must include an explanation of the basis on which such higher
or lower level was established. (42 U.S.C. 6295(q)(2))
Finally, pursuant to the amendments contained in the Energy
Independence and Security Act of 2007 (EISA 2007), Pub. L. 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))
DOE's current test procedures for consumer boilers address standby mode
and off mode energy use in separate metrics (PW,SB and
PW,OFF, respectively). In this proposed rulemaking, DOE
intends to consider these metrics in addition to the active mode
metric, AFUE.
B. Background
1. Current Standards
In a final rule published in the Federal Register on January 15,
2016 (January 2016 Final Rule), DOE prescribed the current energy
conservation standards for consumer boilers manufactured on and after
January 15, 2021. 81 FR 2320, 2416-2417. These standards are set forth
in DOE's regulations at 10 CFR 430.32(e)(2)(iii) and are repeated in
Table II.1.
Table II.1--Federal Energy Conservation Standards for Consumer Boilers *
----------------------------------------------------------------------------------------------------------------
AFUE PW,SB PW,OFF
Product class (percent) (watts) (watts) Design requirements
** [dagger] [dagger]
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water..................... 84 9 9 Constant-burning pilot not
permitted. Automatic means for
adjusting water temperature
required (except for boilers
equipped with tankless
domestic water heating coils).
Gas-fired Steam......................... 82 8 8 Constant-burning pilot not
permitted.
Oil-fired Hot Water..................... 86 11 11 Automatic means for adjusting
temperature required (except
for boilers equipped with
tankless domestic water
heating coils).
Oil-fired Steam......................... 85 11 11 None.
Electric Hot Water...................... None 8 8 Automatic means for adjusting
temperature required (except
for boilers equipped with
tankless domestic water
heating coils).
Electric Steam.......................... None 8 8 None.
----------------------------------------------------------------------------------------------------------------
* A boiler that is manufactured to operate without any need for electricity or any electric connection, electric
gauges, electric pumps, electric wires, or electric devices is not required to meet the AFUE or design
requirements. Instead, such boilers must meet a minimum AFUE of 80 percent (for all classes except gas-fired
steam), and 75 percent for gas-fired steam.
** AFUE stands for Annual Fuel Utilization Efficiency, as determined in 10 CFR 430.23(n)(2).
[dagger] PW,SB and PW,OFF stand for standby mode power consumption and off mode power consumption, respectively.
2. History of Standards Rulemaking for Consumer Boilers
DOE initiated this rulemaking pursuant to its six-year-lookback
authority under 42 U.S.C. 6295(m)(1). On March 25, 2021, DOE published
in the Federal Register a request for information (RFI) that initiated
an early assessment review to determine whether any new or amended
standards would satisfy the relevant requirements of EPCA for a new or
amended energy conservation standard for consumer boilers (March 2021
RFI). 86 FR 15804. Specifically, through the March 2021 RFI, DOE sought
data and information that could enable the agency to determine whether
DOE should propose a ``no new standard'' determination because a more-
stringent standard: (1) would not result in a significant savings of
energy; (2) is not technologically feasible; (3) is not economically
justified; or (4) any combination of foregoing. Id. Additionally, DOE
granted a 30-day comment extension for the March 2021 RFI (for a total
of a 60-day comment period) in a notice published in the Federal
Register on April 9, 2021. 86 FR 18478, 18479.
Subsequently, on May 4, 2022, DOE published in the Federal Register
a preliminary analysis and TSD for purposes of evaluating the need for
amended energy conservation standards for consumer boilers (May 2022
Preliminary Analysis). 87 FR 26304. The May 2022 Preliminary Analysis
and TSD discussed the analytical framework, models, and tools used to
evaluate potential standards, and the results of the preliminary
analyses performed. Id. DOE held a public meeting webinar on June 16,
2022, to receive comments on its May 2022 Preliminary Analysis for
consumer boilers.
DOE received comments in response to the May 2022 Preliminary
Analysis from the interested parties listed in Table II.2.
[[Page 55136]]
Table II.2--May 2022 Preliminary Analysis Written Comments *
----------------------------------------------------------------------------------------------------------------
Comment No. in
Commenter(s) Abbreviation the docket Commenter type
----------------------------------------------------------------------------------------------------------------
American Gas Association, American AGA, APGA, and NPGA....... 38 Utility Trade
Public Gas Association, National Associations.
Propane Gas Association.
Air-Conditioning, Heating, and AHRI...................... 40, 42 Manufacturer Trade
Refrigeration Institute. Association.
Bradford White Corporation.............. BWC....................... 39 Manufacturer.
Crown Boiler Company.................... Crown..................... 30 Manufacturer.
Appliance Standards Awareness Project, Joint Advocates........... 35 Efficiency Advocacy
American Council for an Energy- Organizations.
Efficient Economy, Consumer Federation
of America, National Consumer Law
Center, Natural Resources Defense
Council.
Northwest Energy Efficiency Alliance.... NEEA...................... 36 Efficiency Advocacy
Organization.
New York State Energy Research and NYSERDA................... 33 State Agency.
Development Authority.
PB Heat, LLC............................ PB Heat................... 34 Manufacturer.
Rheem Manufacturing Company............. Rheem..................... 37 Manufacturer.
U.S. Boiler Company, Inc................ U.S. Boiler............... 31 Manufacturer.
Weil-McLain Technologies................ WMT....................... 32 Manufacturer.
----------------------------------------------------------------------------------------------------------------
* DOE received one additional comment to this docket that was not accessible and is not discussed further.
A parenthetical reference at the end of a comment quotation or
paraphrase provides the location of the item in the public record.\15\
To the extent that interested parties have provided written comments
that are substantively consistent with any oral comments provided
during the June 16, 2022 Preliminary Analysis public meeting webinar,
DOE cites the written comments throughout this document.
---------------------------------------------------------------------------
\15\ The parenthetical reference provides a reference for
information located in the docket of DOE's rulemaking to develop
energy conservation standards for consumer boilers. (Docket No.
EERE-2019-BT-STD-0036, which is maintained at www.regulations.gov).
The references are arranged as follows: (commenter name, comment
docket ID number, page of that document).
---------------------------------------------------------------------------
C. Deviation From Appendix A
In accordance with section 3(a) of 10 CFR part 430, subpart C,
appendix A (appendix A), DOE notes that it deviated from the provision
at section 6(a)(2) in appendix A regarding the pre-NOPR stages for an
energy conservation standards rulemaking (specifically, the publication
of a framework document). As initially discussed in the May 2022
Preliminary Analysis, DOE opted to deviate from this step by publishing
a preliminary analysis without a framework document. A framework
document is intended to introduce and summarize the various analyses
DOE conducts during the rulemaking process and requests initial
feedback from interested parties. As noted in the May 2022 Preliminary
Analysis, prior to that document, DOE published an RFI in the Federal
Register in which DOE identified and sought comment on the analyses
conducted in support of the most recent energy conservation standards
rulemakings for boilers. 87 FR 26304, 26307 (May 4, 2022).
In accordance with section 3(a) of appendix A, DOE notes that it is
deviating from the provision in appendix A specifying that there will
not be less than 75 days for public comment on the NOPR (section
6(f)(2) of appendix A). The public comment period on this NOPR will be
60 days. DOE is opting to deviate from this step because the May 2022
Preliminary Analysis already allowed stakeholders an opportunity to
comment on the analytical methods and subsequent preliminary results.
Additionally, DOE extended the comment period for the March 2021 RFI by
30 days for a total of a 60-day comment period. 86 FR 18478, 18479
(April 9, 2021). This NOPR relies on the same overall approach, but has
updated the analyses to incorporate stakeholder feedback in response to
the preliminary results. Consequently, DOE has concluded that that a
comment period of 60 days is appropriate and will provide interested
parties a meaningful opportunity to comment on the proposed rule.
DOE notes that it is not deviating from the provisions in section
8(d)(1) of appendix A, which state that a test procedure final rule
should be published at least 180 days prior to the close of a comment
period of a NOPR proposing amended standards for the products within
the scope of the test procedure final rule. Specifically, section
8(d)(1) pertains to test procedure amendments that impact measured
energy use or efficiency. Most recently, DOE published a test procedure
final rule in the Federal Register on March 13, 2023. 88 FR 15510. In
this final rule, DOE concluded that the updates to the test procedure
have minimal impact on AFUE ratings and that manufacturers will be able
to rely on data generated under the previous version of that test
procedure. Thus, an analysis of potential amended energy conservation
standards for consumer boilers can be carried out using current
performance data, so the 180-day requirement does not apply.
III. General Discussion
DOE developed this proposal after considering oral and written
comments, data, and information from interested parties that represent
a variety of interests. The following discussion addresses issues
raised by these commenters.
A. General Comments
This section summarizes general comments received from interested
parties regarding rulemaking timing and process.
AGA, APGA, and NPGA requested that DOE host a workshop to walk
through the Department's analytical approach for stakeholders and the
public in general, because these commenters suggested that the TSDs and
associated spreadsheets are complex and appear not to be consistent
across product categories. (AGA, APGA, NPGA, No. 38 at p. 4)
In response, DOE notes that the Department posts its TSDs and
spreadsheet analyses to the rulemaking docket found at regulations.gov
in order to provide transparency into the methodology used to arrive at
the results presented in this NOPR. As stated in the DATES section of
this proposed rule, DOE will host a public meeting via webinar which
will include an overview of DOE's methodology and provide an
opportunity for stakeholders to provide additional comments or pose
questions on this topic.
[[Page 55137]]
Crown and U.S. Boiler stated that a 60-day comment period was
insufficient to review the May 2022 Preliminary Analysis, given that
several calculations and underlying assumptions have changed since the
previous rulemaking. (Crown, No. 30 at p. 2; U.S. Boiler, No. 31 at p.
1)
As explained in the May 2022 Preliminary Analysis, DOE opted to
provide a 60-day comment period because the Department had already
requested comment in the March 2021 RFI on its energy conservation
standards analyses. DOE incorporated then most recent data inputs but
largely relied on many of the same analytical assumptions and
approaches used in the previous rulemaking, such that the agency
determined that a 60-day comment period in conjunction with the prior
comment period for the March 2021 RFI provided sufficient time for
interested parties to review the preliminary analysis and develop
comments. 87 FR 26304, 26307 (May 4, 2022). Further, DOE notes that it
is providing an additional 60-day comment period for this NOPR, which
again relies on the same analytical structure as the May 2022
Preliminary Analysis.
B. Scope of Coverage
Consumer boilers are appliances that transfer heat using combustion
gases or electricity to water to provide hot water or steam for space
heating.
Consumer boilers are defined in EPCA as a type of furnace.
Specifically, the term ``furnace'' is defined as a product which
utilizes only single-phase electric current, or single-phase electric
current or direct current in conjunction with natural gas, propane, or
home heating oil, and which--
Is designed to be the principal heating source for the living space
of a residence;
Is not contained within the same cabinet with a central air
conditioner whose rated cooling capacity is above 65,000 Btu per hour
(Btu/h);
Is an electric central furnace, electric boiler, forced-air central
furnace, gravity central furnace, or low pressure steam or hot water
boiler; and
Has a heat input rate of less than 300,000 Btu/h for electric
boilers and low pressure steam or hot water boilers and less than
225,000 Btu/h for forced-air central furnaces, gravity central furnace,
and electric central furnaces. (42 U.S.C. 6291(23))
DOE has codified definitions for the terms ``electric boiler'' and
``low pressure steam or hot water boiler'' in its regulations as
follows:
Electric boiler means an electrically powered furnace designed to
supply low pressure steam or hot water for space heating application. A
low pressure steam boiler operates at or below 15 pounds per square
inch gauge (psig) steam pressure; a hot water boiler operates at or
below 160 psig water pressure and 250 degrees Fahrenheit ([deg]F) water
temperature.
Low pressure steam or hot water boiler means an electric, gas, or
oil-burning furnace designed to supply low pressure steam or hot water
for space heating application. A low pressure steam boiler operates at
or below 15 psig steam pressure; a hot water boiler operates at or
below 160 psig water pressure and 250 [deg]F water temperature.
10 CFR 430.2.
In the May 2022 Preliminary Analysis, DOE requested comment on
hydronic heat pumps as technology options for consumer boilers. (See
the Executive Summary of the preliminary analysis TSD). In response,
the Department received multiple comments regarding the classification
of hydronic heat pump boilers. Hydronic heat pumps, commonly air-to-
water heat pumps, are systems that use the refrigeration cycle to heat
or chill water for domestic hot water or space conditioning use.
Crown and U.S. Boiler stated that heat pumps should not be
classified as boilers due to their inability to generate water
temperatures high enough to satisfy the design heating load of the vast
majority of the residential hot water heating systems in the United
States. (Crown, No. 30 at p. 3; U.S. Boiler, No. 31 at p. 3) BWC also
disagreed with DOE's interpretation in the May 2022 Preliminary
Analysis that air-to-water and water-to-water heat pumps (heat pump
products) should be considered as consumer boilers, stating that heat
pump products have pronounced differences that separate them from
boilers. BWC also claimed that DOE has listed the two products
separately on their website, as well as in DOE's Compliance
Certification Management System (CCMS) database. (BWC, No. 39 at p. 1)
AHRI similarly commented that heat pumps should not be included under
the current regulatory definitions for boilers and boiler product
classes, as the products cannot reach the same water temperature as
conventional boilers and cannot provide sufficient heating year-round
without assistance. AHRI recommended DOE update the current definition
of a ``boiler'' to include the ability to provide the required heat on
the coldest day of the year. AHRI further recommended that given the
difference in the form, fit, and function of heat pumps and
conventional boilers, DOE should establish a separate definition and
product class for these heat pump products. (AHRI, No. 40 at p. 3)
In contrast, Rheem, NYSERDA, the Joint Advocates, and NEEA all
suggested that heat pump boilers are capable of meeting home heating
design loads and should be considered as consumer boilers. (Rheem, No.
37 at p. 3; NYSERDA, No. 33 at p. 2; Joint Advocates, No. 35 at pp. 1-
2; NEEA, No. 36 at pp. 1-2) Rheem also stated that while heat pumps may
not reach the same maximum temperatures as conventional products, heat
pumps can provide adequate space heating in many applications. (Rheem,
No. 37 at p. 2)
In the March 2023 TP Final Rule, which was the most recent
rulemaking amending the consumer boiler test procedure, DOE addressed
similar comments suggesting hydronic air-to-water heat pump boilers and
water-to-water heat pump boilers should be excluded from the ``boiler''
definitions because they cannot provide the same maximum water
temperature as non-heat pump hydronic systems. Specifically, in the
March 2023 TP Final Rule, DOE noted that neither the EPCA definition
nor DOE's definitions at 10 CFR 430.2 for consumer boilers provide a
minimum water temperature requirement and, thus, do not exclude
hydronic heat pump boilers from being considered as consumer boilers.
DOE also noted in the March 2023 TP Final Rule that hydronic heat pump
boilers are marketed as providing the principal heating source for a
residence. 88 FR 15510, 15515-15516 (March 13, 2023).
In response to the comments received on the May 2022 Preliminary
Analysis, DOE again reviewed the market for hydronic heat pumps. Based
on its review of the hydronic heat pumps currently on the market, DOE
agrees with Rheem, NYSERDA, the Joint Advocates, and NEEA that hydronic
heat pumps can provide enough space heating to serve home design loads
in many applications. These products utilize only single-phase electric
current or direct current in conjunction with natural gas, propane, or
home heating oil, can be designed to be the principal heating source
for the living space of a residence, are not contained within the same
cabinet with a central air conditioner whose rated cooling capacity is
above 65,000 Btu/h, meet the definition of an ``electric boiler,'' and
have a heat input rate of less than 300,000 Btu/h (i.e., the
requirement for electric boilers). As such, hydronic heat pumps which
are designed to be the principal heating source of the living
[[Page 55138]]
space of a residence meet the criteria of ``furnace'' as defined in
EPCA at 42 U.S.C. 6291(23). Further, the Department notes that these
products also meet DOE's codified regulatory definition for ``low
pressure steam or hot water boiler.'' Therefore, DOE considers hydronic
heat pumps to be within the scope of coverage for consumer boilers.
However, as discussed in section III.C of this document, there is no
currently-applicable test procedure for hydronic heat pump consumer
boilers, and as a result, DOE has not considered these products further
in this NOPR.
In this NOPR, DOE has considered products which meet the
definitions for ``electric boiler'' and ``low pressure steam or hot
water boiler'' to be consumer boilers within the scope of this
rulemaking, with the exception of hydronic heat pump boilers, for which
there is currently no applicable test procedure to determine compliance
with standards.
See section IV.A.1 of this document for discussion of the product
classes analyzed in this NOPR.
C. Test Procedure
EPCA sets forth generally applicable criteria and procedures for
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293)
Manufacturers of covered products must use these test procedures to
quantify the efficiency of their product, to certify to DOE that their
product complies with energy conservation standards, and when making
efficiency-related representations to the public. (42 U.S.C. 6293(c)
and 42 U.S.C. 6295(s)) EPCA states that the AFUE is the efficiency
descriptor for furnaces and boilers (See 42 U.S.C. 6291(20) and (22));
however, as discussed in section II.A of this document, DOE is required
to also account for standby mode and off mode energy consumption.
Accordingly, for the current consumer boiler energy conservation
standards, AFUE is the active mode efficiency metric, while
PW,SB and PW,OFF are the metrics for standby mode
and off mode electrical energy consumption, respectively (see 10 CFR
430.32(e)(2)(iii)). All three of these metrics are measured by the DOE
test procedure for consumer boilers.
On March 13, 2023, DOE published a final rule in the Federal
Register amending the test procedure for consumer boilers (March 2023
TP Final Rule). 88 FR 15510. The amended test procedure became
effective on April 12, 2023.
Prior to April 12, 2023, the DOE test procedure for determining the
AFUE, PW,SB, and PW,OFF of consumer boilers was
located at appendix N to subpart B of 10 CFR part 430 (appendix N) and
referenced American Society of Heating, Refrigerating and Air-
Conditioning Engineers (ASHRAE) Standard 103-1993, ``Method of Testing
for Annual Fuel Utilization Efficiency of Residential Central Furnaces
and Boilers'' \16\ and International Electrotechnical Commission (IEC)
62301 (Edition 2.0), ``Household electrical appliances--Measurement of
standby power.'' AFUE is an annualized fuel efficiency metric that
fully accounts for fuel consumption in active, standby, and off modes
but does not include auxiliary electrical energy consumption.
PW,SB and PW,OFF are measures of the standby mode
and off mode power consumption, respectively, in watts.
---------------------------------------------------------------------------
\16\ American Society for Testing and Materials (ASTM) Standard
D2159-09 (Reapproved 2013), ``Standard test methods and procedures
for Smoke Density in Flue Gases From Burning Distillate Fuels,''
(ASTM D2156-09 (R2013)) is also referenced by the appendix EE test
procedure for setting up oil-fired burners.
---------------------------------------------------------------------------
In the March 2023 TP final rule, DOE updated appendix N to remove
the provisions applicable only to consumer boilers and to rename the
appendix ``Uniform Test Method for Measuring the Energy Consumption of
Furnaces.'' Correspondingly, the final rule established a new test
procedure specific to consumer boilers in a new appendix EE to subpart
B of 10 CFR part 430 (appendix EE). On and after September 11, 2023,
manufacturers will be required to use the amended test procedure
(though manufacturers may opt to do so early (i.e., any time after
April 12, 2023)), per the March 2023 TP Final Rule, to determine
ratings for consumer boilers. The amended test procedure located at
appendix EE consists of all provisions that were previously included in
appendix N relevant to consumer boilers, with the following
modifications:
Incorporating by reference the current revision to the applicable
industry standard, American National Standards Institute (ANSI)/ASHRAE
Standard 103-2017, ``Methods of Testing for Annual Fuel Utilization
Efficiency of Residential Central Furnaces and Boilers;''
Incorporating by reference the current revision of American Society
for Testing and Materials (ASTM) Standard D2156-09 (Reapproved 2018),
``Standard Test Method for Smoke Density in Flue Gases from Burning
Distillate Fuels;''
Incorporating by reference ANSI/ASHRAE Standard 41.6-2014,
``Standard Method for Humidity Measurement;''
Updating the definitions to reflect the changes in ANSI/ASHRAE 103-
2017 as compared to ANSI/ASHRAE 103-1993;
Removing the definition of ``outdoor furnace or boiler'' from 10
CFR 430.2;
Making certain corrections to improve the accuracy, repeatability,
and reproducibility of calculations within the test procedure.
88 FR 15510, 15512-15513 (March 13, 2023).
DOE determined that the amendments in the March 2023 TP Final Rule
would minimally impact the measured efficiency of certain consumer
boilers, and retesting and re-rating would not be required. 88 FR
15510, 15514 (March 13, 2023). Therefore, DOE expects that the energy
efficiency and energy consumption ratings currently achieved are still
representative of ratings that would be achieved under the revised test
method. As a result, DOE evaluated potential amended energy
conservation standards for consumer boilers using current market data.
As discussed in section III.B of this document, DOE has become
aware of hydronic air-to-water and water-to-water heat pumps, which DOE
has determined meet the definitional criteria to be classified as
consumer boilers. However, the AFUE metric described in ASHRAE 103-2017
(which is incorporated by reference into appendix EE) calculates the
efficiency of an electric boiler as 100 percent minus jacket loss,\17\
which provides a representative measure of efficiency for electric
boilers using electric resistance technology, for which an efficiency
value of 100 percent (the ratio of heat output to energy input) is the
maximum upper limit that technically could be achieved. DOE concluded
that the AFUE metric would not provide a representative or meaningful
measure of efficiency for a boiler with a heat pump supplying the heat
input, because heat pump efficiency (in terms of heat output to energy
input) typically exceeds 100 percent, and the AFUE metric does not
allow for ratings greater than 100 percent for electric boilers. 88 FR
15510, 15515 (March 13, 2023). Similarly, the ASHRAE 103-2017 test
procedure assumes a maximum value of 100 percent for gas-fired and oil-
fired boilers when calculating the steady-state efficiency and heating
seasonal efficiency, such that the methodology would not result in
representative AFUE
[[Page 55139]]
values for gas-fired or oil-fired absorption heat pump boilers.
---------------------------------------------------------------------------
\17\ The term ``jacket loss'' is used by industry to mean the
transfer of heat from the outer surface (i.e., jacket) of a boiler
to the ambient air surrounding the boiler.
---------------------------------------------------------------------------
Rheem, NYSERDA, the Joint Advocates, and NEEA all urged DOE to
develop a test procedure for heat pump consumer boilers. (Rheem, No. 37
at p. 3; NYSERDA, No. 33 at p. 2; Joint Advocates, No. 35 at p. 2;
NEEA, No. 36 at p. 2)
DOE will consider heat pump boilers when re-evaluating the test
procedure for consumer boilers in a future rulemaking. As noted in
section III.B of this document, due to the lack of a Federal test
procedure at this time which adequately addresses AFUE for heat pump
boilers, DOE has initially determined not to analyze heat pump boilers
in this standards rulemaking. However, the standby mode and off mode
power consumption test procedures in appendix EE remain applicable to
heat pump boilers; hence, these metrics are required for heat pump
boilers. Similarly, the statutory design requirements at 10 CFR
430.32(e)(2)(iii)(A) apply to these products.
D. Boilers Not Requiring Electricity
On July 28, 2008, DOE published a final rule technical amendment in
the Federal Register to codify the requirements that would be
applicable to consumer boilers as established in the Energy
Independence and Security Act of 2007. 73 FR 43611. That final rule
codified, as per the statute, that a boiler that is manufactured to
operate without any need for electricity or any electric connection,
electric gauges, electric pumps, electric wires, or electric devices
shall not be required to meet the current minimum AFUE standards or
design requirements for consumer boilers. Id. at 73 FR 43613.
As a result of this statutory exception, the regulations require
that boilers manufactured to operate without any need for electricity
or any electric connection, electric gauges, electric pumps, electric
wires, or electric devices must still meet the minimum AFUE
requirements in 10 CFR 430.32(e)(2)(i)--namely, a minimum AFUE of 80
percent (for all classes except gas-fired steam boilers), and 75
percent for gas-fired steam boilers.
In subsequent final rules, including the January 2016 final rule,
DOE maintained this exception for boilers not requiring electricity as
required by EPCA; however, the codified language had a technical error
wherein the exception inadvertently only applied to boilers
manufactured on or after September 1, 2012, and before January 15, 2021
(see 10 CFR 430.32(e)(2)(v), which only references 10 CFR
430.32(e)(2)(ii)). The provisions at 10 CFR 430.32(e)(2)(v) apply also
to boilers manufactured on or after January 15, 2021 (which must meet
the requirements at 10 CFR 430.32(e)(2)(iii)).
In this NOPR, DOE proposes to make technical amendments to the
standards for consumer boilers to clarify that the aforementioned
exceptions continue to apply.
E. 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. Sections 6(b)(3)(i) and 7(b)(1) of appendix
A.
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; (3) adverse impacts on
health or safety, and (4) unique-pathway proprietary technologies.
Sections 6(b)(3)(ii)-(v) and 7(b)(2)-(5) of appendix A. Section IV.B of
this document discusses the results of the screening analysis for
consumer boilers, particularly the designs DOE considered, those it
screened out, and those that are the basis for the potential standards
considered in this rulemaking. For further details on the screening
analysis for this rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
When DOE proposes to adopt an amended 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 consumer
boilers, 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.1.b of this document and in chapter 5 of the NOPR TSD.
F. Energy Savings
1. Determination of Savings
For each TSL, DOE projected energy savings from application of the
TSL to consumer boilers purchased in the 30-year period that begins in
the year of compliance with the proposed standards (2030-2059).\18\ The
savings are measured over the entire lifetime of consumer boilers
purchased in the previous 30-year period. DOE quantified the energy
savings attributable to each TSL as the difference in energy
consumption between each standards case and the no-new-standards case.
The no-new-standards case represents a projection of energy consumption
that reflects how the market for a product would likely evolve in the
absence of new or amended energy conservation standards.
---------------------------------------------------------------------------
\18\ Each TSL is composed of specific efficiency levels for each
product class. The TSLs considered for this NOPR are described in
section V.A of this document. DOE conducted a sensitivity analysis
that considers impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------
DOE used its national impact analysis (NIA) spreadsheet model to
estimate national energy savings (NES) from potential amended or new
standards for consumer boilers. The NIA spreadsheet model (described in
section IV.H of this document) calculates energy savings in terms of
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 primary energy savings, which is the savings
in the energy that is used to generate and transmit the site
electricity. For natural gas, the primary energy savings are considered
to be equal to the site energy savings. DOE also calculates NES in
terms of FFC energy savings. The 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 conservation standards.\19\
DOE's approach is based on the calculation of an FFC multiplier for
each of the energy
[[Page 55140]]
types used by covered products or equipment. For more information on
FFC energy savings, see section IV.H.2 of this document.
---------------------------------------------------------------------------
\19\ The FFC metric is discussed in DOE's statement of policy
and notice of policy amendment. 76 FR 51281 (August 18, 2011), as
amended at 77 FR 49701 (August 17, 2012).
---------------------------------------------------------------------------
2. Significance of Savings
To adopt any new or amended standards for a covered product, DOE
must determine that such action would result in significant energy
savings. (42 U.S.C. 6295(o)(3)(B))
The significance of energy savings offered by a new or amended
energy conservation standard cannot be determined without knowledge of
the specific circumstances surrounding a given rulemaking.\20\ For
example, some covered products and equipment have most of their energy
consumption occur during periods of peak energy demand. The impacts of
these products on the energy infrastructure can be more pronounced than
products with relatively constant demand. Accordingly, DOE evaluates
the significance of energy savings on a case-by-case basis, taking into
account the significance of cumulative FFC national energy savings, the
cumulative FFC emissions reductions, and the need to confront the
global climate crisis, among other factors. DOE has initially
determined the energy savings from the proposed standard levels are
``significant'' within the meaning of 42 U.S.C. 6295(o)(3)(B).
---------------------------------------------------------------------------
\20\ The numeric threshold for determining the significance of
energy savings, established in a final rule published in the Federal
Register on February 14, 2020 (85 FR 8626, 8670), was subsequently
eliminated in a final rule published in the Federal Register on
December 13, 2021 (86 FR 70892, 70906), which went into effect on
January 12, 2022.
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G. Economic Justification
1. Specific Criteria
As noted previously, EPCA provides seven factors to be evaluated in
determining whether a potential energy conservation standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The
following sections discuss how DOE has addressed each of those seven
factors in this proposed rulemaking.
a. Economic Impact on Manufacturers and Consumers
In determining the impacts of a potential amended standard on
manufacturers, DOE conducts an MIA, as discussed in section IV.J of
this document. DOE first uses an annual cash-flow approach to determine
the quantitative impacts. This step includes both a short-term
assessment--based on the cost and capital requirements during the
period between when a regulation is issued and when entities must
comply with the regulation--and a long-term assessment over a 30-year
period. The industry-wide impacts analyzed include: (1) INPV, which
values the industry on the basis of expected future cash flows, (2)
cash flows by year, (3) changes in revenue and income, and (4) other
measures of impact, as appropriate. Second, DOE analyzes and reports
the impacts on different types of manufacturers, including impacts on
small manufacturers. Third, DOE considers the impact of standards on
domestic manufacturer employment and manufacturing capacity, as well as
the potential for standards to result in plant closures and loss of
capital investment. Finally, DOE takes into account cumulative impacts
of various DOE regulations and other regulatory requirements on
manufacturers.
For individual consumers, measures of economic impact include the
changes in LCC and 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 consumer costs and benefits expected to result from particular
standards. DOE also evaluates the impacts of potential standards on
identifiable subgroups of consumers that may be affected
disproportionately by a standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and
PBP)
EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a 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
its installation) and the operating expense (including energy,
maintenance, and repair expenditures) discounted over the lifetime of
the product. The LCC analysis requires a variety of inputs, such as
product prices, product energy consumption, energy prices, maintenance
and repair costs, product lifetime, and discount rates appropriate for
consumers. 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.
The PBP is the estimated amount of time (in years) it takes
consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
due to a more-stringent standard by the change in annual operating cost
for the year that standards are assumed to take effect.
For its LCC and PBP analysis, DOE assumes that consumers will
purchase the covered products in the first year of compliance with new
or amended standards. The LCC savings for the considered efficiency
levels are calculated relative to the case that reflects projected
market trends in the absence of new or amended standards. DOE's LCC and
PBP analysis is discussed in further detail in section IV.F of this
document.
c. Energy Savings
Although significant conservation of energy is a separate statutory
requirement for adopting an energy conservation standard, EPCA requires
DOE, in determining the economic justification of a standard, to
consider the total projected energy savings that are expected to result
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As
discussed in section III.F.1 of this document, DOE uses the NIA
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
In establishing product classes and in evaluating design options
and the impact of potential standard levels, DOE evaluates potential
standards that would not lessen the utility or performance of the
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data
available to DOE, the standards proposed in this document would not
reduce the utility or performance of the products under consideration
in this rulemaking.
e. Impact of Any Lessening of Competition
EPCA directs DOE to consider the impact of any lessening of
competition, as determined in writing by the Attorney General, that is
likely to result from a proposed standard. (42 U.S.C.
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine
the impact, if any, of any lessening of competition likely to result
from a proposed standard and to transmit such determination to the
Secretary 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)(ii)) DOE will transmit a copy of this proposed
rule to
[[Page 55141]]
the Attorney General with a request that the Department of Justice
(DOJ) provide its determination on this issue. DOE will publish and
respond to the Attorney General's determination in the final rule. DOE
invites comment from the public regarding the competitive impacts that
are likely to result from this proposed rule. In addition, stakeholders
may also provide comments separately to DOJ regarding these potential
impacts. See the ADDRESSES section for information to send comments to
DOJ.
f. Need for National Energy Conservation
DOE also considers the need for national energy and water
conservation in determining whether a new or amended standard is
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy
savings from the proposed standards are likely to provide improvements
to the security and reliability of the Nation's energy system.
Reductions in the demand for electricity also may result in reduced
costs for maintaining the reliability of the Nation's electricity
system. DOE conducts a utility impact analysis to estimate how
standards may affect the Nation's needed power generation capacity, as
discussed in section IV.M of this document.
DOE maintains that environmental and public health benefits
associated with the more efficient use of energy are important to take
into account when considering the need for national energy
conservation. The proposed standards are likely to result in
environmental benefits in the form of reduced emissions of air
pollutants and GHGs associated with energy production and use. DOE
conducts an emissions analysis to estimate how potential standards may
affect these emissions, as discussed in section IV.K of this document;
the estimated emissions impacts are reported in section V.B.6 of this
document. DOE also estimates the economic value of emissions reductions
resulting from the considered TSLs, as discussed in section IV.L of
this document.
g. Other Factors
In determining whether an energy conservation standard is
economically justified, DOE may consider any other factors that the
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To
the extent DOE identifies any relevant information regarding economic
justification that does not fit into the other categories described
previously, DOE could consider such information under ``other
factors.''
2. Rebuttable Presumption
As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a
rebuttable presumption that an energy conservation standard is
economically justified if the additional cost to the consumer of a
product that meets the standard is less than three times the value of
the first year's energy savings resulting from the standard, as
calculated under the applicable DOE test procedure. DOE's LCC and PBP
analyses generate values used to calculate the effects that proposed
energy conservation standards would have on the payback period for
consumers. These analyses include, but are not limited to, the 3-year
payback period contemplated under the rebuttable-presumption test. In
addition, DOE routinely conducts an economic analysis that considers
the full range of impacts to consumers, manufacturers, the Nation, and
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The
results of this analysis serve as the basis for DOE's evaluation of the
economic justification for a potential standard level (thereby
supporting or rebutting the results of any preliminary determination of
economic justification). The rebuttable presumption payback calculation
is discussed in section IV.F.9 and results reported in section V.B.1.c
of this document.
IV. Methodology and Discussion of Related Comments
This section addresses the analyses DOE has performed for this
rulemaking with regard to consumer boilers. Separate subsections
address each component of DOE's analyses.
DOE used several analytical tools to estimate the impact of the
standards proposed in this document. The first tool is a spreadsheet
that calculates the LCC savings and PBP of potential amended or new
energy conservation standards. The national impacts analysis uses a
second spreadsheet set that provides shipments projections and
calculates national energy savings and net present value of total
consumer costs and savings expected to result from potential energy
conservation standards. DOE uses the third spreadsheet tool, the
Government Regulatory Impact Model (GRIM), to assess manufacturer
impacts of potential standards. These three spreadsheet tools are
available on the DOE website for this proposed rulemaking:
www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=45&action=viewcurrent. Additionally, DOE used
output from the latest version of the Energy Information
Administration's (EIA's) Annual Energy Outlook (AEO), a widely known
energy projection for the United States, for the emissions and utility
impact analyses.
A. Market and Technology Assessment
DOE develops information in the market and technology assessment
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 proposed rulemaking include: (1) a determination of
the scope of the rulemaking and product classes, (2) manufacturers and
industry structure, (3) existing efficiency programs, (4) shipments
information, (5) market and industry trends; and (6) technologies or
design options that could improve the energy efficiency of consumer
boilers. The key findings of DOE's market assessment are summarized in
the following sections. See chapter 3 of the NOPR TSD for further
discussion of the market and technology assessment.
1. Product Classes
When evaluating and establishing energy conservation standards, DOE
may establish separate standards for a group of covered products (i.e.,
establish a separate product class) if DOE determines that separate
standards are justified based on the type of energy used, or if DOE
determines that a product's capacity or other performance-related
feature justifies a different standard. (42 U.S.C. 6295(q)) In making a
determination whether a performance-related feature justifies a
different standard, DOE must consider such factors as the utility of
the feature to the consumer and other factors DOE determines are
appropriate. (Id.)
The current product classes are divided by the type of energy used
(i.e., gas, oil, or electricity) and by the heat transfer medium (i.e.,
steam or hot water) as shown in Table IV.1. (See 10 CFR 430.32(e)(2))
The current product classes were originally established by EISA 2007
and are codified at 10 CFR 430.32(e)(2)(iii)(A).
[[Page 55142]]
Table IV.1--Consumer Boiler Product Classes
------------------------------------------------------------------------
Fuel type Heat transfer medium
------------------------------------------------------------------------
Gas....................................... Steam.
Hot Water.
Oil....................................... Steam.
Hot Water.
Electric.................................. Steam.
Hot Water.
------------------------------------------------------------------------
In the May 2022 Preliminary Analysis, DOE maintained these product
classes, and the Department solicited feedback on whether any
additional product classes would be necessary for consumer boilers,
including a potential consideration for hydronic heat pump boilers.
(See the Executive Summary of the preliminary analysis TSD). Multiple
stakeholders provided feedback on potential additional product classes
for fossil fuel-fired hot water boilers and hydronic heat pump boilers,
as discussed in the subsections that follow.
a. Fossil Fuel-Fired Hot Water Boilers \21\
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\21\ As discussed in chapter 3 of the NOPR TSD, due to the high
temperature of steam, condensing operation is not utilized in steam
boilers, and all steam boilers on the market are non-condensing.
Therefore, the discussion in this section is only applicable to hot
water boilers.
---------------------------------------------------------------------------
On December 29, 2021, DOE published in the Federal Register a final
interpretive rule for consumer furnaces, commercial water heaters, and
similarly situated products or equipment (the December 2021
Interpretive Rule), which explained DOE's return to its historic
position that, among other things, non-condensing technology and
associated venting of the flue gases is not a performance-related
``feature'' that provides a distinct consumer utility under EPCA.\22\
86 FR 73947.
---------------------------------------------------------------------------
\22\ For more information, see www.regulations.gov/docket/EERE-2018-BT-STD-0018 (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
In the May 2022 Preliminary Analysis, DOE addressed several
comments on the March 2021 RFI from stakeholders requesting that the
Department consider non-condensing technology and associated venting to
be a performance-related feature, (see chapter 2 of the preliminary
TSD), and DOE maintained its position that non-condensing technology
does not constitute a performance-related ``feature,'' consistent with
the December 2021 Interpretive Rule. 87 FR 26304, 26308 (May 4, 2022).
In response to the May 2022 Preliminary Analysis, commenters provided
follow-up feedback with more information regarding how condensing
versus non-condensing technology would affect the applicable venting
categories.
As discussed in chapter 3 of the NOPR TSD, manufacturers generally
provide specific venting instructions based on the characteristics of
the heating appliance. The National Fire Protection Association (NFPA)
and ANSI maintain NFPA 54/ANSI Z223.1, ``National Fuel Gas Code,''
which assigns four venting categories to gas-fired appliances. Category
I venting is for nonpositive vent static pressures \23\ and limited
flue gas condensate \24\ production in the vent; Category II venting is
for nonpositive vent static pressures and excessive condensate
production in the vent; Category III venting is for positive vent
static pressures and limited condensate production in the vent, and
Category IV venting is for positive vent static pressures and excessive
condensate production in the vent. Non-condensing boilers can use
Category I venting, which is compatible with natural draft vent systems
that use chimney venting, but condensing boilers require category IV
venting, which is not compatible with natural draft vent systems.
(Category II venting is not common for consumer boilers, and Category
III venting can be used for non-condensing boilers but is also not
compatible with natural draft vent systems.)
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\23\ Static pressure is the pressure created by a fluid at rest
relative to the measurement instrument. Here non-positive static
pressure refers to the flue gases having a pressure lower than
atmospheric pressure so no assistance is needed for the flue gases
to escape through the vent system.
\24\ Condensate refers to the moisture that condenses inside
venting systems when the flue gas is cooled to below the dew point
and liquid begins to condense on the walls of the vent system.
---------------------------------------------------------------------------
Crown and U.S. Boiler stated that the ability to vent residential
boilers using Category I venting is a feature that must be preserved
due to boilers being a primarily replacement market in older urban
areas with limited exterior wall space suitable for a vent terminal,
and they recommended that there should be a product class for Category
I boilers. Crown stated that the elimination of Category I venting
would result in the need for extensive renovations to some existing
structures if the chimney can no longer be used, the potential for
boilers to be used long after they are a safe option, the potential use
of less safe heating equipment such as electric space heaters, or the
possibility of poor venting reconfigurations that could lead to safety
issues. Crown and U.S. Boiler stated that these ramifications cannot be
addressed in the standards cost-benefit analysis. Crown and U.S. Boiler
pointed to the preliminary TSD, which discussed that both the United
Kingdom and European Union have exceptions to their condensing boiler
standards that allow for installation of non-condensing boilers in
difficult installation circumstances. (Crown, No. 30 at pp. 2-3; U.S.
Boiler, No. 31 at p. 2)
WMT stated that it believes that EPCA (42 U.S.C. 6295(o)(4))
prohibits the elimination of non-condensing hot water boilers, and non-
condensing operation constitutes a product feature per EPCA that
warrants a separate product class under 42 U.S.C. 6295(q)(1), as stated
by DOE in the January 2021 Interpretative Rule (86 FR 4776). (WMT, No.
32 at pp. 1-2) WMT suggested that non-condensing boilers in Category I
venting should be a separate product class in order to recognize that
these products operate at 180 [deg]F return water temperatures, vent
through Category I venting, and may be installed in insufficiently-
insulated homes. WMT asserted that these homes also do not have the
ability to increase heat emitter surface area, and, thus, the various
efficiency levels analyzed in the preliminary analysis could not be
achieved by this hypothetical new product class. (WMT, No. 32 at p. 7)
PB Heat advocated for a separate product class for non-condensing
boilers, claiming that this action would secure cost-effective products
for consumers, in terms of product lifespan and maintenance, as well as
maintaining the consumer boiler replacement market. (PB Heat, No. 34 at
p. 2)
In contrast, NYSERDA stated that condensing and non-condensing
boilers should remain in the same product class because condensing
operation is not a performance-related feature. NYSERDA indicated that
challenging installations represent a small proportion of the market.
NYSERDA provided data showing that almost 40 percent of all furnaces
and boilers in New York achieve a condensing level of performance,\25\
and commented that DOE's estimate that fewer than 5 percent of
installations could be labeled as challenging is well-supported and
reflective of the significant gain of market share that condensing
products have achieved over the last twenty years. (NYSERDA, No. 33 at
p. 3)
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\25\ NYSERDA provided information from its 2019 Residential
Building Stock Assessment, found online at www.nyserda.ny.gov/About/Publications/Building-Stock-and-Potential-Studies/Residential-Building-Stock-Assessment (Last accessed Jan. 3, 2023).
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The Joint Advocates likewise supported DOE's decision to evaluate
condensing and non-condensing boilers within a single product class (as
[[Page 55143]]
discussed in chapter 2 of the preliminary TSD). The Joint Advocates
stated that condensing technology provides the same utility, uses the
same fuel source, and does not constitute a ``performance related
feature'' that would warrant a separate product class from non-
condensing technology. (Joint Advocates, No. 35 at p. 1) NEEA also
supported DOE's decision to evaluate condensing and non-condensing
boilers within a single product class, as both products utilize the
same primary fuel source, neither provides unique consumer utility, and
keeping them in the same class prevents non-condensing boiler
manufacturers from obtaining a competitive, regulatory advantage over
condensing boiler manufacturers (i.e., by having less-stringent
requirements). (NEEA, No. 36 at p. 1)
With respect to commenters' statements that non-condensing
technology and associated venting is a ``feature'' that DOE's standards
cannot make unavailable, DOE concluded in the December 2021 final
interpretive rule that incorporation of non-condensing technology and
associated venting is not a performance-related ``feature'' for the
purpose of the EPCA prohibition at 42 U.S.C. 6295(o)(4). 86 FR 73955
73947, 73955 (Dec. 29. 2021). In support of that conclusion, DOE
explained that given EPCA's focus on an appliance's major function(s),
it is reasonable to assume that the consumer would be aware of
performance-related features and would recognize such features as
providing additional benefit in the appliance's performance of such
major function. Id. For example, some boilers have Wi-Fi connectivity
features that allow the consumer to remotely monitor and control their
boiler.\26\ In contrast to these features, an aspect of the appliance
that does not provide any additional benefit to the consumer during
operation would not be a performance-related feature that Congress
would expect DOE to preserve at the expense of energy savings. With
respect to boilers, some examples are heat exchanger designs or
materials, burner designs, and ignition system designs. While all of
these components are necessary parts of a boiler, they are not
performance-related features that provide other additional benefit to
the consumer during operation. Non-condensing technology and associated
venting falls squarely into this category. Further, energy conservation
standards work by removing the less-efficient technologies and designs
from the market. For example, DOE set standards for furnace fans in
2014 that effectively eliminated permanent split capacitor motors from
several product classes in favor of brushless permanent magnet motors,
which are more efficient. 79 FR 38130. As a second example, the amended
standards for residential clothes washers established by the May 31,
2012, rule effectively eliminated the use of electromechanical-style
user interface controls from the market, in favor of fully electronic
user interface controls--which enable more efficient energy and water
performance. 77 FR 32307. As a third example, DOE published a final
rule on June 17, 2013, adopting energy conservation standards for
microwave oven standby mode and off mode. These standards effectively
eliminated the use of linear power supplies from microwave oven control
boards, in favor of switch-mode power supplies, which exhibit
significantly lower standby mode and off mode power consumption. 78 FR
36316. It would completely frustrate the energy-savings purposes of
EPCA if DOE were to adopt an overly-broad reading of ``features'' that
preserves less-efficient technologies without determining that boilers
using those less-efficient technologies offer consumers an additional
benefit during normal operation that other boilers do not offer.
---------------------------------------------------------------------------
\26\ For example, see: https://www.viessmann-us.com/content/dam/public-brands/us/flyers/Vitodens_200_W_B2HE_06_2021.pdf/_jcr_content/renditions/original./Vitodens_200_W_B2HE_06_2021.pdf
and https://ntiboilers.com/wp-content/uploads/2020/09/FTVN_Series-Handout_2020_Web.pdf.
---------------------------------------------------------------------------
For these reasons, DOE disagrees with commenters that eliminating
non-condensing boiler technology and associated venting from the market
would violate EPCA's ``unavailability'' provision as that technology
does not provide unique utility to consumers that is not substantially
the same as that provided by condensing boilers. Moreover, such a
finding would preserve a less efficient technology with no unique
consumer utility at the expense of a significant savings of energy and
consumer benefit. Accordingly, for the purpose of the analysis
conducted for this rulemaking, DOE did not analyze separate equipment
classes for non-condensing and condensing boilers in this final rule.
In addition, while DOE agrees with NYSERDA that the number of
challenging installations represent a decreasing proportion of the
market because newer constructions can be designed around Category IV
venting considerations, DOE also agrees with manufacturers that those
few consumers with challenging installations could incur significant
costs. But DOE does not agree with the assertion by Crown and U.S.
Boiler that non-condensing technology and associated venting must be
preserved because the costs of these challenging installations cannot
be accounted for in DOE's economic analysis. First, as stated
previously, non-condensing technology and associated venting is not a
performance-related feature because, among other things, it does not
provide additional benefit in the appliance's performance of its major
function. Using existing venting can reduce installation costs, but
that does not provide the consumer with any additional benefits during
operation of the boiler. Further, EPCA specifically directs DOE to
consider installation and operating costs as part of the Department's
determination of economic justification. (See 42 U.S.C.
6295(o)(2)(B)(i)(II)) As a result, there is a clear distinction in EPCA
between the purposes of the product class provision in 42 U.S.C.
6295(q)--preserve performance-related features in the market--and the
economic justification requirement in 42 U.S.C. 6295(o)(2)(B)--
determine whether the benefits, e.g., reduced fuel costs for an
appliance, of a proposed standard exceed the burdens, e.g., increased
installation cost. And, DOE has accounted for the costs of altering or
replacing an existing venting system with a venting system that will
accommodate a condensing furnace as part of the installation costs in
the LCC analysis (see section IV.F.2 of this document and chapter 8 of
the NOPR TSD).
With respect to Crown and U.S. Boiler's concerns regarding safety
issues caused by condensing boilers, DOE is not aware of, nor have the
commenters provided, any data showing that non-condensing boilers are a
safer option than condensing boilers. DOE notes that condensing boilers
are currently widely available on the market and have been available
for decades, and in certain locations have experienced widespread
adoption (even having achieved greater market share than non-condensing
boilers in some areas). Given the track record of condensing boilers
being installed and operated safely, DOE finds that installers are
capable of safely installing and venting condensing boilers, even in
circumstances that would require the venting system to be upgraded.
Additionally, in response to WMT, DOE expects that condensing
boilers and non-condensing boilers alike would be capable of operating
with return water temperatures of 180 [deg]F. Thus, the return water
temperature provided by the product would not be reason to
differentiate product classes. DOE understands that condensing boilers,
when operating at these temperatures,
[[Page 55144]]
would have minimal condensation occurring in the heat exchanger, which
does result in non-condensing efficiency. This effect is accounted for
in the energy use analysis (see section IV.E of this document).
b. Hydronic Heat Pump Boilers
In the May 2022 Preliminary Analysis, DOE specifically sought
information regarding whether there are any performance-related
features of heat pump boilers which would justify a separate product
class. DOE also requested information on the expected market for such
products (see the Executive Summary of the preliminary analysis TSD).
Rheem suggested that DOE should include heat pump boilers in the
existing product class structure, but if that cannot be accomplished, a
separate product class may be warranted, with changes to the regulatory
definition for consumer boilers. (Rheem, No. 37 at p. 2)
Crown and U.S. Boiler stated that heat pump boilers are unable to
generate water temperatures high enough to satisfy the design heating
load of the vast majority of the residential hot water heating systems
in the United States, and, therefore, if heat pump boilers are
considered to be consumer boilers, they should be placed in their own
products class. (Crown, No. 30 at p. 3; U.S. Boiler, No. 31 at p. 3)
BWC commented that heat pump boilers are not able to provide the same
utility as conventional consumer boilers, especially during extreme
environmental conditions, and, therefore, should be placed in a
separate class than conventional consumer boilers. (BWC, No. 39 at p.
1)
As discussed in section III.C of this document, the DOE test
procedure for consumer boilers would not currently provide test results
that are representative of the energy use or energy efficiency of an
air-to-water or water-to-water heat pump boiler, and without an
appropriate test procedure for these products at this time, DOE did not
analyze heat pump boilers in this NOPR.
2. Market Assessment
In the market assessment, DOE obtains information on the present
and past industry structure and market characteristics in order to
inform multiple other analyses. In preparing the May 2022 Preliminary
Analysis, DOE reviewed available public literature to develop an
understanding of the consumer boiler industry in the United States,
including assessing manufacturer market share and characteristics,
existing regulatory and non-regulatory initiatives for improving
product efficiency, and trends in product characteristics and retail
markets. The Department used data sources such as its own Compliance
Certification Database (CCD),\27\ supplemented by information in
California Energy Commission's Modernized Appliance Efficiency Database
System (MAEDbS),\28\ AHRI's Directory of Certified Product
Performance,\29\ and the U.S. Environmental Protection Agency's ENERGY
STAR product finder.\30\ DOE specifically sought comment in the May
2022 Preliminary Analysis on whether manufacturer model counts from
publicly-available databases accurately reflect manufacturer market
shares on a model-weighted or sales-weighted basis in order to inform
the LCC analysis by providing insights into the typical consumer or
installation scenarios (see the Executive Summary of the consumer
boilers preliminary TSD).
---------------------------------------------------------------------------
\27\ DOE's CCD can be found online at: www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (Last accessed Jan. 3,
2023).
\28\ MAEDbS can be found online at:
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (Last
accessed Jan. 3, 2023).
\29\ AHRI's Directory of Certified Product Performance can be
found online at: www.ahridirectory.org/Search/SearchHome?ReturnUrl=%2f (Last accessed March 1, 2023).
\30\ EPA's ENERGY STAR product finder can be found online at:
www.energystar.gov/products/products_list (Last accessed Jan. 3,
2023).
---------------------------------------------------------------------------
WMT stated that certification databases do not indicate shipments
and, thus, reflect the distribution of neither input capacities nor
efficiencies. (WMT, No. 32 at pp. 7-8) WMT commented that the boilers
market is increasingly transitioning towards higher efficiencies, and
this is occurring in specific areas and regions where higher-efficiency
consumer boilers have the most financial benefit and the application
allows for it. The commenter stated that areas with lower adoption
rates are based less on need for financial benefit than the inability
to adapt the building to lower water circulation temperatures required
for high-efficiency products; in other words, regions where local
building codes or policies result in increased installation costs or
even prohibit condensing appliance installations have the least
transition towards higher efficiencies. WMT commented that this would
disproportionally affect certain consumer subgroups. (WMT, No. 32 at p.
11)
Similarly, Rheem did not recommend using model counts from
publicly-available databases to reflect market shares. (Rheem, No. 37
at p. 2)
AHRI also disagreed with the Department's use of manufacturer model
counts from publicly-available databases to reflect manufacturer market
shares on a model-weighted or sales-weighted basis, claiming that these
databases do not accurately represent market share and misrepresent the
market. (AHRI, No. 40 at p. 3) In a follow-up submission, AHRI provided
information to DOE containing a market share analysis for gas-fired hot
water boilers. AHRI stated that its contractor survey, completed in
July 2022, was conducted in conjunction with the Air Conditioning
Contractors of America (ACCA) and the Plumbing, Heating, and Cooling
Contractors Association (PHCC), and that it gathered feedback from over
140 experienced contractors. (AHRI, No. 42 at p. 1)
DOE notes that the data provided by AHRI contained insights into
manufacturer shipments, installation types, consumer boiler lifetimes,
and other parameters which DOE has incorporated, as applicable, into
its market assessment and considered for the downstream analyses (e.g.,
LCC and PBP, shipments).
3. Technology Options
In the preliminary market analysis and technology assessment, DOE
identified 13 technology options that would be expected to improve the
efficiency (in terms of the three regulated metrics: AFUE,
PW,SB, and PW,OFF) of consumer boilers, as
measured by the DOE test procedure:
Technology options to improve AFUE: heat exchanger improvements,
modulating operation, vent dampers, direct vent, pulse combustion,
premix burners, burner derating, low-pressure air-atomized oil burners,
delayed-action oil pump solenoid valves, and electronic ignition.
Technology option to improve PW,SB and PW,OFF: control relays for
models with brushless permanent magnet (BPM) motors, transformer
improvements, and switching mode power supplies.
Additionally, based on an extensive review of publicly available
literature, DOE listed technologies that could potentially improve the
overall efficiency of consumer boilers but would not result in
improvements to AFUE, PW,SB, or PW,OFF. These
were, namely: micro combined heat and power systems, improved motor
efficiency, positive shut-off valves for oil burner nozzles, renewable
natural
[[Page 55145]]
gas,\31\ and heat pump technology. See chapter 3 of the preliminary TSD
for details. After developing the preliminary list of technology
options, DOE requested feedback on this list. The Department also
sought information regarding the adoption of low-loss transformers and
switching mode power supplies in consumer boilers to meet the existing
PW,SB and PW,OFF standards.
---------------------------------------------------------------------------
\31\ Renewable natural gas is methane (natural gas) that is
produced via the breakdown of biological material, then treated to
remove contaminants.
---------------------------------------------------------------------------
BWC disagreed with some of the design characteristics which were
presented in Table 3.3.2 of the preliminary TSD, stating that non-
condensing copper heat exchangers can be either Category I or II
venting, not just Category II venting. BWC also stated that condensing
operation can begin in venting at around the 85-percent AFUE level, as
opposed to the 88-percent AFUE threshold described in the preliminary
TSD. BWC recommended that DOE perform a more up-to-date teardown
analysis to address these discrepancies. (BWC, No. 39 at p. 2) In
response, DOE believes that BWC may have misinterpreted the information
provided in this table. Table 3.3.2 of the preliminary TSD simply
provides brief descriptions of the terms that are used to characterize
consumer boiler designs, and these terms are grouped together in
accordance with the corresponding design parameter. DOE stated in Table
3.3.2 that copper heat exchangers are used in some non-condensing
models, not that these heat exchangers are limited to Category II
venting.
Rheem stated that renewable natural gas likely has little effect on
efficiency compared to traditional natural gas, and, therefore, the
commenter recommended that this technology option should be removed
from the analysis. (Rheem, No. 37 at p. 2) DOE agrees that renewable
natural gas would not result in improvements to AFUE, PW,SB,
or PW,OFF, and, thus, this fuel has not been considered as a
technology option in this NOPR.
AHRI stated that it does not have data on any current technologies
that can be used to reach a more-stringent standard, but further stated
that consumer boilers are typically installed within the thermal
envelope of the building and any energy lost from the consumer boiler
results in useful heat provided to the building. (AHRI, No. 40 at pp.
3-4) In response, DOE notes that a consumer boiler's primary purpose is
to deliver heat to the hot water or steam in the home heating loop. DOE
understands the comment from AHRI to mean that any technologies which
limit the loss of heat from the consumer boiler to its immediate
surroundings (i.e., heat that does not go into the hot water or steam)
should not be considered as improving the efficiency of the consumer
boiler because the heat is ultimately delivered to the building even if
it is not through the hot water or steam. The previous appendix N test
procedure and the new appendix EE test procedure both account for this
by assigning a value of 0 to the jacket loss factor (a value which
quantifies heat lost directly to the consumer boiler's surroundings
through its jacket) if the boiler is non-weatherized, as it is assumed
to be located within the conditioned space of the building.\32\ At the
time of this analysis, DOE did not identify any commercially available
weatherized consumer boilers. The technology options identified as
improving AFUE are consistent with this understanding.
---------------------------------------------------------------------------
\32\ In defining the AFUE metric, EPCA states that this
descriptor is based on the assumption that all weatherized warm air
furnaces or boilers are located out-of-doors, and boilers which are
not weatherized are located within the heated space. (42 U.S.C.
6291(20)(A)-(C)) The jacket loss is, therefore, assigned a value of
0 for any boilers that are non-weatherized.
---------------------------------------------------------------------------
DOE requests information on the market share of weatherized
consumer boilers and the typical jacket losses of such products.
BWC strongly discouraged DOE from evaluating more-stringent standby
mode and off mode power consumption (PW,SB and
PW,OFF) standards. BWC commented that, based on its own
testing, it has not seen a significant decrease in energy used in
standby mode through the use of larger, low-loss transformers. BWC also
stated that DOE's methodology of examining a few discrete components
and their energy consumption instead of the overall power consumption
of the consumer boiler was of concern to BWC because it fails to
account for the power consumed by a consumer boiler's entire electrical
system (including all ancillary components), and it recommended not to
pursue more-stringent power consumption standards. (BWC, No. 39 at p.
2)
In response, DOE has considered this information about the
implementation of low-loss transformers and has tentatively determined
that it remains uncertain whether this technology option can be used to
further reduce standby mode and off mode energy consumption. In the
January 2016 Final Rule, DOE had determined that low-loss transformers
and switching mode power supplies would be necessary to achieve the
PW,SB and PW,OFF standards that were promulgated
in that rule (which were set at the maximum technologically feasible
levels at the time). 81 FR 2320, 2407-2408 (Jan. 15, 2016). As
discussed in chapter 5 of the NOPR TSD, transformer improvements (i.e.,
low loss transformers) and switching mode power supplies would have
uncertain potential to further improve standby mode and off mode power
consumption because these were considered to be the maximum
technologically feasible designs in the January 2016 Final Rule which
established the current standards. Thus, low-loss transformers and
switching mode power supplies were not considered as potential design
options for consumer boilers in this NOPR. In this NOPR, DOE
tentatively determined that control relays are the only viable
technology option remaining which can lead to discernible improvements
to PW,SB and PW,OFF. However, as discussed in
section IV.B of this document, control relays were screened out from
further consideration, leaving no design options currently identified
to improve these metrics. As a result, this NOPR did not further assess
potential amended PW,SB and PW,OFF standards, and
only amended AFUE standards are proposed. See chapters 3 and 4 of the
NOPR TSD for further details of the technology assessment leading to
this tentative conclusion not to further analyze amended standby mode
and off mode energy consumption standards at this time.
DOE received multiple comments in response to the May 2022
Preliminary Analysis regarding heat pumps as technology options for
consumer boilers. NYSERDA, the Joint Advocates, and NEEA recommended
that heat pumps be considered as technology options once a test
procedure for these products is established, suggesting that heat pump
boilers would define the maximum technologically feasible efficiency
for consumer boilers. (NYSERDA, No. 33 at p. 2; Joint Advocates, No. 35
at pp. 1-2; NEEA, No. 36 at pp. 1-2)
Additionally, NYSERDA stated that New York's ambitious climate
objectives will require retrofitting the heating systems of existing
homes to reduce GHGs, and given the prevalence of hydronic systems in
the New York market, providing consumers choices for low-emission
hydronic heating solutions will be important. (NYSERDA, No. 33 at p. 2)
The Joint Advocates commented that hydronic heating is used in 8
percent of homes overall in the United States, including 28 percent of
homes in the Northeastern region, and heat pump boilers will assist
that proportion's rise to higher efficiencies as State policies
[[Page 55146]]
shift forward. The Joint Advocates stated that gas absorption heat
pumps can replace standard gas space heating appliances in cold
climates, operating at much higher theoretical AFUE values. (Joint
Advocates, No. 35 at pp. 1-2)
NEEA recommended that DOE should evaluate electric and gas heat
pump technology, as well as dual-fuel heat pump boilers and gas
absorption heat pump boilers, for consumer boilers as potential ``max-
tech'' efficiency levels. NEEA stated that these products provide the
same product utility as conventional consumer boilers and that these
products are commercially available. (NEEA, No. 36 at pp. 1-2)
WMT, on the other hand, stated that it is not aware of viable heat
pump boilers in the market which can operate consistently and reliably
at circulating water temperatures sufficient for heating needs across
the Nation. (WMT, No. 32 at p. 8) AHRI commented that it did not have
data regarding current technologies that can be used to meet more-
stringent standards or the adoption of electric heat pump or gas heat
pump technology in the consumer boiler market. (AHRI, No. 40 at pp. 3-
4)
As discussed in section IV.A.1.b of this document, DOE has
tentatively determined that heat pump technology would not yield
improvements in AFUE per the new appendix EE test procedure, and that
further development of the test procedure would be necessary in order
to address these novel products. Therefore, DOE has not included heat
pump technologies in its list of technology options for this NOPR. The
Department appreciates the feedback and information provided by
stakeholders on this topic and will continue to evaluate heat pump
boilers in a future rulemaking.
B. Screening Analysis
DOE uses the following five 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 commercially viable,
existing prototypes will not be considered further.
(2) Practicability to manufacture, install, and service. If it
is determined that mass production of a technology in commercial
products and reliable installation and servicing of the technology
could not be achieved on the scale necessary to serve the relevant
market at the time of the projected compliance date of the standard,
then that technology will not be considered further.
(3) Impacts on product utility. If a technology is determined to
have a significant adverse impact on the utility of the product to
subgroups of consumers, or results 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) Safety of technologies. If it is determined that a
technology would have significant adverse impacts on health or
safety, it will not be considered further.
(5) Unique-pathway proprietary technologies. If a technology has
proprietary protection and represents a unique pathway to achieving
a given efficiency level, it will not be considered further, due to
the potential for monopolistic concerns.
10 CFR part 430, subpart C, appendix A, sections 6(b)(3) and 7(b).
In summary, if DOE determines that a technology, or a combination
of technologies, fails to meet one or more of the listed five criteria,
it will be excluded from further consideration in the engineering
analysis. The reasons for eliminating any technology are discussed in
the following sections.
The subsequent discussion includes 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.
In response to the May 2022 Preliminary Analysis, several
commenters raised concerns regarding the consideration of an 85-percent
AFUE efficiency level for gas-fired hot water boilers, stating that
this particular efficiency could have issues with installation and
repair, reliability, and safety. These commenters assert that this
issue should have bearing on DOE's consideration of technology options
for this rulemaking.
AGA, APGA, and NPGA stated that if DOE were to propose 85-percent
AFUE as a standard, it would be too close to condensing operation to be
safely implemented with existing Category I venting systems, and that
forcing the consumer to upgrade to condensing technology would place
undue burden and expense on the consumer. AGA, APGA, and NPGA stated
that manufacturers would not produce consumer boilers that are prone to
failure, instead opting to make condensing boilers, thereby limiting
the choice of and increasing the burden on the consumer. (AGA, APGA and
NPGA, No. 38 at p. 3) Rheem similarly expressed concern that the 85-
percent efficiency level is too close to condensing operation to be
used safely without reliability issues and costly upgrades. (Rheem, No.
37 at p. 4)
Reiterating its comments from the previous standards rulemaking,
Crown provided data from the U.S. Consumer Product Safety Commission
(CPSC) on failure modes that led or contributed to carbon monoxide
incidents associated with modern furnaces and boilers between the years
2002-2009 and concluded that, as the AFUE increases, the likelihood
that one of these failure modes would cause a carbon monoxide incident
also increases. Crown stated that this is due the flue gases being less
buoyant at higher efficiencies, and, thus, being less able to overcome
the effects of depressurization, partial blockage, back-drafting, or an
improperly designed vent system; additionally, cooler flue gases are
more likely to cause damage to the vent system if something else also
goes wrong (e.g., Crown provided the example of trace halogen
aspiration into the consumer boiler). (Crown, No. 30 at pp. 3-5) U.S.
Boiler provided the same comments as Crown. (U.S. Boiler, No. 31 at pp.
3-5)
Crown stated that setting a standard for gas-fired hot water
boilers at 85-percent AFUE would completely ignore the safety and
reliability concerns that can result from the installation of a
consumer boiler operating at this efficiency level into a Category I
chimney. Crown provided graphical data charting flue gas CO2
concentration and net flue gas temperature that suggested that the
steady-state efficiency at which a consumer boiler could operate while
maintaining a Category I designation would be between 82.7-84.1-percent
AFUE. Crown made the observation that, since AFUE will never exceed
steady-state efficiency, the current standard at 84-percent AFUE, for
all practical purposes, is already at this limit. Crown argued that
while there are consumer boilers on the market at 85-percent AFUE, not
all of them are certified to ANSI Z21.13, ``Gas-Fired Low Pressure
Steam And Hot Water Boilers,'' and are, therefore, not officially
Category I venting. Crown also stated that these 85-percent AFUE
consumer boilers have modifications such as power gas burners and
operate in conditions different than laboratory conditions where AFUE
was determined, creating uncertainty on whether they would be safe in
all field conditions. Crown commented that while there are explicit
instructions on how to install consumer boilers, manufacturers have
little control on whether these instructions are followed, and an AFUE
minimum of 85 percent introduces more of a safety risk to the consumer;
therefore, a standard at this level would force all manufacturers to
[[Page 55147]]
either prescribe vent requirements more stringent than those currently
in the National Fuel Gas Code and/or give up any remaining extra safety
margin they have built into their products for suboptimal vent systems,
all for an incremental energy savings benefit likely amounting to a
rounding error. (Crown, No. 30 at pp. 3-5) U.S. Boiler provided the
same comments. (U.S. Boiler, No. 31 at pp. 3-5)
In response, DOE understands that Crown, U.S. Boiler, APA, APGA,
and NPGA are concerned about the safety of installing gas-fired hot
water boilers with incremental heat exchanger improvements (leading to
an AFUE of 85 percent) within current Category I venting systems.
However, as a technology option, an increase in heat exchanger
effectiveness alone does not pose a safety risk for consumers or
service technicians. To this point, in the January 2016 Final Rule, the
Department recognized that certain efficiency levels could pose health
or safety concerns under certain conditions if they are not installed
properly in accordance with manufacturer specifications. However, these
concerns can be resolved with proper product installations and venting
system design; this is evidenced by the significant shipments of
products that are currently commercially available at these efficiency
levels, as well as the lack of restrictions on the installation
location of these units in installation manuals. In addition, DOE noted
that products achieving these efficiency levels have been on the market
since at least 2002, which demonstrates their reliability, safety, and
consumer acceptance. In some circumstances, if the potential for
condensate is high, different vent materials (such as a high grade
stainless steel vent) may be required to withstand the condensate. High
efficiency condensing boilers typically use PVC/CPVC venting since the
exhaust gases are cool enough. Given the significant product
availability and the amount of time products at these efficiency levels
have been available on the market, DOE continues to believe that
products at these efficiency levels are safe and reliable when
installed correctly. 81 FR 2320, 2344-2345 (Jan. 15, 2016).
Further, DOE examined the most recent report from the CPSC
regarding carbon monoxide incidents related to the use of consumer
products, which presented data from 2018 (CPSC 2018 Report).\33\ This
report discusses that information collected on the carbon monoxide
incidents often describes conditions of compromised vent systems, flue
passageways, and chimneys for furnaces, boilers, and other heating
systems. CPSC 2018 Report at p. 9. Specifically, the CPSC 2018 Report
states that ``[a]ccording to the information available, some products
had vents that became detached or were installed/maintained improperly.
Vents were also sometimes blocked by soot caused by inefficient
combustion, which, in turn, may have been caused by several factors,
such as leaky or clogged burners, an over-firing condition, or
inadequate combustion air. Other furnace-related conditions included
compromised heat exchangers or filter doors/covers that were removed or
not sealed. Some products were old and apparently not well maintained.
Other incidents mentioned a backdraft condition, large amounts of
debris in the chimney, and the use of a product that was later
prohibited by the utility company and designated not to be turned on
until repaired.'' Id. Based on this information, DOE has tentatively
determined that it is the potential for older or improperly maintained
venting and burner systems to be inadequate which may pose a safety
risk, and not the higher-efficiency consumer boiler itself. In other
words, high efficiency boilers available on the market today are just
as safe as baseline boilers when they are installed and maintained
properly. If either high-efficiency or low-efficiency boilers are not
installed and maintained properly, then some potential for safety
concerns may exist as outlined by the CPSC report. But DOE has not
found, nor have commenters presented, evidence that more stringent
standards for boilers would result in a reduction of boiler safety. In
the LCC analysis, DOE accounts for the costs associated with correctly
installing boilers (including modifications to vent system when
appropriate), as well as preventative maintenance and any necessary
repairs over the lifetime of a product. As a result, DOE has not
screened out heat exchanger improvements as a technology option from
this NOPR analysis.
---------------------------------------------------------------------------
\33\ M.V. Hnatov, ``Non-Fire Carbon Monoxide Deaths Associated
with the Use of Consumer Products; 2018 Annual Estimates,'' U.S.
Consumer Product Safety Commission, September 2021. Available online
at www.cpsc.gov/s3fs-public/Non-Fire-Carbon-Monoxide-Deaths-Associated-with-the-Use-of-Consumer-Products-2018-Annual-Estimates.pdf?VersionId=IN1CTo8Njoxta0CmddOUl2t.tmQ.iEEb (Last
accessed Jan. 3, 2023).
---------------------------------------------------------------------------
PB Heat stated that the current minimum efficiency levels are close
to the condensing range, and increasing them any further will reduce
applications where Category I consumer boilers can be installed and,
therefore, reduce consumer utility and access to affordable heating.
(PB Heating, No. 34 at p. 1)
As stated in section IV.A.1.a of this document, in this rulemaking,
DOE is not considering venting configurations to constitute a consumer
or product utility, consistent with the conclusions of the December
2021 Interpretive Rule. DOE acknowledges that certain types of homes
may require substantial investment to upgrade the venting if
transitioning from a Category I vent system to a Category IV vent
system, and the Department aims to accurately capture these costs to
the consumer in the LCC and PBP analyses. Additionally, DOE has
considered a low-income consumer subgroup in order to assess the LCC
impacts on access to affordable heating in particular. The details of
these analyses are discussed in sections IV.F and IV.I of this
document, respectively.
1. Screened-Out Technologies
Rheem suggested that hydrogen technology (including hydrogen and
hydrogen blends) should be screened out from the technology options in
this rulemaking due to technological feasibility. (Rheem, No. 37 at p.
3)
In response, DOE notes that in commenting on the March 2021 RFI,
Rheem had recommended that the Department consider new fuel sources,
including hydrogen-blended gas and renewable natural gas, while stating
that industry groups are currently evaluating the safe and efficient
use of hydrogen-blended fuels (with up to 15-percent hydrogen) in gas-
fired appliances. (Rheem, No. 10 at p. 5) Consequently, DOE included
hydrogen-ready boilers \34\ in the technology assessment of the May
2022 Preliminary Analysis (see chapter 3 of the preliminary TSD). DOE
evaluated hydrogen-ready boilers and differences in burner systems that
would be able to accommodate a transition to hydrogen blend gas and has
tentatively determined that hydrogen-ready burner designs do not appear
to contribute to gains in AFUE. As a result of these findings, DOE did
not consider hydrogen-ready burners in this NOPR as a technology option
to improve consumer boiler AFUE, and, thus, this technology was not
even included in the NOPR screening analysis. In addition, DOE notes
that hydrogen-ready boilers do not appear to be commercially-available
technologies in the United States, and have not yet been
[[Page 55148]]
demonstrated to be commercially-viable and mass-produced, as per
screening criteria number 2; therefore, even if hydrogen-ready burners
were to provide an efficiency benefit to consumer boilers, this
technology would have likely been screened out during this proposed
rulemaking on the basis of practicability to manufacture, install, and
service.
---------------------------------------------------------------------------
\34\ ``Hydrogen-ready'' boilers are appliances that have the
ability to burn both natural gas and hydrogen (i.e., either a blend
of the two fuels or a complete switch between fuels).
---------------------------------------------------------------------------
DOE requests further information on the potential future adoption
of hydrogen-ready consumer boilers in the United States and any data
demonstrating potential impacts of these burner systems on AFUE.
After consideration of each technology option analyzed in the
technology assessment, DOE has screened out the following technologies
in this NOPR analysis: condensing operation in oil-fired hot water
boilers, pulse combustion, burner derating, low-pressure air-atomized
oil burners, and control relays for models with BPM motors. DOE
screened these technologies out in the May 2022 Preliminary Analysis
for the reasons explained in that document (see chapter 4 of the
preliminary analysis TSD), but the Department did not receive any
additional feedback from stakeholders on these determinations. Table
IV.2 presents the criteria that were the basis for screening out each
of these technologies from further consideration in the NOPR analysis.
Further details can be found in chapter 4 of the NOPR TSD.
Table IV.2--Screened-Out Technologies for Consumer Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
EPCA criterion (X = basis for screening out)
-------------------------------------------------------------------------------------
Practicability Adverse Adverse
Technology option Technological to manufacture, impacts on impacts on Unique- pathway
feasibility install, and utility or health and proprietary
service availability safety technologies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Condensing operation in oil-fired hot water boilers............... ............... X ............... ............... ...............
Pulse combustion.................................................. ............... ................ ............... X ...............
Burner derating................................................... ............... ................ X ............... ...............
Low-pressure air-atomized oil burners............................. ............... X ............... ............... ...............
Control relays for BPM motors..................................... ............... ................ X ............... ...............
--------------------------------------------------------------------------------------------------------------------------------------------------------
DOE requests comment on the tentative determination that condensing
operation in oil-fired hot water boilers, pulse combustion, burner
derating, low-pressure air-atomized oil burners, and control relays for
models with BPM motors should be screened out from further analysis.
2. Remaining Technologies
Through a review of each technology, DOE tentatively concludes that
all of the other identified technologies met all five screening
criteria to be examined further as design options to improve AFUE in
DOE's NOPR analysis. In summary, DOE did not screen out the following
technology options presented in Table IV.3.
Table IV.3--Retained Technologies for Consumer Boilers
------------------------------------------------------------------------
Technology
-------------------------------------------------------------------------
Type Design Option
------------------------------------------------------------------------
Fans/Venting...................... Inducer fans.*
Vent dampers.
Direct venting/power venting.
Heat Exchanger Improvements....... Condensing heat exchanger (for gas
hot water boilers only)
Improved geometry and increased heat
exchanger surface area.
Baffles.
Burner............................ Modulating operation/modulating
Aquastats.
Premix burners.
Delayed-action oil pump solenoid
valves.
Ignition.......................... Electronic ignition (for oil-fired
boilers)
------------------------------------------------------------------------
* In chapter 3 of the May 2022 Preliminary Analysis TSD, inducer fans
were described as mechanical draft systems and grouped with heat
exchanger improvements, as use of induced draft can allow for use of
more restrictive heat exchanger designs that improve heat transfer.
DOE has initially determined that these technology options are
technologically feasible because they are being used or have previously
been used in commercially-available products or working prototypes. DOE
also finds that all of the remaining technology options to improve AFUE
meet the other screening criteria (i.e., practicable to manufacture,
install, and service and do not result in adverse impacts on consumer
utility, product availability, health, or safety, unique-pathway
proprietary technologies).
By screening out control relays for models with BPM motors, DOE has
tentatively determined that there remain no other technology options
which could viably improve standby mode and off mode power consumption.
As a result of this screening analysis, DOE has tentatively determined
that it is not technologically feasible at this time to increase the
stringency of the standby mode and off mode power consumption standards
for consumer boilers.
For additional details, see chapter 4 of the NOPR TSD.
C. Engineering Analysis
The purpose of the engineering analysis is to establish the
relationship between the efficiency and cost of consumer boilers. There
are two elements to consider in the engineering analysis: the selection
of efficiency levels to analyze (i.e., the ``efficiency analysis'') and
the determination of product cost at each efficiency level (i.e., the
``cost analysis''). In determining the performance of higher-efficiency
products, DOE considers technologies
[[Page 55149]]
and design option combinations not eliminated by the screening
analysis. For each product class, DOE estimates the baseline cost, as
well as the incremental cost for the product at efficiency levels above
the baseline. The output of the engineering analysis is a set of cost-
efficiency ``curves'' that are used in downstream analyses (i.e., the
LCC and PBP analyses and the NIA).
As discussed in the previous section of this document, DOE has
tentatively determined that it is not technologically feasible at this
time to increase the stringency of the standby mode and off mode power
consumption standards for consumer boilers because all of the potential
technology options have either uncertain impact on PW,SB and
PW,OFF or have been removed from further consideration in
the screening analysis. Thus, the engineering analysis of this NOPR
assesses improvements in AFUE only.
AHRI supported the Department's preliminary decision not to analyze
a more-stringent standard for standby and off mode power consumption,
stating that there is limited benefit to setting a more-stringent
standard. (AHRI, No. 40 at p. 4) Rheem also supported DOE's tentative
determination not to analyze more-stringent standby mode and off mode
standards. Rheem requested clarification as to whether DOE can
simultaneously increase the minimum AFUE if that results in an increase
in electrical energy consumption and a corresponding increase in
standby mode and off mode energy use, even if the combined change
results in a net decrease in energy use. (Rheem, No. 37 at pp. 3-4)
In response to the question from Rheem, EPCA states that the
Secretary may not prescribe any amended standard which increases the
maximum allowable energy use or decreases the minimum required energy
efficiency of a covered product (which includes consumer boilers). (42
U.S.C. 6295(o)(1)) This statutory ``anti-backsliding'' provision would
prohibit DOE from increasing the standby mode and off mode energy
consumption standards.
The comment from Rheem appears to suggest that standards should
consider a combined metric of both active mode, standby mode, and off
mode energy consumption. EPCA requires integration of standby mode and
off mode energy consumption ``into the overall energy efficiency,
energy consumption, or other energy descriptor for each covered
product, with one exception being if such an integrated test procedure
is technically infeasible for a particular covered product, in which
case the Secretary shall prescribe a separate standby mode and off mode
energy use test procedure for the covered product, if technically
feasible. (42 U.S.C. 6295(gg)(2)(A)) In a final rule published in the
Federal Register on October 20, 2010, DOE determined that an integrated
metric is not technically feasible because the measurement of standby
mode and off mode energy consumption is much smaller than the active
mode fuel consumption reflected in AFUE, making the standby mode and
off mode energy consumption infeasible to regulate as part of a
combined metric. 75 FR 64621, 64622-64627.
From its own test data and manufacturer interviews, DOE has
tentatively determined that increases to the AFUE of a boiler would not
result in increases to the standby mode and off mode power consumption
in such a way that it would be impossible to comply with the existing
standby mode and off mode power consumption standards.
Additionally, as discussed in section III.C of this document, DOE's
test method for consumer boilers assigns a value of 100-percent AFUE to
any electric boiler which is non-weatherized (see section 11.1 of
ASHRAE 103-2017, which is incorporated by reference into appendix EE).
DOE has not identified any electric boilers that are weatherized or
intended for installation outdoors, and has tentatively determined that
electric boilers would typically be non-weatherized and installed
indoors. As such, the AFUE for these products would already be at the
maximum possible value per the test procedure. Thus, DOE did not
further analyze electric hot water or electric steam boilers in the
engineering analysis, and AFUE-based standards for these product
classes are not proposed in this NOPR.
The following subsections outline the methodology used when
conducting the efficiency analysis and cost analysis.
1. Efficiency Analysis
DOE typically uses one of two approaches to develop energy
efficiency levels for the engineering analysis: (1) relying on observed
efficiency levels in the market (i.e., the efficiency-level approach),
or (2) determining the incremental efficiency improvements associated
with incorporating specific design options to a baseline model (i.e.,
the design-option approach). Using the efficiency-level approach, the
efficiency levels established for the analysis are determined based on
the market distribution of existing products (in other words, based on
the range of efficiencies and efficiency level ``clusters'' that
already exist on the market). Using the design option approach, the
efficiency levels established for the analysis are determined through
detailed engineering calculations and/or computer simulations of the
efficiency improvements from implementing specific design options that
have been identified in the technology assessment. DOE may also rely on
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended
using the design option approach to ``gap fill'' levels (to bridge
large gaps between other identified efficiency levels) and/or to
extrapolate to the max-tech level (particularly in cases where the max-
tech level exceeds the maximum efficiency level currently available on
the market).
In this proposed rulemaking, DOE has relied on the efficiency-level
approach. This approach ensures that the efficiency levels considered
in the engineering analysis are attainable using technologies which are
commercially available and viable for consumer boilers, and DOE
considered this approach reasonable because all of the technology
options to improve AFUE that passed the screening analysis have been
observed in commercially-available products. Additionally, as discussed
later, since the consumer boiler industry is relatively mature, it
exhibits a design option pathway to improved AFUE efficiency
demonstrated by models on the market. As such, DOE was able to conduct
teardown analyses on consumer boilers which meet each efficiency level,
and ascertain a list of representative design options which
manufacturers are most likely to employ in order to achieve these
efficiencies. The selection of these efficiency levels from market data
is discussed in the following sections.
a. Baseline Efficiency
For each product class, DOE generally selects a baseline model as a
reference point for each class, and measures changes resulting from
potential energy conservation standards against the baseline. The
baseline model in each product class represents the characteristics of
a product typical of that class (e.g., capacity, physical size).
Generally, a baseline model is one that just meets current energy
conservation standards, or, if no standards are in place, the baseline
is typically the most common or least efficient unit on the market. For
consumer boilers, there currently exist minimum AFUE standards for gas-
fired and oil-fired products at 10 CFR 430.32(e)(2)(iii)(A), which were
used to define the baseline efficiency levels for these product
classes. Additionally, baseline models
[[Page 55150]]
must meet the design requirements at 10 CFR 430.32(e)(2)(iii)(A) and
the standby mode and off mode power consumption standards at 10 CFR
430.32(e)(2)(iii)(B).
b. Higher Efficiency Levels
As part of DOE's analysis, the maximum available efficiency level
is the highest efficiency unit currently available on the market. DOE
also defines a ``max-tech'' efficiency level to represent the maximum
possible efficiency for a given product. For this analysis, because the
consumer boiler industry is relatively mature and there is a clear
design option pathway to improved AFUE efficiency demonstrated by
models on the market, DOE has tentatively determined that the maximum
available efficiency level is representative of the max-tech efficiency
level for gas-fired and oil-fired boilers, and that any additional
design options that could theoretically be used to further improve
efficiency have been screened out. The max-tech efficiency levels
analyzed in the May 2022 Preliminary Analysis are provided in Table
IV.4.
Table IV.4--Max-Tech AFUE Efficiency Levels for Consumer Boilers
------------------------------------------------------------------------
AFUE
Product class (%)
------------------------------------------------------------------------
Gas-fired hot water............................................. 96
Gas-fired steam................................................. 83
Oil-fired hot water............................................. 88
Oil-fired steam................................................. 86
------------------------------------------------------------------------
In the May 2022 Preliminary Analysis, DOE also considered the range
of input capacities of models certified at these efficiencies to ensure
that the max-tech efficiencies analyzed would not inadvertently
correspond to a lessening of product availability to meet the full
range of household heating needs (see chapter 5 of the preliminary
analysis TSD). These assessments were made based on the database of
consumer boilers constructed as part of the market assessment,
discussed in section IV.A.2 of this document.
In response to the May 2022 Preliminary Analysis, AHRI noted that
NFPA-31, ``Standard for the Installation of Oil[hyphen]Burning
Equipment'' (NFPA-31),\35\ provides guidance for the relining of
chimneys based on steady-state efficiency, and within these guidelines
are restrictions on higher-efficiency oil boilers that AHRI stated may
have an impact on consumers. AHRI commented that, according to NFPA-31,
a 6-inch diameter by 35-foot long metal chimney liner can be used for
an 86-percent ``steady-state efficiency'' boiler having an input
between 119,000 and 280,000 Btu/h, but this input range becomes 140,000
to 210,000 Btu/h if the ``steady-state efficiency'' is 88-percent. As a
result, AHRI recommended that DOE should treat 86.0-percent AFUE as
max-tech for oil-fired hot water boilers. (AHRI, No. 40 at p. 4)
---------------------------------------------------------------------------
\35\ NFPA-31 Appendix E states that metal chimney liners may be
needed to reduce transient low draft during startup, as well as
protect masonry from acidic condensate damage. The required size of
the liner is specified based on the steady state efficiency of the
boiler, which is shown in NFPA-31 Appendix E tables E.5.4(a) and
E.5.4(b).
---------------------------------------------------------------------------
In response, DOE reviewed the 2020 edition of NFPA-31 \36\ and
notes that Tables E.5.4(a) through E.5.4(e) of that standard present
the chimney metal liner specifications that are appropriate for various
firing rates (in terms of gallons of oil per hour), and DOE understands
that AHRI has converted these values of oil firing rates into Btu/h
input rates. AHRI's comment indicates that, for a 6-inch diameter by
35-foot long chimney liner, a steady-state efficiency \37\ greater than
86-percent could result in a smaller range of input capacities
allowable. Upon further inspection of Table E.5.4(a) of NFPA-31, DOE
notes that AHRI's calculation is based on a lateral run of 10 feet.
Adjusting to a shorter horizontal vent run of 4 feet,\38\ for example,
would allow households to meet their heating needs using a boiler with
a higher efficiency. Table E.5.4(a) of NFPA-31 indicates that a firing
rate of 1.75 gallons per hour (approximately 245,000 Btu/h) is
acceptable at the high end of firing rates for steady-state
efficiencies of 88 percent, which DOE estimates would correspond to
AFUEs of 87-88 percent. This would suggest that the narrowing of the
acceptable input capacity range is not significant enough to mean that
a large fraction of homes would not be able to find a replacement
boiler to meet their heating needs if the standard were set at 88-
percent AFUE.
---------------------------------------------------------------------------
\36\ Found online at link.nfpa.org/free-access/publications/31/2020 (Last accessed Jan. 3, 2023).
\37\ Section E.8.3 of NFPA-31 suggests that the steady-state
efficiency of a hydronic boiler can be estimated by adding 1
percentage point to the rated AFUE of the boiler.
\38\ As discussed in appendix 8D of the NOPR TSD, most oil-fired
boilers do not have a horizontal vent option, so the horizontal run
would be limited for vertical venting.
---------------------------------------------------------------------------
Therefore, upon re-evaluating the input capacity ranges available
for the maximum available AFUEs on the market, DOE has initially
concluded that the max-tech levels from the May 2022 Preliminary
Analysis are still applicable, and these levels were analyzed as max-
tech in this NOPR.
Between the baseline efficiency level and max-tech efficiency
level, DOE analyzed several other intermediate higher efficiency
levels. In the May 2022 Preliminary Analysis, DOE sought comment on
whether the AFUE efficiency levels identified at the preliminary stage
were appropriate for each product class (see the Executive Summary of
the preliminary TSD).
As discussed in section IV.B of this document, DOE received
multiple comments regarding the 85-percent AFUE efficiency level which
was analyzed for gas-fired hot water boilers in the May 2022
Preliminary Analysis. For the reasons explained in that section, the
Department has tentatively determined that the concerns raised by
stakeholders reflect potential downsides to these products regarding
the installation, maintenance, and repair costs--and not a risk
directly associated with incrementally more-efficient heat exchanger
technologies. Hence, DOE has retained the 85-percent AFUE efficiency
level in this NOPR analysis after observing that a substantial number
of models on the market are certified at this level. This observation
is further corroborated by AHRI's 2021 shipment data for consumer
boilers, which indicate that boilers rated between 85.0-percent and
85.9-percent AFUE are the second-highest frequency of non-condensing
model shipments, behind only baseline models (see AHRI, No. 42 at p.
2).
Crown provided a detailed analysis of how venting category
requirements correlate to the flue gas temperature and percent of
CO2 in the flue gas, and described the approximate
relationship between these parameters and the steady-state combustion
efficiency of a consumer boiler. Reiterating comments provided in the
previous rulemaking, Crown stated that there is a limit to the steady-
state efficiency that is achievable while maintaining Category I
venting status. (Crown, No. 30 at pp. 3-5) U.S. Boiler provided the
same comments as Crown. (U.S. Boiler, No. 31 at pp. 3-5) DOE agrees
with the assessment provided by Crown and U.S. Boiler and notes that,
in the engineering analysis, design options to improve efficiency
include technologies which would move the consumer boiler out of
Category I venting status.
In response to the May 2022 Preliminary Analysis, Rheem suggested
consideration of an additional efficiency level for gas-fired hot water
boilers at 90-percent AFUE to capture a segment of the market certified
by ENERGY STAR (at the minimum level under that program) with existing
products on the market. (Rheem, No. 37 at p. 4)
[[Page 55151]]
In response, DOE notes that EPA's ENERGY STAR Product Specification
for Boilers, Version 3.0 (effective October 1, 2014) (ENERGY STAR
Product Specification V3.0) requires a minimum performance of 90-
percent AFUE for gas-fired boilers and 87-percent AFUE for oil-fired
boilers.\39\ While the 87-percent AFUE efficiency level was already
considered for oil-fired hot water boilers, the May 2022 Preliminary
Analysis did not assess a 90-percent AFUE efficiency level for gas-
fired hot water boilers. Therefore, in this NOPR analysis, DOE has
added an efficiency level corresponding to the ENERGY STAR Product
Specification V3.0 for gas-fired hot water boilers. Additional teardown
analyses were conducted to assess the design options representative of
this efficiency level, and further details are described in chapter 5
of the NOPR TSD.
---------------------------------------------------------------------------
\39\ ENERGY STAR Product Specification for Boilers, Version 3.0
can be found online at www.energystar.gov/sites/default/files/specs/Boilers%20Program%20Requirements%20Version%203%200.pdf (Last
accessed Jan. 3, 2023).
---------------------------------------------------------------------------
The efficiency levels analyzed in this NOPR are shown subsequently
in Table IV.5 through Table IV.8.
2. Cost Analysis
The cost analysis portion of the engineering analysis is conducted
using one or a combination of cost approaches. The selection of cost
approach depends on a suite of factors, including the availability and
reliability of public information, characteristics of the regulated
product, and the availability and timeliness of purchasing the product
on the market. The cost approaches are summarized as follows:
Physical teardowns: Under this approach, DOE physically
dismantles a commercially-available product, component-by-component, to
develop a detailed bill of materials (BOM) for the product.
Catalog teardowns: In lieu of physically deconstructing a
product, DOE identifies each component using parts diagrams (available
from manufacturer websites or appliance repair websites, for example)
to develop the bill of materials for the product.
Price surveys: If neither a physical nor catalog teardown
is feasible (for example, for tightly integrated products such as
fluorescent lamps, which are infeasible to disassemble and for which
parts diagrams are unavailable) or cost-prohibitive and otherwise
impractical (e.g. large commercial boilers), DOE conducts price surveys
using publicly-available pricing data published on major online
retailer websites and/or by soliciting prices from distributors and
other commercial channels.
In the present case, DOE conducted the analysis using physical and
catalog teardowns to generate BOMs for models meeting the efficiency
levels selected in the efficiency analysis. While the BOM generated for
each model describe the product's construction in detail (i.e.,
including each fabrication and assembly operation, types of parts that
are purchased versus built in-house, types of equipment needed to
manufacture the product, and manufacturing process parameters), any
additional higher-cost features that were included in the consumer
boiler design but do not have any impact on AFUE were not factored into
the engineering analysis. Wherever possible, DOE compared models from
similar product lines at different efficiencies in order to clearly
identify the design option pathway to higher efficiency levels. Through
these teardown analyses, DOE has found that the pathway for improving
AFUE is relatively homogeneous across all boiler product classes and
efficiency levels--consisting mainly of heat exchanger improvements.
The BOM provides the basis for the manufacturer production cost
(MPC) estimates. DOE sought comment on the MPC estimates presented in
the May 2022 Preliminary Analysis (see the Executive Summary of the
preliminary TSD).
Crown and U.S. Boiler commented that manufacturing, installation,
and operating costs used for DOE's preliminary analysis are likely
obsolete due to recent sharp increases in prices (reflecting inflation
and supply chain issues). Crown stated that if DOE were to raise the
standards for gas-fired hot water boilers to a condensing efficiency
level, it would result in significant increases in MPCs for gas steam
and oil-fired cast-iron boilers even if the standards for those product
classes remain unchanged due to the large, fixed costs for cast-iron
foundries. Crown indicated that if standards for gas-fired hot water
boilers were raised to a condensing efficiency level, the fixed costs
of the foundries could no longer be shared between gas-fired hot water
boilers and noncondensing gas steam and/or oil-fired boilers due to
their significant differences in design. Such a scenario could render
some foundries no longer financially viable. (Crown, No. 30 at pp. 5-6;
U.S. Boiler, No. 31 at pp. 5-6) Similarly, WMT indicated that sectional
cast-iron heat exchangers are nearly identical across product classes,
so the potential elimination of non-condensing cast-iron gas-fired hot
water boilers would significantly change the cost structure for other
product classes. (WMT, No. 32 at p. 2)
In response, DOE's cost analysis accounts for the recent increases
in material and part prices caused by inflation and supply chain
challenges; specifically, prices from September 2022 were used for
purchased parts and non-metals, and a five-year average up to September
2022 was used to account for raw metal prices (this average being a
method to account for rapid fluctuations which typically average out in
the future). For this NOPR and with regards to the potential changes in
manufacturing cost due to cast-iron foundry impacts, DOE did not
directly account for the pricing interaction across product classes
described by Crown and U.S. Boiler for cast-iron boilers in the
industry MPC estimates. DOE notes that many consumer boiler original
equipment manufacturers (OEMs) have already transitioned to using
foundries owned by companies unrelated to the particular consumer
boiler OEM (i.e., ``third-party foundries'') for their consumer boiler
castings. Of the 10 consumer boiler OEMs that offer gas-fired steam,
oil-fired hot water, or oil-fired steam cast-iron boilers, research
indicates that only two OEMs currently own domestic foundries (i.e.,
vertically integrated OEMs) that supply consumer boiler castings for
the U.S. market. This would suggest that current component price
estimates already reflect a transition in foundry operation. Although
DOE did not directly account for the pricing interaction across product
classes in the engineering analysis, DOE estimates the potential fixed
foundry overhead and depreciation costs associated with producing gas-
fired hot water boiler heat exchangers that may need to be reallocated
to gas-fired steam, oil-fired hot water, and oil-fired steam production
costs under a condensing standard and analyzes the potential impacts of
a condensing standard on OEMs that operate their own foundries in
section V.B.2.d of this document, ``Impacts on Subgroups of
Manufacturers.''
DOE requests comment on whether an increase in MPCs for gas-fired
steam, oil-fired hot water, and oil-fired steam boilers would result
from an amended standard requiring condensing technology for gas-fired
hot water boilers and, if so, how much of an increase would occur. DOE
also requests comment on whether the potential increase in cast-iron
boiler MPCs would only be applicable to consumer boiler manufacturers
that operate their own foundries.
[[Page 55152]]
BWC requested that DOE re-evaluate the assumptions in Table 5.6.4
of the preliminary TSD (``Factory Parameter Assumptions''), which it
argued appeared to be grossly overstated given the overall size of the
boiler industry. (BWC, No. 39 at p. 3)
In addition to seeking public comment on the MPC estimates from the
May 2022 Preliminary Analysis, DOE consultants discussed the results of
the preliminary cost analysis with manufacturers in confidential
interviews in order to solicit direct feedback on the MPCs. DOE
incorporated a substantial amount of the qualitative and quantitative
feedback obtained from manufacturers to refine the assumptions used in
the cost modeling for this NOPR, as suggested by BWC. These updates are
detailed in chapter 5 of the NOPR TSD, and include revisions to the
factory parameter assumptions.
3. Manufacturer Markup and Shipping Costs
To account for manufacturers' non-production costs and profit
margin, DOE applies a multiplier (the manufacturer markup) to the MPC.
The resulting manufacturer selling price (MSP) is the price at which
the manufacturer distributes a unit into commerce. DOE developed an
average manufacturer markup by examining the annual Securities and
Exchange Commission (SEC) 10-K reports \40\ filed by publicly-traded
manufacturers primarily engaged in heating, ventilation, and air
conditioning (HVAC) manufacturing and whose combined product range
includes consumer boilers. See chapter 12 of the NOPR TSD or section
IV.J.2.d of this document for additional detail on the manufacturer
markup.
---------------------------------------------------------------------------
\40\ U.S. Securities and Exchange Commission, Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. Available at
www.sec.gov/edgar/search/ (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
Shipping costs account for the additional non-production cost for
manufacturers to distribute their products to the first buyer in the
distribution chain. In the May 2022 Preliminary Analysis, DOE estimated
shipping costs based on how many units can fit in a typical trailer,
considering the extra space necessary for shipping and loading
inefficiencies for mixed truckload configurations with other equipment.
In general, DOE found that shipping costs would not vary appreciably by
efficiency level, except for gas-fired hot water boilers. For this
product class, models with condensing heat exchangers would have more
lightweight and compact designs, allowing for more products to
potentially be loaded onto a trailer such that the shipping cost would
decrease for condensing efficiency levels (see chapter 5 of the
preliminary analysis TSD).
WMT commented that shipping costs have increased dramatically (in
some cases nearly doubling or tripling the costs of shipping from pre-
pandemic levels), and this would affect costs for components to ship to
consumer boiler manufacturers, as well as the costs for consumer
boilers to be shipped to customers. WMT stated that such shipping cost
impacts should be included in DOE's analysis. (WMT, No. 32 at p. 9)
In response, DOE notes that the MPC estimates discussed in section
IV.C.2 of this document account for the costs for components to ship to
consumer boiler manufacturers. In general, through its review of
publicly-available component cost data and confidential interviews with
consumer boiler manufacturers, the Department has observed an increase
in purchased component prices, which is reflected in the increase in
MPCs in this NOPR analysis compared to the May 2022 Preliminary
Analysis.
For outgoing shipping costs, DOE monitors trailer prices on a
regular basis to ensure that these costs reflect the most recent
freight shipping rates to transport products. DOE did observe a
substantial increase in prices immediately following the COVID-19
pandemic and subsequent supply chain crisis,\41\ and these increases
were reflected in the shipping cost estimates in the May 2022
Preliminary Analysis. Many of the shipping costs estimated in this NOPR
are comparable to the preliminary estimates in the May 2022 Preliminary
Analysis; however, DOE did revise its approach for this NOPR. Instead
of using a coast-to-coast distance estimate, which was used in the May
2022 Preliminary Analysis, DOE relied on a Midwest-to-coast distance
estimate after careful review of the geographic locations of consumer
boiler manufacturing sites. Therefore, although DOE included the most
up-to-date trailer prices, this change in the shipping distance
estimate caused the shipping costs for most product classes to be lower
in this NOPR compared to the May 2022 Preliminary Analysis.
---------------------------------------------------------------------------
\41\ U.S. Bureau of Labor Statistics Producer Price Index (PPI)
commodity data for transportation services indicate a sharp rise in
long-distance motor carrying prices since 2020. See online at
data.bls.gov/timeseries/wpu301202&output_view=pct_12mths (Last
accessed Jan. 3, 2023).
---------------------------------------------------------------------------
Crown and U.S. Boiler commented that condensing boilers are often
imported fully assembled from Europe or Asia, and when they are not,
the ``heat engine'' (heat exchanger and burner system) almost always
is, with final assembly occurring in the United States. Crown indicated
that the longer supply chain for condensing boilers would negate any
savings in shipping costs due to the reduced size and weight of
condensing boilers. (Crown, No. 30 at p. 6; U.S. Boiler, No. 31 at p.
6)
In response, DOE once again notes that as mentioned, inbound
freight costs are included in the MPCs as a portion of the cost for
purchased parts. In this analysis, based on further manufacturer
feedback during interviews, DOE estimated MPCs associated with final
assembly occurring in the United States. While developing the MPCs for
consumer boilers in this NOPR, DOE incorporated recent manufacturer
feedback to arrive at the most recent estimates for heat exchangers and
burners purchased from overseas. Based on the results of the
engineering analysis, DOE agrees with Crown and U.S. Boiler that the
MPC plus shipping costs for condensing boilers will in total be higher
than the MPC plus shipping costs for non-condensing boilers.
4. Cost-Efficiency Results
The results of the engineering analysis are reported as cost-
efficiency data (or ``curves'') in the form of AFUE versus MPC and MSP
(in 2022 dollars). DOE developed four curves representing the four
consumer boiler product classes which are being analyzed in this NOPR.
Manufacturing costs can vary with the input rating of the consumer
boiler, and for each product class, one representative input capacity
was chosen as the basis for analysis to represent the entire class:
100,000 Btu/h for gas-fired boilers and 140,000 Btu/h for oil-fired
boilers. This allowed DOE to develop one curve to represent the cost of
implementing engineering design changes for each product class. The
methodology for developing the curves started with determining the MPCs
for baseline products. Above the baseline, DOE determined the design
options which would comprise the most cost-effective pathway to higher
efficiency levels using teardown data at each level. See chapter 5 of
the NOPR TSD for additional detail on the engineering analysis. The
resulting cost-efficiency curves are shown in Table IV.5, through Table
IV.8.
DOE requests comment on the cost-efficiency results in this
engineering analysis. DOE also seeks input on the design options that
would be implemented to achieve the selected efficiency levels.
[[Page 55153]]
Table IV.5--Cost-Efficiency Curve for Gas-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
Shipping
Efficiency level AFUE Design options MPC MSP cost
(%) (2022$) (2022$) (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline)....................... 84 Non-condensing heat exchanger; 581.22 819.52 30.32
Natural or induced draft.
EL 1.................................. 85 EL0 + Increased heat exchanger 645.20 909.73 30.32
surface area; Natural or
induced draft.
EL 2 (ENERGY STAR V3.0)............... 90 Cast-aluminum or stainless- 991.66 1,398.24 18.53
steel condensing heat
exchanger; Premix modulating
burner.
EL 3.................................. 95 Stainless-steel condensing 1,020.12 1,438.37 18.53
heat exchanger; Premix
modulating burner.
EL 4 (max-tech)....................... 96 EL3 + Increased heat exchanger 1,471.07 2,074.21 18.53
surface area with
improvements in geometry.
----------------------------------------------------------------------------------------------------------------
Table IV.6--Cost-Efficiency Curve for Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
Shipping
Efficiency level AFUE Design options MPC MSP cost
(%) (2022$) (2022$) (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline)....................... 82 Cast-iron non-condensing heat 781.76 1,102.28 38.59
exchanger; Natural or induced
draft.
EL 1 (max-tech)....................... 83 EL0 + Increased heat exchanger 865.05 1,219.72 38.59
surface area; Natural or
induced draft.
----------------------------------------------------------------------------------------------------------------
Table IV.7--Cost-Efficiency Curve for Oil-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
Shipping
Efficiency level AFUE Design options MPC MSP cost
(%) (2022$) (2022$) (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline)....................... 86 Cast-iron non-condensing heat 1,198.85 1,690.38 48.60
exchanger; Power oil burner.
EL 1 (ENERGY STAR V3.0)............... 87 EL0 + Increased heat exchanger 1,244.66 1,754.97 48.60
surface area.
EL 2 (max-tech)....................... 88 EL1 + Increased heat exchanger 1,289.64 1,818.39 48.60
surface area.
----------------------------------------------------------------------------------------------------------------
Table IV.8--Cost-Efficiency Curve for Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
Shipping
Efficiency level AFUE Design options MPC MSP cost
(%) (2022$) (2022$) (2022$)
----------------------------------------------------------------------------------------------------------------
EL 0 (baseline)....................... 85% Cast-iron non-condensing heat 1,182.48 1,667.30 62.79
exchanger; Power oil burner.
EL 1 (max-tech)....................... 86% EL0 + Increased heat exchanger 1,287.50 1,815.38 62.79
surface area; Baffles.
----------------------------------------------------------------------------------------------------------------
D. Markups Analysis
The markups analysis develops appropriate markups (e.g., retailer
markups, distributor markups, contractor markups) in the distribution
chain and sales taxes to convert the MSP estimates derived in the
engineering analysis to consumer prices, which are then used in the LCC
and PBP analysis. At each step in the distribution channel, companies
mark up the price of the product to cover business costs and profit
margin.
For consumer boilers, the main parties in the distribution chain
are: (1) manufacturers, (2) wholesalers or distributors, (3) retailers,
(4) plumbing contractors, (5) builders, (6) manufactured home
manufacturers, and (7) manufactured home dealers/retailers. See chapter
6 and appendix 6A of the NOPR TSD for a more detailed discussion about
parties in the distribution chain.
For this NOPR, DOE characterized how consumer boiler products pass
from the manufacturer to residential and commercial consumers \42\ by
gathering data from several sources, including consultant reports
(available in appendix 6A) and a 2022 BRG report,\43\ to determine the
distribution channels and fraction of shipments going through each
distribution channel. The distribution channels for replacement or new
owners of consumer boilers in residential applications (not including
mobile homes) are characterized as follows: \44\
---------------------------------------------------------------------------
\42\ Based on available data, DOE estimates that 10 percent of
hot water gas-fired boilers, 9 percent of steam gas-fired boilers,
13 percent of hot water oil-fired boilers, and 13 percent of steam
oil-fired boilers will be shipped to commercial applications in
2030.
\43\ BRG Building Solutions, The North American Heating &
Cooling Product Markets (2022 Edition) (Available at:
www.brgbuildingsolutions.com/reports-insights) (Last accessed Jan.
3, 2023).
\44\ Based on available data, DOE estimates that for both gas-
fired and oil-fired boilers, 95 percent goes through the wholesaler-
contractor distribution channel, 5 percent goes directly from
retailers to consumers, and 5 percent goes through retailers to
contractors and to consumers.
Manufacturer [rarr] Wholesaler [rarr] Plumbing Contractor [rarr]
Consumer
Manufacturer [rarr] Retailer [rarr] Consumer
Manufacturer [rarr] Retailer [rarr] Plumbing Contractor [rarr] Consumer
For mobile home replacement or new owner applications, there is one
additional distribution channel as follows: \45\
---------------------------------------------------------------------------
\45\ Based on available data, DOE estimates that for both gas-
fired and oil-fired boilers, 80 percent goes through the wholesaler-
contractor distribution channel, 5 percent goes directly from
retailers to consumers, 5 percent goes through retailers to
contractors and to consumers, and 10 percent goes through specialty
retailers or dealers.
[[Page 55154]]
---------------------------------------------------------------------------
Manufacturer [rarr] Mobile Home Dealer/Retail Outlet [rarr] Consumer
Mainly for consumer boilers in commercial applications (for both
replacement and new construction markets), DOE considers an additional
distribution channel as follows:
Manufacturer [rarr] Wholesaler [rarr] Consumer (National Account)
The new construction distribution channel can include an additional
link in the chain--the builder. The distribution channels for consumer
boilers in new construction \46\ in residential applications (not
including mobile homes) are characterized as follows: \47\
---------------------------------------------------------------------------
\46\ Based on available data, DOE estimates that 18 percent of
hot water gas-fired boilers, 4 percent of steam gas-fired boilers, 8
percent of hot water oil-fired boilers, and 1 percent of steam oil-
fired boilers will be shipped to new construction applications in
2030.
\47\ DOE believes that many builders are large enough to have a
master plumber and not hire a separate contractor, and assigned 45
percent of consumer boiler shipments in new construction to this
channel. DOE estimates that in the new construction market, 90
percent of the residential (not including mobile homes) and 80
percent of commercial applications go through a builder and that the
rest go through the national account distribution channel.
Manufacturer [rarr] Wholesaler [rarr] Plumbing Contractor [rarr]
Builder [rarr] Consumer
Manufacturer [rarr] Wholesaler [rarr] Builder [rarr] Consumer
Manufacturer [rarr] Wholesaler (National Account) [rarr] Consumer
For new construction, all mobile home boilers are sold as part of
mobile homes in a specific distribution chain characterized as follows:
Manufacturer [rarr] Mobile Home Manufacturer [rarr] Mobile Home Dealer
[rarr] Consumer
DOE developed baseline and incremental markups for each actor in
the distribution chain. Baseline markups are applied to the price of
products with baseline efficiency, while incremental markups are
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental
markup is typically less than the baseline markup and is designed to
maintain similar per-unit operating profit before and after new or
amended standards.\48\
---------------------------------------------------------------------------
\48\ Because the projected price of standards-compliant products
is typically higher than the price of baseline products, using the
same markup for the incremental cost and the baseline cost would
result in higher per-unit operating profit. While such an outcome is
possible, DOE maintains that, in markets that are reasonably
competitive, it is unlikely that standards would lead to a
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------
To estimate average baseline and incremental markups, DOE relied on
several sources, including: (1) form 10-K from the U.S. Securities and
Exchange Commission (SEC) for Home Depot, Lowe's, Wal-Mart, and Costco
(for retailers); (2) U.S. Census Bureau 2017 Annual Retail Trade Report
for miscellaneous store retailers (North American Industry
Classification System (NAICS) 453) (for online retailers),\49\ (3) U.S.
Census Bureau 2017 Economic Census data \50\ on the residential and
commercial building construction industry (for builder, plumbing
contractor, mobile home manufacturer, mobile home retailer/dealer); and
(4) the U.S. Census Bureau 2017 Annual Wholesale Trade Report data \51\
(for wholesalers). DOE assumes that the markups for national account is
half of the value of wholesaler markups. In addition, DOE used the 2005
Air Conditioning Contractors of America's (ACCA) Financial Analysis on
the Heating, Ventilation, Air-Conditioning, and Refrigeration (HVACR)
contracting industry \52\ to disaggregate the mechanical contractor
markups into replacement and new construction markets for consumer
boilers used in commercial applications.
---------------------------------------------------------------------------
\49\ U.S. Census Bureau, 2017 Annual Retail Trade Report (AWTR)
(Available at: www.census.gov/programs-surveys/arts.html) (Last
accessed January 3, 2023). Note that the 2017 Annual Retail Trade
Report is the latest version of the report that includes detailed
operating expenses data.
\50\ U.S. Census Bureau, 2017 Economic Census Data (Available
at: www.census.gov/programs-surveys/economic-census.html) (Last
accessed Jan. 3, 2023). Note that the 2017 Economic Census Data is
the latest version of this data.
\51\ U.S. Census Bureau, 2017 Annual Wholesale Trade Report
(AWTR) (Available at: www.census.gov/wholesale/) (Last
accessed Jan. 3, 2023). Note that the 2017 AWTR Census Data is the
latest version of this data.
\52\ Air Conditioning Contractors of America (ACCA), Financial
Analysis for the HVACR Contracting Industry (2005) (Available at:
www.acca.org/store#/storefront) (Last accessed Jan. 3, 2023). Note
that the 2005 Financial Analysis for the HVACR Contracting Industry
is the latest version of the report and is only used to disaggregate
the mechanical contractor markups into replacement and new
construction markets.
---------------------------------------------------------------------------
In addition to the markups, DOE obtained State and local taxes from
data provided by the Sales Tax Clearinghouse.\53\ These data represent
weighted-average taxes that include county and city rates. DOE derived
shipment-weighted average tax values for each State considered in the
analysis.
---------------------------------------------------------------------------
\53\ Sales Tax Clearinghouse Inc., State Sales Tax Rates Along
with Combined Average City and County Rates (Jan. 4, 2022)
(Available at: www.thestc.com/STrates.stm) (Last accessed May 3,
2023).
---------------------------------------------------------------------------
BWC stated that it is not aware of any boiler manufacturer that is
selling direct to consumers, for both new construction and replacement,
and that it is possible that some boilers are being sold from a
manufacturer to a mechanical contractor followed by the consumer. BWC
stated that it does not see boilers being sold from a manufacturer to a
wholesaler and then to a builder and consumer, as a contractor would
still need to be involved for the installation. (BWC, No. 39 at p. 3)
Based on available data sources, DOE estimated that the majority of the
contractors obtain boilers from wholesaler or retailer stores. DOE
acknowledges that contractors are needed for installations, and for the
new construction distribution channel without contractors, the
assumption is that the builders have in-house contractors.
Rheem noted that not only do the percentages in Table 6.2.3 of the
preliminary analysis TSD not add up to 100, but the manufacturer markup
is also inconsistent throughout the analysis, with different values in
the comment request and Tables 6.9.1, 6.9.2, and 6.9.3. (Rheem, No. 37
at p. 4) DOE acknowledges that the percentages in Table 6.2.3 and
manufacturer markup values in Tables 6.9.1, 6.9.2, and 6.9.3 of the
preliminary analysis TSD were incorrectly reported and they have been
fixed in the NOPR TSD. The actual values applied in the analysis remain
the same between the preliminary and NOPR analysis.
AGA, APGA, and NPGA stated that DOE should put greater weight on ex
post and market-based evidence of markups to project a more realistic
range of likely effects of a standard on prices, including the
possibility that prices may fall. (AGA, APGA, and NPGA, No. 38 at p. 4)
In response, DOE is not aware of any non-proprietary data that would
allow estimation of changes in actual markups on consumer boilers.
Regarding the effect of standards on prices, one study in 2013 that
compared predicted and observed prices for nine products found that
costs after standards, after adjusting for inflation, were less than
what DOE estimated.\54\ In the case of consumer boilers, DOE compared
retail prices before and after the 2021 standards took effect and found
that on average, actual consumer boiler retail prices were below what
DOE estimated after adjusting for inflation. (See appendix 6A of the
NOPR TSD for further details) Such comparisons are problematic,
however, because a number of factors can cause
[[Page 55155]]
prices to change, in addition to new efficiency standards. To serve the
goal of DOE's analysis to specifically estimate the cost to consumers
of new or amended energy conservation standards, DOE's method of
estimating incremental costs relative to a baseline product is more
likely to yield relevant results.
---------------------------------------------------------------------------
\54\ Steven Nadel and Andrew deLaski, Appliance Standards:
Comparing Predicted and Observed Prices (July 30, 2013) ACEEE and
ASAP (Available at: www.aceee.org/research-report/e13d) (Last
accessed Jan. 3, 2023).
---------------------------------------------------------------------------
Chapter 6 of the NOPR TSD provides details on DOE's development of
markups for consumer boilers.
E. Energy Use Analysis
The purpose of the energy use analysis is to determine the annual
energy consumption of consumer boilers at different efficiencies in
representative U.S. single-family homes, multi-family residences,
mobile homes, and commercial buildings, and to assess the energy
savings potential of increased consumer boiler efficiency. The energy
use analysis estimates the range of energy use of consumer boilers in
the field (i.e., as they are actually used by consumers). The energy
use analysis provides the basis for other analyses DOE performed,
particularly assessments of the energy savings and the savings in
consumer operating costs that could result from adoption of amended or
new standards.
DOE estimated the annual energy consumption of consumer boilers at
specific energy efficiency levels across a range of climate zones,
building characteristics, and applications. The annual energy
consumption includes the natural gas, liquid petroleum gas (LPG), fuel
oil, and electricity used by the consumer boilers. DOE's assessment of
annual energy consumption is calculated for all households or buildings
using a consumer boiler intended for space heating. In addition, DOE
also included the annual energy consumption for a fraction of consumer
boilers that are used to provide hot water in addition to space
heating. DOE does not account for other potential boiler uses such as
snow melt systems, pool or spa heating, or steam or hot water
production for industrial or commercial processes, since currently DOE
does not have any information about the market share and energy use of
such systems to include it in its analysis.
The energy used by a consumer boiler when installed will vary by
household or building characteristics, usage, and region. For this
proposed rulemaking, the energy use for consumer boilers is estimated
by identifying the various households or buildings in RECS and CBECS
dataset that utilize consumer boilers covered by this proposed rule.
Next, DOE used the same datasets to identify the space and water
heating load for each of the buildings within the sample, which was
used to determine the size of the commercial water heating equipment
needed to meet the space and water heating need of the households or
buildings being analyzed. The determination of the boiler capacity of a
sampled household or building is based on heating load sizing
calculations from industry reference manuals such as Manual J coupled
with the above building characteristics and climate data. Households or
buildings with higher heating requirements need larger capacity boilers
per this sizing calculation. These households or buildings are then
rank ordered to match available industry and market research shipment
data by boiler capacity, so that the analysis has an informed
distribution of boiler capacities that matches industry shipment data
and larger capacity boilers are preferentially assigned to households
or buildings with higher heating loads.
In order for energy use of the equipment to be determined, DOE
calculated the time the boiler is spent in active mode (providing space
heating or hot water to meet the load of the building) and in standby
mode (electrical components are on but the boiler is not actively
heating water). Starting from this energy consumption estimate, the
heating load is further refined based on building characteristic data
also included in RECS and CBECS, such as the building square footage,
building vintage, foundation type, number of floors, and outdoor
temperature (i.e., climate for a given region of the country). Certain
building shell characteristics (e.g., insulation) are inferred based on
the building's age and building shell indices from AEO 2023 dataset.
The efficiency of the existing boiler for each household or buildings
is estimated based on informed assumptions about the reported boiler
age and historical efficiency distributions. The energy use is further
adjusted by informed assumptions to reflect the impact of the return
water temperature, which is discussed below in more detail below, as
well as more minor effects such as jacket losses.
Chapter 7, appendix 7A, and appendix 7B presents further detail
regarding the boiler sizing methodology and estimation of energy
consumption.
DOE requests comment on DOE's space heating and water heating
energy use methodology. DOE would also appreciate feedback,
information, and data on these additional system types and processes
that use consumer boilers (such as snow melt systems, pool or spa
heating, or steam or hot water production for industrial or commercial
processes).
Chapter 7 of the NOPR TSD provides details on DOE's energy use
analysis for consumer boilers.
1. Building Sample
To determine the field energy use of consumer boilers used in
homes, DOE established a sample of households using consumer boilers
from EIA's 2015 Residential Energy Consumption Survey (RECS 2015),\55\
which is the most recent such survey that is currently fully available.
The RECS data provide information on the vintage of the home, as well
as space heating and water heating energy use in each household. DOE
used the household samples not only to determine boiler annual energy
consumption, but also as the basis for conducting the LCC and PBP
analyses. DOE projected household weights and household characteristics
in 2030, the anticipated first year of compliance with any amended or
new energy conservation standards for consumer boilers. To characterize
future new homes, DOE used a subset of homes in RECS 2015 that were
built after 1990.
---------------------------------------------------------------------------
\55\ Energy Information Administration (EIA), 2015 Residential
Energy Consumption Survey (RECS) (Available at: www.eia.gov/consumption/residential) (Last accessed Jan. 3, 2023). Note that
RECS 2020 building characteristics have been released in preliminary
form by EIA; however, the full release of RECS 2020 data was still
not published when the analysis was conducted (expected to be
published on June 2023).
---------------------------------------------------------------------------
To determine the field energy use of consumer boilers used in
commercial buildings, DOE established a sample of buildings using
consumer boilers from EIA's 2018 Commercial Building Energy Consumption
Survey (CBECS 2018), which is the most recent such survey that is
currently fully available. See appendix 7A of the NOPR TSD for details
about the CBECS 2018 sample.
In commenting on the May 2022 preliminary analysis, WMT expressed
concern about the level of accuracy in RECS 2015 data due to the
substantial update to the end-use modeling and calibration methods
described by EIA as having been implemented in this dataset. WMT noted
that EIA removed unusually small or large outliers from the dataset,
and that the variation in the data should be quantified to determine
whether the data is actually representative of home sizes in the United
States. WMT also commented that RECS estimates the energy used by
boilers but does not include a reference to the actual energy use data
used to validate these models, and, thus, this data may not accurately
estimate the
[[Page 55156]]
impact of proposed minimum efficiency levels relative to the base case
energy consumption. WMT concluded that any LCC analysis based upon RECS
must include the documented variation in the RECS dataset, as
identified by EIA. (WMT, No. 32 at pp. 9-10)
In response, DOE notes that EIA administers the RECS to a
nationally representative sample of U.S. housing units. For RECS 2015,
specially trained interviewers collected energy characteristics on the
housing unit, usage patterns, and household demographics. This
information is combined with data from energy suppliers to these homes
to estimate energy costs and usage for heating, cooling, appliances,
and other end uses. The RECS survey data, including energy use, is an
integral ingredient of EIA's Annual Energy Outlook (AEO) and Monthly
Energy Review (MER). EIA's methodology for RECS 2015 is described in
multiple reports.\56\ As described in these reports, RECS 2015
represents a substantial update to the end-use modeling and calibration
methods. For example, in the 2015 RECS, the end-use models follow an
engineering approach, and the calibration--which follows a minimum
variance estimation approach--is based on the relative uncertainties of
and correlations between the end uses being estimated. Instead of
estimating unknown parameters and interpreting their solution values as
in statistical modeling, engineering models improve upon statistical
models by drawing on existing studies. Also, engineering models lead to
more realistic variations across modeled housing units. In addition,
calibration procedures in RECS 2015 use minimum variance estimation,
which better incorporates household characteristics data uncertainty
and recognizes correlations between end uses. DOE notes that households
that use natural gas, propane, or fuel oil predominately use these
fuels for space heating and water heating. In the case of space
heating, it is heavily seasonal, while water heating remains more
constant throughout the year.
---------------------------------------------------------------------------
\56\ See www.eia.gov/consumption/residential/data/2015/index.php?view=methodology (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
DOE determined the 95-percent confidence level for the average
energy use values used in its analysis for consumer boilers to be plus
or minus 7.2 percent, using EIA's methodology for calculating sampling
error.\57\ DOE also compared the RECS 2015 energy consumption estimates
for boilers to previous RECS energy consumption estimates and other
available studies for consumer boilers, and the Department found that
energy consumption values estimated in 2015 are similar (or within in
the RECS 2015 sampling error) of those other sources, after being
adjusted for heating degree-day differences, building shell changes in
the stock, and average boiler efficiency in the stock. This analysis
included comparing homes using consumer boilers by home sizes and type
in the different studies, including larger sample sized studies at the
national level such as the 2021 American Community Survey (ACS),\58\
the 2021 American Housing Survey (AHS),\59\ the 2022 American Home
Comfort Study,\60\ as well as regional studies such as the 2016-2017
Residential Building Stock Assessment (RBSA) for the northwest region
(Idaho, Montana, Oregon, and Washington),\61\ the 2019 Residential
Building Stock Assessment for the State of New York,\62\ the
Massachusetts Residential Baseline Study,\63\ and the 2019 California
Residential Appliance Saturation Study (RASS).\64\ In conclusion, DOE
finds that RECS 2015 matches other studies' energy use estimates for
boilers and is a reliable source for DOE to use to create a
representative national sample reflecting variations in real world
energy use. See appendix 7A and 7B of the NOPR TSD for more details.
---------------------------------------------------------------------------
\57\ See www.eia.gov/consumption/residential/data/2015/pdf/microdata_v3.pdf (Last accessed Jan. 3, 2023).
\58\ U.S. Census Bureau, 2021 American Community Survey
(Available at: www.census.gov/programs-surveys/acs) (Last accessed
Jan. 3, 2023).
\59\ Department of Housing and Urban Development (HUD) and U.S.
Census Bureau, 2021 American Housing Survey (Available at:
www.census.gov/programs-surveys/ahs.html) (Last accessed Jan. 3,
2023).
\60\ Decision Analyst, 2022 American Home Comfort Study
(Available at: www.decisionanalyst.com/syndicated/homecomfort/)
(Last accessed Jan. 3, 2023).
\61\ NEEA, 2016-2017 Residential Building Stock Assessment
(Individua Reports for Single Family, Manufactured Homes and
Multifamily Homes) (Available at: neea.org/data/residential-building-stock-assessment) (Last accessed Jan. 3, 2023).
\62\ NYSERDA, 2019 Residential Building Stock Assessment
(Available at: www.nyserda.ny.gov/About/Publications/Building-Stock-and-Potential-Studies/Residential-Building-Stock-Assessment) (Last
accessed Jan. 3, 2023).
\63\ Electric and Gas Program Administrators of Massachusetts,
Massachusetts Residential Building Use and Equipment
Characterization Study (Available at: ma-eeac.org/wp-content/uploads/Residential-Building-Use-and-Equipment-Characterization-Study-Comprehensive-Report-2022-03-01.pdf) (Last accessed Jan. 3,
2023).
\64\ CEC, 2019 California Residential Appliance Saturation Study
(Available at: www.energy.ca.gov/publications/2021/2019-california-residential-appliance-saturation-study-rass) (Last accessed Jan. 3,
2023).
---------------------------------------------------------------------------
AHRI and Rheem expressed concern with the Department using
allegedly outdated data for the analysis, and these commenters stated
that it is not a valid assumption that the market has remained
unchanged since 2012 or 2015, and that the use of such data in the
final rule will not be representative of impacts on consumers. AHRI and
Rheem encouraged the Department to update its analysis to use the CBECS
2018 data and to use the RECS 2020 data as soon as it becomes
available. In addition, AHRI and Rheem recommended that DOE conduct
updated surveys, studies, and analyses where the existing data sources
are out of date. (AHRI, No. 40 at p. 5; Rheem, No. 37 at pp. 4-5) BWC
commented that throughout the TSD, numerous references are made to what
it perceived to be outdated surveys and other data sources. BWC stated
that the reality of today's costs to consumers and manufacturers are
significantly beyond what they were just a few years ago, let alone
more than a decade ago. Accordingly, BWC strongly recommended that DOE
should conduct surveys or studies to obtain the information necessary
to properly inform major regulatory policy decisions. (BWC, No. 39 at
p. 3)
In response, DOE notes that for this NOPR, it used the most recent
data that was available. While conducting the preliminary analysis,
RECS 2020 and CBECS 2018 were not fully available and did not have
energy consumption estimates. However, DOE did incorporate CBECS 2018
for this NOPR and updated the weighting for residential sample based on
RECS 2020. To confirm sample weighting using RECS 2020 and CBECS 2018,
DOE also reviewed trends from multiple sources including Home
Innovations data, American Home Comfort Survey data, and the American
Housing Survey (AHS) to determine any changes in occupant density and
types of home, changes in the housing stock by region, new construction
trends, and changes in the types of water heater used by region and
market segment. Regarding conducting independent surveys, DOE does not
have the capacity to conduct nationally-representative surveys with
sufficiently large sample sizes to provide useful results, on the same
level as RECS and CBECS. However, as stated previously, DOE compared
its energy use model results to multiple studies, including NEEA data,
RASS data, and multiple other residential boiler studies and determined
that its methodology for assessment of the current market is
appropriate.
Crown and U.S. Boiler stated that DOE is significantly
overestimating the number of residential boilers used in commercial
buildings, which inflated
[[Page 55157]]
the estimate of energy savings that would result from adoption of a new
standard. They also stated that while most of the buildings in the
CBECS sample may indeed have multiple boilers, they are far more likely
to have multiple commercial boilers than DOE has assumed. Crown and
U.S. Boiler stated that the preliminary TSD indicates that DOE assumed
that half of all buildings over 10,000 square feet that are heated with
boilers use commercial boilers and the other half use residential
boilers, but these commenters argued that DOE has provided no rationale
for this breakdown. (Crown, No. 30 at p. 6; U.S. Boiler, No. 31 at p.
6)
In response, DOE revised its estimates of the number of consumer
boilers in commercial buildings based on available shipment data from
the 2022 BRG Building Solutions report,\65\ the updated 2018 CBECS
sample, and revised sizing methodology for boilers in commercial
buildings. This resulted in a decrease in the fraction of commercial
buildings above 10,000 square feet that use consumer boilers from 50
percent to 22 percent. See appendix 7A of the NOPR TSD for more
details.
---------------------------------------------------------------------------
\65\ BRG Building Solutions, The North American Heating &
Cooling Product Markets (2022 Edition) (Available at:
www.brgbuildingsolutions.com/reports-insights) (Last accessed Jan.
3, 2023).
---------------------------------------------------------------------------
DOE requests comment on DOE's methodology for determining the
fraction of consumer boilers used in commercial buildings. DOE also
seeks input regarding the fraction of consumer boilers in commercial
buildings larger than 10,000 square feet.
Crown and U.S. Boiler stated that residential steam systems are
obsolete and that the newest residential steam systems in the U.S. were
installed long before 1970, so all residential steam boilers sold in
the U.S. for space heating are, therefore, used in replacement
installations. They stated that in some cases, oil steam boilers are
replaced with gas steam boilers, making them ``new owner''
installations. Crown and U.S. Boiler stated that it is reasonable to
expect the stock of buildings heated by residential steam heating
boilers and steam boiler sales to decline over time. (Crown, No. 30 at
p. 6; U.S. Boiler, No. 31 at p. 6) Crown's and U.S. Boiler's statements
are consistent with DOE's sample development for steam boilers, as
discussed further in sample variables in appendix 7A and in the
shipments analysis in appendix 9A of the NOPR TSD.
2. Space Heating Energy Use
To estimate the annual energy consumption of consumer boilers, DOE
first calculated the heating load based on the RECS and CBECS estimates
of the annual energy consumption of the boiler for each household or
commercial building. DOE estimated the house or building heating load
by referencing to the existing boiler's characteristics, specifically
its capacity and efficiency (AFUE), as well as the heat generated from
the electrical components. The AFUE of the existing boilers was
determined using the boiler vintage (the year of installation of the
product) from RECS and historical data on the market share of boilers
by AFUE.
DOE adjusted the AFUE of the existing and new boilers to reflect
the variation in efficiency in different hydronic space heating
applications by associating a specific space heating application with
each sampled household or building. The field-adjusted AFUE of the
existing and new boilers was calculated depending on the return water
temperature, automatic means for adjusting water temperature, and
jacket losses.
a. Heating Load Calculation
DOE estimated the house/building heating load by using the energy
use estimates from RECS and CBECS for each consumer boiler and then
assigning an existing boiler's characteristics, specifically its
capacity and efficiency (AFUE). If DOE assigned multiple consumer
boilers to a building, then the heating load was divided equally to
each boiler. DOE then adjusted the energy use to normalize for weather
by using long-term heating degree-day (HDD) data for each geographical
region.\66\ DOE also accounted for changes in building shell
characteristics between 2015 (for RECS data) or 2018 (for CBECS data)
and 2030 by applying the building shell efficiency indices in the
National Energy Modeling System (NEMS) based on EIA's Annual Energy
Outlook 2023 (AEO 2023).\67\ DOE also accounted for future heating
season climate based on AEO 2023 HDD projections.
---------------------------------------------------------------------------
\66\ National Oceanic and Atmospheric Administration, NNDC
Climate Data Online (Available at: www.cpc.ncep.noaa.gov/products/analysis_monitoring/cdus/degree_days/) (Last accessed Jan. 3, 2023).
\67\ EIA, Annual Energy Outlook 2023 with Projections to 2050,
Washington, DC (Available at: www.eia.gov/forecasts/aeo/) (Last
accessed May 3, 2023).
---------------------------------------------------------------------------
WMT stated that DOE's analysis does not represent the portion of
the insufficiently insulated homes and buildings for which condensing
boilers would operate continuously at high fire and yet may be unable
to provide adequate heat on the coldest days. WMT stated that the
practical impact of the variation in insulation quality across the
country is that the annual operating cost of boilers in underserved and
disadvantaged portions of society is understated in the current model,
because the burner operating hours (BOH) modeled in the LCC analysis
will not adequately represent the actual energy consumed to heat homes
with insufficient insulation. WMT stated that the BOH approach modeled
minimizes this concern through the ``building envelope'' approach
described in the Technical Support Document, but neither the RECS nor
the CBECS data address such insulation concerns adequately, and,
therefore, these subgroups must be evaluated at the State and local
level in addition to the national level. (WMT, No. 32 at pp. 5-6)
In response, DOE's equipment sizing approach considers the same
maximum output capacity for both non-condensing and condensing
equipment, and the level of heat provided in the coldest days is
assumed to be the same for the baseline and higher efficiency
equipment. However, installing contractors typically oversize the
equipment significantly so that the boiler is able to meet the heating
load demand on the coldest days. If a contractor decided to oversize
the condensing equipment, then this could lead to increased energy use
for the condensing equipment (but not necessarily increased burner
operating hours, since larger output capacity could result in similar
or decreased operating hours). DOE argues, though, that this additional
energy use to be able to meet the heating load in the coldest days for
an insufficiently insulated home or building would lead to greater
comfort for the occupant and would lead to an unfair comparison to the
non-condensing baseline model, since the installing contractor could
also oversize the non-condensing model to achieve a similar result.
DOE notes that there may be a significant number of insufficiently
insulated homes and buildings in the U.S., but RECS and CBECS already
account for the higher energy use associated with heating these
buildings in their energy consumption and expenditure data. The number
of insufficiently insulated homes and buildings has decreased over time
because of retrofit efforts (such as weatherization programs for low-
income households) and the decreasing number of older homes in the
building stock as some older homes get demolished. DOE relies on
``building envelope'' projections from AEO 2023 to account
[[Page 55158]]
for continued improvements to the insulation of homes and buildings,
which accounts for changes in the building codes over time as well. For
the NOPR analysis, DOE maintained its equipment sizing approach and
approach for projecting changes in ``building envelope,'' as used in
the preliminary analysis.
b. Impact of Return Water Temperature on Efficiency
Consumer boilers need a low return water temperature (RWT) to
condensate the hot flue gas and operate efficiently, as designed. When
operating at a high RWT, consumer may lose the efficiency advantage.
Considering the varying conditions in the installations, DOE accounted
for boiler operational efficiency in specific installations by
adjusting the AFUE of the sampled boiler based on an average system
return water temperature. The criteria used to determine the return
water temperature of the boiler system included consideration of
building vintage, product type (condensing or non-condensing, single-
stage or modulating), and whether the boiler employed an automatic
means for adjusting water temperature. Using product type and system
return water temperature, DOE developed and applied the AFUE
adjustments based on average heating season return water temperatures.
BWC expressed concern with DOE using a curve fit of curves
represented by various manufacturers showing the relationship of boiler
efficiency versus RWT when the efficiency values represented were not
verified by a third party, and it cannot be guaranteed that all these
manufacturers characterized the boiler efficiencies in the same way.
(BWC, No. 39 at p. 4) On this point, DOE notes that for the preliminary
analysis, it used all the available data from the 2016 Final Rule
(including data provided by Burnham in the 2015 NOPR for non-condensing
and condensing boilers) to determine the impact of return water
temperature on boiler efficiency. For this NOPR, DOE did not find any
additional third-party testing data to justify changing its approach.
DOE collected data on several more models, and these sources indicate a
decrease similar to that encountered in the previous data DOE used.
DOE requests comments, information, and data regarding the
relationship between boiler efficiency and return water temperature.
Crown and U.S. Boiler pointed to DOE's thermal efficiency versus
RWT graphs converging into a narrow band between 86 percent and 88
percent as the RWT approaches 140 [deg]F as supporting their position
that the AFUE of a condensing boiler operating above the dew point is
largely independent of the rated efficiency in condensing mode. (Crown,
No. 30 at p. 7; U.S. Boiler, No. 31 at pp. 7-8) In response, DOE would
point out that although the regression analysis does show a narrow band
at temperatures at or above 140 [deg]F RWT, there is still a
differential between the three condensing efficiency levels, and that
the graph presents the extent of the efficiency decreases in different
temperature ranges. Consequently, DOE contends that it is not accurate
to portray estimated condensing boiler efficiency above dew point as
independent of rated efficiency.
BWC commented that DOE stated in the preliminary analysis TSD that
a single-stage condensing boiler rated without automatic means or a
condensing boiler (either two-stage or modulating) with automatic
means, would have a field-adjusted efficiency above 90 percent AFUE in
a high RWT system (160 [deg]F), a result which does not seem possible
when an RWT above 130 [deg]F would prevent the boiler from condensing,
and as such, its maximum expected efficiency would range from 85-
percent to 88-percent AFUE. (BWC, No. 39 at pp. 3-4) Crown and U.S.
Boiler stated that the current DOE assumption that adjustments for
return water temperature are additive and constant relative to the
rated AFUE at 120 [deg]F RWT. According to the commenters, this
correction leads to a 95-percent AFUE modulating condensing boiler
having a field-adjusted AFUE of 92.94 percent at 140 [deg]F RWT, a
result which Crown and U.S. Boiler characterized as being unreasonable
and highly optimistic. (Crown, No. 30 at p. 7; U.S. Boiler, No. 31 at
pp. 7-8) Crown and U.S. Boiler also stated that any ``AFUE
adjustments'' that are made should have a sound technical basis, or not
be made at all. Crown and U.S. Boilers agreed with DOE that actual
energy use for a boiler having a given rated AFUE will vary from one
installation to the next based upon many factors, but stated that DOE's
attempt to adjust the rated AFUE to account for these varying field
conditions is flawed and generally tends to overstate the efficiency of
condensing boilers relative to non-condensing boilers. (Crown, No. 30
at p. 7; U.S. Boiler, No. 31 at p. 7)
In response to Crown's and U.S. Boiler's comments, DOE reviewed its
field-adjusted AFUE values and compared them with the latest available
field data. Based on this data (see appendix 7B of the NOPR TSD for
details), DOE was able to refine field-adjusted AFUE by taking into
account differences in local weather conditions, equipment sizing, heat
emitter types, return water temperatures, and other installation
characteristics for each sampled household or building. Overall, DOE
found that modulating condensing boilers are able to match the heating
load even if they are significantly oversized, compared to non-
modulating equipment that might short-cycle more often if significantly
oversized, which would impact efficiency. DOE also notes that current
modulating condensing boilers with outdoor reset controls are able to
handle a significant fraction of the heating load during typical winter
conditions, even if the heat emitters are not properly sized. On
average, the field-adjusted AFUE used in the preliminary analysis is
similar to the field-adjusted efficiency for the NOPR, but the updated
approach provides a more significant level of variability that is found
in the field. See appendix 7B of the NOPR TSD for more details.
WMT stated that the vast majority of current boiler installations
operate at 180 [deg]F circulating (return) water temperatures and that
the prevalence of such boiler systems should be accounted for in the
analysis. The commenter likewise argued that a related reduction in
efficiency (for condensing boilers where additional emitter surface
area is not added) should be accounted for in the analysis. WMT also
stated that higher efficiencies are only consistently realized when the
heat emitter surface area is adequately sized, because when it is not
adequately sized, increased efficiencies are highly dependent upon the
local climate. (WMT, No. 32 at p. 5) AHRI stated that according to a
contractor survey they conducted, when replacing a non-condensing
boiler with a condensing boiler, heat emitters are not being added in
the field due to the cost of additional heat emitters or installation
space constraints. Therefore, AHRI argued that DOE overstated the
energy savings in its model, because such installations provide less
than the stated efficiency levels, and the boilers would have to run
longer to maintain home temperatures. (AHRI, No. 42 at p. 4)
In response, DOE agrees that many existing hydronic distribution
systems were originally designed to meet the heating load on the
coldest day, with the hot water circulating through the heat emitters
(such as radiators) at 180 [deg]F. Based on weather data, boilers today
typically experience conditions \68\
[[Page 55159]]
at design limits less than five percent of the time when fulfilling
space heating needs. The conditions that boilers usually face are
considerably less than design during the rest of the year. By using bin
data, DOE estimated that for most consumer boiler installations, for 80
percent or more of the heating season, boilers are required to consume
50 percent or less energy than the BTUs needed to meet designed maximum
heating needs. In addition, the heating system (including the boiler
and the installed radiator) is typically oversized significantly
compared to the design conditions, and a significant number of
buildings have improved their building shell in comparison to when the
original hydronic heating system was originally installed. Condensing
boilers also use outdoor reset features to calculate the right water
temperature for the heat emitters based upon the load that the house or
building is experiencing. DOE analyzed the design conditions, reset
curves, and bin data for different houses or buildings in DOE's sample
and determined that for a large majority of the heating season, the
boiler can lower the water temperature so that the return temperatures
coming back to the boiler are below combustion gas dewpoint levels,\69\
which allows the boiler flue gases to condense and the boiler to
operate at or near its rated efficiency. Another feature of condensing
boilers is that the burner modulates, which typically increases the
overall efficiency of the unit by allowing it to operate the majority
of the time in part-load, which is typically at or near its rated
efficiencies. In an ideal situation, the heat emitter for a condensing
boiler installation is chosen to provide all the BTUs needed. For this
to occur, all of the existing homes and commercial buildings would have
to change and/or upgrade their existing heat emitters. As shown in
AHRI's 2022 contractor survey, although upgrading the heat emitter does
occur in the field to some extent, the majority of the time it does
not. Therefore, for the NOPR, DOE updated its energy use model to
estimate the fraction of the time the condensing boiler would operate
at different efficiencies based on return water temperature by using
binned weather data for each household or building installation. Such
approach should allow DOE to characterize the impact of individual
installations more accurately, but on average, the Department has found
the resulting efficiencies to be similar to the ones estimated in the
preliminary analysis.
---------------------------------------------------------------------------
\68\ The space heating design outdoor temperature is typically
defined as the temperature point above which the actual ambient
temperature would be for 99 percent of all the hours in the year,
based on a 30-year average. In other words, at the space heating
design temperature, the boiler would be expected to encounter colder
temperatures for only 1 percent of the hours in a year.
\69\ For example, when a condensing boiler is designed for 180
[deg]F water, 70 [deg]F indoors, and a design outdoor temperature of
between 0 [deg]F and 10 [deg]F, the reset curve will calculate a
water temperature that provides return temperatures below the
dewpoint of the flue gases. Such mechanism would be expected to work
as intended down to 25 [deg]F in order to ensure that the boiler is
operating in a condensing mode.
---------------------------------------------------------------------------
DOE requests comment on DOE's updated methodology for determining
energy use for condensing boilers in different return water temperature
applications.
c. Impact of Jacket Losses on Energy Use
In its analysis, DOE accounted for jacket losses when the boiler is
located in a non-conditioned space (i.e., unconditioned basement or
garage). For boilers located in conditioned spaces, DOE assumed that
jacket losses contribute to space heating as useful heat.
Crown and U.S. Boiler stated that there is little justification in
applying jacket loss to any boilers installed in basements, especially
when the DOE test procedure treats non-weatherized boilers as being
located indoors in a conditioned space, consistent with long-standing
DOE practice. Crown and U.S. Boiler also pointed out that there may be
a problem with the two jacket loss factors K and CJ being
inconsistent with each other in ASHRAE 103-2017. (Crown, No. 30 at p.
8; U.S. Boiler, No. 31 at p. 8)
In response, because some of the jacket losses could contribute to
heating the conditioned space, DOE maintains that the jacket loss
adjustment values are only applied to installations in unconditioned
basements. In regard to the jacket loss values, since there are very
limited test data, for the NOPR, DOE revised its jacket loss value for
condensing boilers so that it is equal to on average 0.5 (per ASHRAE
103-2022 for finned-tube boilers, which would more closely approximate
condensing boiler designs, and DOE assumed 0.5 percent for the jacket
loss fraction.
d. Impact of Excess Air Adjustments
A properly controlled amount of excess air provided to the boiler
during operation helps with efficient combustion and safe venting, but
will impact the efficiency of the boiler if the excess air becomes too
much. The current DOE test procedure requires the burners of gas-fired
boilers to be adjusted to their maximum Btu input ratings at the normal
pressure and to set the primary air shutters in accordance with the
manufacturer's recommendation to give a good flame. However, as many
consumer boilers operate on the lower end of the firing rates in the
field, the excess air level calibrated at high fire decreases the
operational efficiency. For the preliminary analysis, DOE accounted for
differences in excess air between the test procedure and field
conditions; DOE assumed that the increased excess air level in the
field would be based on the assumed stack temperature and draft type,
and addressed this by reducing AFUE by an adjustment factor ranging
from 0.0 percent to 1.6 percent.
Crown and U.S. Boiler stated that DOE's ``excess air adjustment''
adds error to the analysis and needs to be dropped. Crown and U.S.
Boiler stated that because DOE's test procedure does not require gas
burner excess air to be adjusted in accordance with manufacturer's
instructions, and because excess air on non-atmospheric gas burners can
often be adjusted independently of input, they believe that non-
atmospheric boilers are more likely than atmospheric to run in the
field at an excess air level above (and efficiency below) that at which
the AFUE was measured, which is exactly opposite what is done in DOE's
adjustment. (Crown, No. 30 at p. 9; U.S. Boiler, No. 31 at p. 9)
In response, DOE assumed that boilers at high fire operate at 15 to
20 percent excess air, based on an article in the ASHRAE Journal \70\
and the relationship between excess air, stack temperature, and
combustion efficiency from the Engineering Toolbox.\71\ Based on these
two sources, DOE made the following assumptions. For natural draft
(atmospheric) boilers below 86 percent AFUE, DOE assumed 20 percent
excess air and 400 [deg]F stack temperature, resulting in a triangular
distribution of AFUE impact from 0 percent to 1.6 percent (0.8 percent
average). For non-condensing mechanical draft boilers and natural draft
boilers above 86-percent AFUE, DOE assumed 15 percent excess air and
400 [deg]F stack temperature, resulting in a 0.4 percent average, which
is half of the impact on AFUE compared to natural draft boilers below
86 percent AFUE. For condensing boilers, DOE assumed 15 percent excess
air and 200 [deg]F stack temperature, resulting in 0.2 percent average,
which is half of the impact on AFUE compared to non-condensing
mechanical draft boilers. DOE has not found additional data or
[[Page 55160]]
information to support changing its methodology.
---------------------------------------------------------------------------
\70\ Eoff, D., Understanding Fuel Savings in the Boiler Room,
ASHRAE Journal (2008) 50(12): pp. 38-43.
\71\ The Engineering Toolbox, Combustion Efficiency and Excess
Air (Available at: www.engineeringtoolbox.com/boiler-combustion-efficiency-d_271.html) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
DOE requests comments, information, and data showing the
relationship between boiler efficiency and excess air during AFUE
testing and in the field.
3. Water Heating Use
Consumer boilers are often used to provide hot water in addition to
space heating. The most common means of doing so are through an
indirect water heater, tankless coil, or as an integrated part of the
boiler. This functionality's energy use is taken into account in the
DOE test procedure for consumer boilers.
As mentioned previously, DOE does not account for other boiler uses
such as snow melt systems, pool or spa heating, or steam or hot water
production for commercial processes, since currently DOE does not have
any information about the prevalence and energy use of such systems.
DOE welcomes information and data on these additional system types and
processes.
RECS 2015 and CBECS 2018 do not directly provide information about
whether a boiler is used to provide hot water. For that to happen, DOE
determined that it is a prerequisite for the households and buildings
with (a) boiler(s) to report using the same fuel for both space and
water heating. DOE also estimated the probability of consumer boilers
used for water heating based on a 2015 AHRI contractor survey.\72\ DOE
determined that boilers are used for water heating in 50 percent of
gas-fired hot water boiler installations, 5 percent of gas-fired steam
boiler installations, 40 percent of oil-fired hot water boiler
installations, and 5 percent of oil-fired steam boiler installations.
---------------------------------------------------------------------------
\72\ AHRI, Survey of Boiler Installation Contractors (2015),
Usage of Boilers for Both Heat and Hot Water, pp. 10-11 (Available
at: www.regulations.gov/document/EERE-2012-BT-STD-0047-0066) (Last
accessed Jan. 3, 2023).
---------------------------------------------------------------------------
On this topic, Crown and U.S. Boiler stated that according to
EPCA's definition of a ``furnace,'' within which boilers are included,
nothing is said about domestic water production, so DOE's authority to
include the energy use in the cost-benefit analysis for a standard is
questionable. Crown and U.S. Boiler also stated that DOE's residential
boiler test method is not designed to measure this energy consumption
(including idle losses) and that DOE's crude attempt to estimate it
includes several questionable and arbitrary assumptions. (Crown, No. 30
at pp. 9-10; U.S. Boiler, No. 31 at pp. 9-10) In response, DOE notes
that EPCA requires DOE to consider the savings in operating costs
throughout the estimated average life of the covered product in the
type (or class) compared to any increase in the price of, or in the
initial charges for, or maintenance expenses of, the covered product
that are likely to result from a standard. (42 U.S.C.
6295(o)(2)(B)(i)(II)) As there is no restriction on the type of energy-
consuming service provided by a covered product, it is appropriate for
DOE to include all such energy consumption and related costs associated
with boiler operation, including those for domestic hot water supply.
DOE believes that its energy use approach for estimating energy use for
water heating and idle losses is reasonable, but welcomes any comments,
methodology suggestions, and data to make further improvements to its
energy use model.
Crown and U.S. Boiler also stated that DOE is likely overstating
the use of water heating by assuming any boiler, other than an oil-
fired steam boiler, is providing water heating if RECS 2015 or CBECS
2012 reports the use of ``tankless water heating.'' (Crown, No. 30 at
pp. 9-10; U.S. Boiler, No. 31 at p. 10) Overall, DOE has found that the
fraction of boilers that are used for water heating in its sample
matches the available contractor survey data compiled by AHRI in 2014
and 2022. For the sampling process, DOE assumed that for oil-fired
boilers (both steam and hot water), if RECS 2015 or CBECS 2018 reports
the use of ``tankless water heating,'' then the boiler provides hot
water. For gas-fired boilers, only a fraction of the reported
``tankless water heating'' is assumed to be provided by the boiler.
See appendix 7B of the NOPR TSD for more information about the
energy use analysis.
F. Life-Cycle Cost and Payback Period Analysis
DOE conducted LCC and PBP analyses to evaluate the economic impacts
on individual consumers of potential energy conservation standards for
consumer boilers. 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 used the following
two metrics to measure consumer impacts:
The LCC is the total consumer expense of an appliance or
product over the life of that product, consisting of total installed
cost (manufacturer selling price, distribution chain markups, sales
tax, and installation costs) plus operating costs (expenses for energy
use, maintenance, and repair). To compute the operating costs, DOE
discounts future operating costs to the time of purchase and sums them
over the lifetime of the product.
The PBP is the estimated amount of time (in years) it
takes consumers to recover the increased purchase cost (including
installation) of a more-efficient product through lower operating
costs. DOE calculates the PBP by dividing the change in purchase cost
at higher efficiency levels by the change in annual operating cost for
the year that amended or new standards are assumed to take effect.
For any given efficiency level, DOE measures the change in LCC
relative to the LCC in the no-new-standards case, which reflects the
estimated efficiency distribution of consumer boilers in the absence of
new or amended energy conservation standards. In contrast, the PBP for
a given efficiency level is measured relative to the baseline product.
For each considered efficiency level in each product class, DOE
calculated the LCC and PBP for a nationally representative set of
housing units and commercial buildings. As stated previously, DOE
developed household samples from RECS 2015 and CBECS 2018. For each
sample household and commercial building, DOE determined the energy
consumption for the consumer boilers and the appropriate energy price.
By developing a representative sample of households and commercial
buildings, the analysis captured the variability in energy consumption
and energy prices associated with the use of consumer boilers.
Inputs to the calculation of total installed cost include the cost
of the product--which includes MPCs, manufacturer markups, retailer and
distributor markups, and sales taxes--and installation costs. Inputs to
the calculation of operating expenses include annual energy
consumption, energy prices and price projections, repair and
maintenance costs, product lifetimes, and discount rates. DOE created
distributions of values for product lifetime, discount rates, and sales
taxes, with probabilities attached to each value, to account for their
uncertainty and variability.
The computer model DOE uses to calculate the LCC relies on a Monte
Carlo simulation to incorporate uncertainty and variability into the
analysis. The Monte Carlo simulations randomly sample input values from
the probability distributions and consumer boiler user samples. For
this rulemaking, the Monte Carlo approach
[[Page 55161]]
is implemented in MS Excel together with the Crystal Ball\TM\ add-
on.\73\ The model calculated the LCC for products at each efficiency
level for 10,000 housing units and commercial buildings per simulation
run. The analytical results include a distribution of 10,000 data
points showing the range of LCC savings for a given efficiency level
relative to the no-new-standards case efficiency distribution. In
performing an iteration of the Monte Carlo simulation for a given
consumer, product efficiency is chosen based on its probability. If the
chosen product efficiency is greater than or equal to the efficiency of
the standard level under consideration, the LCC calculation reveals
that a consumer is not impacted by the standard level. By accounting
for consumers who already purchase more-efficient products, DOE avoids
overstating the potential benefits from increasing product efficiency.
---------------------------------------------------------------------------
\73\ Crystal Ball\TM\ is commercially-available software tool to
facilitate the creation of these types of models by generating
probability distributions and summarizing results within Excel
(Available at: www.oracle.com/technetwork/middleware/crystalball/overview/) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
DOE calculated the LCC and PBP for consumers of consumer boilers as
if each were to purchase a new product in the expected year of required
compliance with new or amended standards. New and amended standards
would apply to consumer boilers manufactured 5 years after the date on
which any new or amended standard is published. (42 U.S.C.
6295(m)(4)(A)(ii)) At this time, DOE estimates publication of a final
rule in mid-2024. Therefore, for purposes of its analysis, DOE used
2030 as the first full year of compliance with any amended standards
for consumer boilers.
Table IV.9 summarizes the approach and data DOE used to derive
inputs to the LCC and PBP calculations. The subsections that follow
provide further discussion. Details of the spreadsheet model, and of
all the inputs to the LCC and PBP analyses, are contained in chapter 8
of the NOPR TSD and its appendices.
Table IV.9--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
Inputs Source/method
------------------------------------------------------------------------
Product Cost................. Derived by multiplying MPCs by
manufacturer and retailer markups and
sales tax, as appropriate. Used
historical data to derive a price
scaling index to project product costs.
Installation Costs........... Baseline installation cost determined
with data from RSMeans 2023. Assumed no
change with efficiency level.
Annual Energy Use............ The total annual energy use multiplied by
the hours per year. Average number of
hours based on field data.
Variability: Based on RECS 2015 and CBECS
2018.
Energy Prices................ Natural Gas: Based on EIA's Natural Gas
Navigator data for 2022 and RECS 2015
billing data;
Electricity: Based on EIA's Form 861 data
for 2022 and RECS 2015 billing data;
Propane and Fuel Oil: Based on EIA's
State Energy Data System (SEDS) for
2021.
Variability: Energy prices by States were
used for residential and commercial
applications.
Marginal prices used for natural gas,
propane, and electricity prices.
Energy Price Trends.......... Based on AEO2023 price projections.
Repair and Maintenance Costs. Based on RSMeans data and other sources.
Product Lifetime............. GHW: 26.9 years; GST: 23.7 years; OHW:
25.6 years; OST: 19.6 years.
Discount Rates............... Residential: approach involves
identifying all possible debt or asset
classes that might be used to purchase
the considered appliances, or might be
affected indirectly. Primary data source
was the Federal Reserve Board's Survey
of Consumer Finances.
Commercial: Calculated as the weighted-
average cost of capital for businesses
purchasing consumer boilers. Primary
data source was Damodaran Online.
Compliance Date.............. 2030.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
in the sections following the table or in chapter 8 of the NOPR TSD.
1. Product Cost
To calculate consumer product costs, DOE multiplied the MPCs
developed in the engineering analysis by the markups described
previously (along with sales taxes). DOE used different markups for
baseline products and higher-efficiency products, because DOE applies
an incremental markup to the increase in MSP associated with higher-
efficiency products.
Examination of historical price data for certain appliances and
equipment that have been subject to energy conservation standards
indicates that the assumption of constant real prices may, in many
cases, overestimate long-term trends in appliance and equipment prices.
Economic literature and historical data suggest that the real costs of
these products may in fact trend downward over time according to
``learning'' or ``experience'' curves.
In the experience curve method, the real cost of production is
related to the cumulative production or ``experience'' with a
manufactured product. This experience is usually measured in terms of
cumulative production. As experience (production) accumulates, the cost
of producing the next unit decreases. The percentage reduction in cost
that occurs with each doubling of cumulative production is known as the
learning rate. In typical experience curve formulations, the learning
rate parameter is derived using two historical data series: cumulative
production and price (or cost). DOE obtained historical PPI data for
heating equipment from 1999 to 2021 for cast iron boilers and from 1980
to 1986 and 1994 to 2014 for steel boilers from the Bureau of Labor
Statistics (BLS).\74\ The PPI data reflect nominal prices, adjusted for
product quality changes. An inflation-adjusted (deflated) price index
for heating equipment manufacturing was calculated by dividing the PPI
series by the implicit price deflator for Gross Domestic Product
Chained Price Index.\75\
---------------------------------------------------------------------------
\74\ See www.bls.gov/ppi/.
\75\ See www.bea.gov/data/gdp/gross-domestic-product.
---------------------------------------------------------------------------
From 1999 to 2001, the deflated price index of the cast iron
heating boiler was decreasing. Since then, the indices for cast iron
boilers and steel boilers have both risen, due to rising prices of the
raw materials. However, given the uncertainty in the material prices
and the economy, it is uncertain the current trend of the price indices
will be sustained. Therefore, DOE decided to use constant prices as the
default price
[[Page 55162]]
assumption to project future consumer boiler prices. Thus, projected
prices for the LCC and PBP analysis are equal to the 2021 values for
each efficiency level in each product class.
DOE requests comments on the default constant price trend for
consumer boilers. DOE seeks comments on how material prices and
technological advancement would be expected to impact future prices of
consumer boilers.
2. Installation Cost
Installation cost includes labor, overhead, and any miscellaneous
materials and parts needed to install the product, such as venting and
piping modifications and condensate disposal that might be required
when installing products at various efficiency levels. DOE estimated
the costs associated with installing a boiler in a new housing unit/
commercial building or as a replacement for an existing boiler. DOE
used data from RSMeans to estimate the baseline and higher efficiency
installation costs for consumer boilers.\76\
---------------------------------------------------------------------------
\76\ See www.rsmeansonline.com/.
---------------------------------------------------------------------------
DOE calculated the basic installation cost, which is applicable to
both replacement and new construction boiler installations and includes
the cost of putting in place and setting up the boiler, permitting, and
removal or disposal fees. DOE also considered additional costs
(``adders'') for a fraction of installations of non-condensing and
condensing boilers. These additional costs may account for installing a
new vent system, chimney relining, updating of flue vent connectors,
vent resizing, the costs for a stainless-steel vent, and condensate
withdrawal (if required). In addition, DOE accounted for the costs
associated with adding water heating service using the boiler (for
example, through an indirect tank or through combination space heating/
water heating boilers) for a fraction of installations. See chapter 8
and appendix 8C of the TSD for more details on installation cost
including average installation costs by product class and efficiency
level.
AHRI expressed concerns that RSMeans does not have enough
resolution with respect to the differences in installation times for
condensing and non-condensing boilers. (AHRI, No. 40 at p.6) WMT stated
that RSMeans should not be utilized as a true job costing calculator
because it does not accurately capture the true and nuanced costs of
installation work. WMT believes the RSMeans data is intended as an
initial estimation tool, providing information for businesses to
benchmark against the larger industry and to provide quotations of
complicated projects, and, in fact, RSMeans itself states that they
have no expressed or implied warranty as to the fitness of the
information for a particular purpose. WMT believes the actual cost of a
project is determined after the work is completed, and, therefore, the
best source of information for the difference in installation
activities is the manufacturer's service call information. (WMT, No. 32
at pp. 10-11)
In response, DOE notes that the Department does not utilize RSMeans
as the sole source for its estimation of boiler installation costs. DOE
uses RSMeans data to provide labor costs, materials costs, and labor
hours for a variety of installation tasks associated with installing a
boiler. In order to appropriately characterize the installation costs,
DOE used a variety of additional sources including consultant reports,
manufacturer installation manuals, and other online resources. The
resulting installation cost model for consumer boilers provides a
distribution of costs that matches with available field data from 2014
and 2022 AHRI contractor surveys and other online resources (see
Appendix 8D for more details).
Crown and U.S. Boiler argued that DOE used labor rates from RSMeans
that do not appear applicable to residential boiler installation,
service, and maintenance. Crown and U.S. Boiler stated that, for
example, installation work on simple gas-fired natural draft non-
condensing boilers is sometimes performed by plumbers. (Crown, No. 30
at p. 11; U.S. Boiler, No. 31 at p. 10) In response, DOE uses RSMeans
data and consultant reports to estimate the appropriate labor crew for
residential boiler tasks. DOE is aware that residential consumer boiler
installations can be, and in certain cases are, accomplished by
plumbers and other contractors, but RSMeans crew type for boilers
approximates the average labor costs per hour for a crew performing the
main boiler installation tasks. Also, the cost differential for this
crew type versus a plumber for example is not very significant. (See
appendix 8D of the NOPR TSD). Therefore, DOE kept its approach for
using labor rates based on RSMeans for the NOPR analysis.
Crown and U.S. Boiler stated DOE is underestimating the relative
difference in the installation costs for condensing and non-condensing
boilers, and past discussions with their customers suggest that a
$3,500 adder for a condensing boiler installation, as evidenced by
DOE's consultant, is closer to reality. (Crown, No. 30 at p. 11; U.S.
Boiler, No. 31 at p. 11) In contrast, NEAA and the Joint Advocates
stated that DOE's analysis of installation costs for consumer boilers
is comprehensive and reasonable for condensing boiler installations and
includes an evaluation of the installation issues associated with
switching from a non-condensing to a condensing boiler. (NEAA, No. 36
at p. 2; Joint Advocates, No. 35 at p. 3) NYSERDA stated that DOE
correctly found that new technologies have entered the market to help
alleviate previously challenging installations, particularly related to
venting, for condensing products. NYSERDA further commented that the
contractors have significant experience installing these products in a
wide variety of scenarios, as almost 40 percent of all furnaces and
boilers in New York achieve a condensing level of performance. NYSERDA
added that DOE's analysis, which revealed that fewer than 5 percent of
installations could be labeled as challenging, is well-supported and
reflects the significant gain of market share that condensing products
have achieved over the last twenty years. (NYSERDA, No. 33 at p.3)
In response, DOE acknowledges that a small fraction of replacement
installations may be difficult, but DOE does not believe that the
difficulties are insurmountable. DOE notes that in response to the NOPR
for the current residential furnaces rulemaking, the American Council
for an Energy-Efficient Economy (ACEEE) stated that the Energy
Coordinating Agency, a major weatherization program in Philadelphia
that has installed many condensing furnaces in row houses, has
developed moderate cost solutions (at most $350) to common problems
such as having no place to horizontally vent directly from the
basement. (Docket No. EERE-2014-BT-STD-0031, ACEEE, No. 113 at p. 7)
DOE's analysis accounts for additional costs for that small fraction of
installations that would require significant installation costs in the
range of several thousand dollars. DOE also accounts for adders for
condensing models in a distribution of costs that matches with
available field data from 2014 and 2022 AHRI contractor surveys and
other online resources (see appendix 8D of the NOPR TSD for more
details). Although in some areas and certain applications a bigger
relative difference can be observed in the field, DOE argues that the
distribution of costs it develops for the installation cost analysis
will better represent field applications overall. DOE agrees with
NYSERDA that the fraction of remaining
[[Page 55163]]
difficult installations has been decreasing as the market share of
condensing boiler installations has increased over time.
PB Heat stated that the current minimum efficiency levels for
Category I, chimney-vented boilers are near physical limits of chimney
venting. The commenter added that increasing boiler minimum efficiency
levels beyond the current levels would significantly reduce the
applications where a Category I boiler could be installed with an
existing chimney and produce reliable and safe operation over its
expected life. PB Heat asserted that increasing the minimum efficiency
would reduce the flue temperature, which along with chimney height is a
key driver for venting of flue gases, and this would increase the
likelihood of condensation in the chimney (causing premature
degradation) and the likelihood of poor draft, which can result in flue
gas spillage into the heated space. (PB Heat, No. 34 at p. 1)
In response, DOE agrees that Category I venting may no longer be
suitable for amended energy conservation standards set at significantly
higher levels of boiler efficiency. DOE has estimated that in cases of
replacement with near-condensing gas-fired boilers (85-89 percent
AFUE), instead of using Category I chimney venting or Category II
stainless steel venting, installers would use Category III stainless
steel venting with mechanical draft.\77\ When considering condensing
boilers, Category I or Category II venting presents reliability issues,
even with stainless steel venting, because of the variety of operating
conditions encountered in the field. Accordingly, for this analysis,
DOE assumed that for such installations (that otherwise would require
Category II venting), it would be appropriate to install a mechanical
draft boiler with Category III venting (which requires stainless steel
venting), in order to prevent safety and reliability issues. DOE
included the cost of AL29-4C stainless steel venting for all Category
III installations.
---------------------------------------------------------------------------
\77\ For replacement with an 84-percent AFUE boiler, DOE found
that that it is necessary to use special venting in a small fraction
of cases based on shipments data provided by Burnham during the 2015
NOPR. [EERE-2012-BT-STD-0047 (Burnham, No. 60, p.18)].
---------------------------------------------------------------------------
AHRI stated that its contractor survey showed that while direct
venting is a common means to vent condensing boilers, it is not the
only method being used in the field. The commenter opined that the
choice in venting is most likely based on the availability of the
product and, as such, must be maintained as an option to ensure that
contractors can install and vent boilers safely and effectively in all
situations that they may encounter. (AHRI, No. 42 at p. 8) In response,
for the preliminary analysis, DOE assumed that direct venting is used
by a fraction of condensing installations. For the NOPR analysis, DOE
updated its fraction of direct vent installations to match the data
provided by AHRI's contractor survey.
AHRI stated that DOE is not including in its costing model the cost
of replacement baseboard. AHRI elaborated that when a consumer switches
from a non-condensing boiler to a condensing boiler, they will need to
replace or increase the length of their baseboard to work with lower
water temperatures in order to realize the energy savings potential of
the condensing boiler. (AHRI, No. 40 at p. 1) AHRI's 2022 contractor
survey shows that upgrading the heat emitter rarely occurs in practice.
Therefore, for this analysis, DOE has chosen not to include the cost of
replacing or increasing the length of the baseboard for retrofitting an
existing non-condensing boiler with a condensing boiler. Instead, DOE
has chosen to adjust the energy efficiency of the boiler to compensate
for the decrease in the field efficiency of condensing boilers when the
heat emitter is not sized properly.
3. Annual Energy Consumption
For each sampled household and commercial building, DOE determined
the energy consumption for a consumer boiler at different efficiency
levels using the approach described previously in section IV.E of this
document.
Higher-efficiency boilers reduce the operating costs for a
consumer, which can lead to greater use of the boiler (i.e., a
``rebound effect''). A direct rebound effect occurs when a product that
is made more efficient is used more intensively, such that the expected
energy savings from the efficiency improvement may not fully
materialize. At the same time, consumers benefit from increased
utilization of products due to rebound. Although some households may
increase their boiler use in response to increased efficiency, DOE does
not include the rebound effect in the LCC analysis because the
increased utilization of the water heater provides value to the
consumer. DOE does include rebound in the NIA for a conservative
estimate of national energy savings and the corresponding impact to
consumer NPV. See section IV.H.3 of this document and chapter 10 of the
NOPR TSD for more details.
4. Energy Prices
Because marginal energy prices more accurately capture the
incremental savings associated with a change in energy use from higher
efficiency, they provide a better representation of incremental change
in consumer costs than average energy prices. Therefore, DOE applied
average energy prices for the energy use of the products purchased in
the no-new-standards case, and marginal energy prices for the
incremental change in energy use associated with the other efficiency
levels considered.
DOE derived average monthly marginal residential and commercial
electricity, natural gas, LPG, and fuel oil prices for each State using
data from EIA.78 79 80 DOE calculated marginal monthly
regional energy prices by: (1) first estimating an average annual price
for each region; (2) multiplying by monthly energy price factors, and
(3) multiplying by seasonal marginal price factors for electricity,
natural gas, LPG, and fuel oil. The analysis used historical data up to
2022 for residential and commercial natural gas and electricity prices
and historical data up to 2021 for LPG and fuel oil prices adjusted to
2022 values using AEO data. Further details may be found in chapter 8
of the NOPR TSD.
---------------------------------------------------------------------------
\78\ U.S. Department of Energy-Energy Information
Administration, Form EIA-861M (formerly EIA-826) detailed data
(2022) (Available at: www.eia.gov/electricity/data/eia861m/) (Last
accessed May 3, 2023).
\79\ U.S. Department of Energy-Energy Information
Administration, Natural Gas Navigator (2022) (Available at:
www.eia.gov/naturalgas/data.php) (Last accessed May 3, 2023).
\80\ U.S. Department of Energy-Energy Information
Administration, 2021 State Energy Data System (SEDS) (2021)
(Available at: www.eia.gov/state/seds/) (Last accessed May 3, 2023).
---------------------------------------------------------------------------
The Joint Commenters encouraged DOE to evaluate one or more
alternate natural gas price scenarios to better understand the effect
of increased gas prices, because they believe that DOE significantly
underestimates future natural gas prices using the projections from AEO
2021. The Joint Commenters argued that as the movement towards
electrification continues and the efficiencies of gas-fired appliances
increase, customers and sales of natural gas will likely decline over
time and that multiple studies indicate that a consistent decline in
gas customers and/or consumption will result in an increase in gas
prices for the remaining customers. (Joint Commenters, No. 35 at p. 2)
In response, because the extent of widespread electrification, and
the associated impact on natural gas prices, are very uncertain at this
point, DOE
[[Page 55164]]
prefers to rely on the latest AEO price forecasts in its analysis. DOE
uses other inputs from the AEO analysis, and the Department contends
that it is important to maintain consistency in terms of its use of AEO
in DOE's other inputs and energy price projections since they are
interconnected in the National Energy Modeling System (NEMS) that EIA
uses.\81\ DOE notes that if future natural gas prices end up higher
than DOE estimates due to electrification, the economic justification
for the standards proposed for gas-fired boilers in this NOPR would
become stronger still. DOE's analysis also includes sensitivity
analysis using energy prices in high and low economic growth scenarios.
However, DOE has tentatively concluded that such alternate energy price
trends are too speculative for use as the agency's primary analysis.
---------------------------------------------------------------------------
\81\ See www.eia.gov/outlooks/aeo/info_nems_archive.php.
---------------------------------------------------------------------------
Accordingly, for this NOPR, to estimate energy prices in future
years, DOE multiplied the 2022 energy prices by the projection of
annual average price changes for each of the nine Census Divisions from
the Reference case in AEO 2023, which has an end year of 2050.\82\ To
estimate price trends after 2050, DOE used the average annual growth
rate in prices from 2046 to 2050 based on the methods used in the 2022
Life-Cycle Costing Manual for the Federal Energy Management Program
(FEMP).\83\
---------------------------------------------------------------------------
\82\ EIA. Annual Energy Outlook 2023 with Projections to 2050.
Washington, DC (Available at: www.eia.gov/forecasts/aeo/) (Last
accessed May 3, 2023).
\83\ Lavappa, Priya D. and J.D. Kneifel, Energy Price Indices
and Discount Factors for Life-Cycle Cost Analysis--2022 Annual
Supplement to NIST Handbook 135. National Institute of Standards and
Technology (NIST). NISTIR 85-3273-37 (Available at: www.nist.gov/publications/energy-price-indices-and-discount-factors-life-cycle-cost-analysis-2022-annual) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
5. Maintenance and Repair Costs
Repair costs are associated with repairing or replacing product
components that have failed in an appliance; maintenance costs are
associated with maintaining the operation of the product. Typically,
small incremental increases in product efficiency produce no, or only
minor, changes in repair and maintenance costs compared to baseline
efficiency products. In the present case, DOE included additional
repair costs for higher-efficiency consumer boilers (including repair
costs associated with electronic ignition, controls, and blowers for
condensing designs) based on 2023 RSMeans data. DOE also accounted for
regional differences in labor costs by using RSMeans regional cost
factors. Further details may be found in appendix 8F of the NOPR TSD.
Crown and U.S. Boiler stated that DOE used labor rates from RSMeans
that do not appear applicable to residential boiler service and
maintenance. Crown and U.S. Boiler stated that maintenance and repair
on residential boilers mostly will be performed by an HVAC technician,
which requires a completely different skill set from the ``steam fitter
and steam fitter apprentice'' that DOE assumed. (Crown, No. 30 at p.
11; U.S. Boiler, No. 31 at p. 10).
In response, DOE uses RSMeans data and consultant reports to
estimate the appropriate labor crew for residential boiler tasks. DOE
is aware that residential consumer boiler maintenance and repair are
typically accomplished by an HVAC technician, but the RSMeans crew type
for boilers approximates the average labor costs per hour for a crew
performing these maintenance and repair tasks. See IV.F.2 of this
document for further discussions about the use of RSMeans. Therefore,
DOE kept its approach for using labor rates from RSMeans.
6. Product Lifetime
Product lifetime is the age at which an appliance is retired from
service. To determine boiler lifetimes, DOE relied on RECS 1990, 1993,
2001, 2005, 2009, 2015, and 2020. DOE also used the U.S. Census's
biennial American Housing Survey (AHS), from 1974-2021, which surveys
all housing and notes the presence of a range of appliances. DOE used
the appliance age data from these surveys, as well as the historical
boiler shipments, to generate an estimate of the survival function for
consumer boilers. The survival function provides a lifetime range from
minimum to maximum, as well as an average lifetime.
PB Heat and AHRI stated that condensing boilers have a shorter
lifespan than non-condensing boilers, in line with AHRI's Survey of
Boiler Installation Contractors (July 2015) and EER Consultants on
boiler lifetime. (PB Heat, No. 34 at p. 1; AHRI, No. 40 at p. 5) AHRI
stated that the contractor survey it conducted showed that condensing
boilers on average are expected to last between 10-20 years. (AHRI, No.
42 at p. 6) BWC commented that condensing boilers are technically more
complex products with additional components, and that they have higher
lifetime service and maintenance costs compared to non-condensing
boilers, which are contributing factors that make it challenging for
condensing boilers to have the same life span as non-condensing
boilers. (BWC, No. 39 at p. 2) PB Heat mentioned the complexity of
condensing boilers and negatively impacting their lifetime, and the
company stated that the heat exchanger of a boiler is the key component
whose failure is highly likely to drive early end-of-life decisions.
(PB Heat, No. 34 at p. 2) Crown and U.S. Boilers stated that condensing
boilers have a significantly shorter life expectancy than non-
condensing boilers because of their increased complexity, exposure of
components to acids, and also the much tighter flue and water passages
that are subject to fouling if not cleaned diligently. Crown and U.S.
Boilers pointed to the difference in the heat exchanger warranty
coverages as an indication of what manufacturers themselves expect the
lifetime to be. (Crown, No. 30 at p. 11-15; U.S. Boilers, No. 31 at pp.
12-16) WMT stated that the product lives of condensing boilers are
approximately half that of the 25- to 30-year expected life of cast
iron non-condensing boilers. (WMT, No. 32 at pp. 2-3) Crown and U.S.
Boilers also stated that many of DOE's sources are even older than the
2016 AHRI survey whose values DOE did not adopt. (Crown, No. 30 at p.
12; U.S. Boilers, No. 31 at p. 12)
After carefully considering these comments, DOE has concluded that
there is not enough data available to accurately distinguish the
lifetime of non-condensing and condensing gas-fired boilers, because
they have not been prevalent in the U.S. market long enough to
demonstrate whether their average lifetime is less than or greater than
25 years. Commenters provided opinions based on their conjecture and
certain anecdotal experiences, but they did not provide data that would
evidence a significantly reduced lifetime for condensing boilers. In
addition, condensing boiler technologies have been improving since
their introduction to the U.S. market; therefore, the lifetime of the
earliest condensing boilers may not be representative of current or
future condensing boiler designs. Consequently, condensing lifetime
estimates from AHRI's contractor survey might be biased towards
earliest condensing boiler designs, and it lacks clarity as to the
number of condensing boilers installed that were 15 years or older.
Therefore, DOE has maintained the same lifetime for condensing and non-
condensing boilers for this NOPR. However, as mentioned previously, DOE
did include additional repair costs for condensing boilers that would
likely allow for a lifetime similar to non-
[[Page 55165]]
condensing boilers, by assuming different service lifetimes for heat
exchangers for condensing boilers and non-condensing boilers based on
warranty data from product literature and survey data provided by
stakeholders.
In light of the above, for this NOPR, DOE used the appliance age
data derived from RECS 1990-2020 and the U.S. Census's biennial
American Housing Survey (AHS) 1974-2021, as well as the historical
boiler shipments, to generate an estimate of the survival function for
consumer boilers. The survival function provides a lifetime range from
minimum to maximum, as well as an average lifetime. Utilizing this
approach, DOE estimates the average product lifetime to be 24.6 years
for consumer boilers. This estimate is consistent with the range of
values identified in a literature review in appendix 8G of the NOPR
TSD.
7. Discount Rates
In the calculation of LCC, DOE applies discount rates appropriate
to households and commercial buildings to estimate the present value of
future operating cost savings. DOE estimated a distribution of discount
rates for consumer boilers based on the opportunity cost of consumer
funds and cost of capital for commercial applications.
DOE applies weighted-average discount rates calculated from
consumer debt and asset data, rather than marginal or implicit discount
rates.\84\ The LCC analysis estimates net present value over the
lifetime of the product, so the appropriate discount rate will reflect
the general opportunity cost of household funds, taking this time scale
into account. Given the long time horizon modeled in the LCC analysis,
the application of a marginal interest rate associated with an initial
source of funds is inaccurate. Regardless of the method of purchase,
consumers are expected to continue to rebalance their debt and asset
holdings over the LCC analysis period, based on the restrictions
consumers face in their debt payment requirements and the relative size
of the interest rates available on debts and assets. DOE estimates the
aggregate impact of this rebalancing using the historical distribution
of debts and assets. For commercial applications, DOE's method views
the purchase of a higher-efficiency appliance as an investment that
yields a stream of energy cost savings. DOE derived the discount rates
for the LCC analysis by estimating the cost of capital for companies or
public entities that purchase consumer boilers. For private firms, the
weighted-average cost of capital (WACC) is commonly used to estimate
the present value of cash flows to be derived from a typical company
project or investment. Most companies use both debt and equity capital
to fund investments, so their cost of capital is the weighted average
of the cost to the firm of equity and debt financing, as estimated from
financial data for publicly-traded firms in the sectors that purchase
consumer boilers. As discount rates can differ across industries, DOE
estimates separate discount rate distributions for a number of
aggregate sectors with which elements of the LCC building sample can be
associated.
---------------------------------------------------------------------------
\84\ The implicit discount rate is inferred from a consumer
purchase decision between two otherwise identical goods with
different first cost and operating cost. It is the interest rate
that equates the increment of first cost to the difference in net
present value of lifetime operating cost, incorporating the
influence of several factors: transaction costs; risk premiums and
response to uncertainty; time preferences; and interest rates at
which a consumer is able to borrow or lend. The implicit discount
rate is not appropriate for the LCC analysis because it reflects a
range of factors that influence consumer purchase decisions, rather
than the opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------
To establish residential discount rates for the LCC analysis, DOE
identified all relevant household debt or asset classes in order to
approximate a consumer's opportunity cost of funds related to appliance
energy cost savings. It estimated the average percentage shares of the
various types of debt and equity by household income group using data
from the Federal Reserve Board's triennial Survey of Consumer Finances
\85\ (SCF) starting in 1995 and ending in 2019. Using the SCF and other
sources, DOE developed a distribution of rates for each type of debt
and asset by income group to represent the rates that may apply in the
year in which amended standards would take effect. DOE assigned each
sample household a specific discount rate drawn from one of the
distributions. The average rate across all types of household debt and
equity and income groups, weighted by the shares of each type, is 4.2
percent.
---------------------------------------------------------------------------
\85\ The Federal Reserve Board, Survey of Consumer Finances
(1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019)
(Available at: www.federalreserve.gov/econres/scfindex.htm) (Last
accessed Jan. 3, 2023).
---------------------------------------------------------------------------
To establish commercial discount rates for the small fraction of
consumer boilers installed in commercial buildings, DOE estimated the
weighted-average cost of capital using data from Damodaran Online.\86\
The weighted-average cost of capital is commonly used to estimate the
present value of cash flows to be derived from a typical company
project or investment. Most companies use both debt and equity capital
to fund investments, so their cost of capital is the weighted average
of the cost to the firm of equity and debt financing. DOE estimated the
cost of equity using the capital asset pricing model, which assumes
that the cost of equity for a particular company is proportional to the
systematic risk faced by that company. DOE's commercial discount rate
approach is based on the methodology described in an LBNL report, and
the distribution varies by business activity.\87\ The average rate for
consumer boilers used in commercial applications in this NOPR analysis,
across all business activity, is 10.0 percent.
---------------------------------------------------------------------------
\86\ Damodaran Online, Data Page: Costs of Capital by Industry
Sector (2022) (Available at: pages.stern.nyu.edu/~adamodar/) (Last
accessed May 3, 2023).
\87\ Fujita, K. Sydny. Commercial, Industrial, and Institutional
Discount Rate Estimation for Efficiency Standards Analysis: Sector-
Level Data 1998-2022. 2023. (Available at: eta-publications.lbl.gov/publications/commercial-industrial-and-2) (Last accessed May 3,
2023).
---------------------------------------------------------------------------
See chapter 8 of this NOPR TSD for further details on the
development of consumer and commercial discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
To accurately estimate the share of consumers that would be
affected by a potential energy conservation standard at a particular
efficiency level, DOE's LCC analysis considered the projected
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy
conservation standards) in the compliance year (2030). This approach
reflects the fact that some consumers may purchase products with
efficiencies greater than the baseline levels.
To estimate the energy efficiency distribution of consumer boilers
for 2030, DOE used available shipments data by efficiency, including
previous AHRI-submitted historical shipments data, ENERGY STAR unit
shipments data, 2013-2021 HARDI shipment data, and data from the 2022
BRG Building Solutions report. To cover gaps in the available shipments
data, DOE used DOE's public CCD model database and AHRI certification
directory.
In its comments on the May 2022 Preliminary Analysis, AHRI
submitted 2021 shipment data for gas-fired hot water boilers to DOE.
AHRI stated that while there is an array of products at 85-percent AFUE
in the AHRI Directory and CCD, these products do not account for a
significant portion of current
[[Page 55166]]
shipments. (AHRI, No. 42 at p. 2) For the NOPR, DOE included these data
to supplement its fraction of 85-percent AFUE gas-fired hot water
consumer boilers.
The estimated market shares for the no-new-standards case for
consumer boilers are shown in Table IV.10.
Table IV--10 No-New-Standards Case Energy Efficiency Distributions in
2030 for Consumer Boilers
------------------------------------------------------------------------
Product class Efficiency level Distribution (%)
------------------------------------------------------------------------
Gas-fired Hot Water............. 0 13.3
1 2.5
2 10.7
3 45.4
4 7.6
Gas-fired Steam................. 0 7.6
1 1.6
Oil-fired Hot Water............. 0 7.5
1 1.9
2 1.0
Oil-fired Steam................. 0 0.8
1 0.1
------------------------------------------------------------------------
Each building in the sample was then assigned a boiler efficiency
sampled from the no-new-standards-case efficiency distribution for the
appropriate product class shown in Table IV.10. In assigning boiler
efficiencies, DOE determined that, based on the presence of well-
understood market failures (discussed at the end of this section), a
random assignment of efficiencies, with some modifications discussed
below, best accounts for consumer behavior in the consumer boilers
market. Random assignment of efficiencies reflects the full range of
consumer behaviors in this market, including consumers who make
economically beneficial decisions and consumers that, due to market
failures, do not make such economically beneficial decisions.
The LCC Monte Carlo simulations draw from the efficiency
distributions and randomly assign an efficiency to the consumer boilers
purchased by each sample household and commercial building in the no-
new-standards case. The resulting percentage shares within the sample
match the market shares in the efficiency distributions. But, as
mentioned previously, DOE considered available data in determining
whether any modifications should be made to the random assignment
methodology. First, DOE considered the 2022 AHCS survey,\88\ which
includes questions to recent purchasers of HVAC equipment regarding the
perceived efficiency of their equipment (Standard, High, and Super-High
Efficiency), as well as questions related to various household and
demographic characteristics. From these data, DOE found that households
with larger square footage exhibited a higher fraction of High or
Super-High efficiency equipment installed. DOE used the AHCS data to
adjust the efficiency distributions as follows: (1) the market share of
higher-efficiency equipment for households under 1,500 sq. ft. was
decreased by 5 percentage points; and (2) the market share of
condensing equipment for households above 2,500 sq. ft. was increased
by 5 percentage points.
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\88\ Decision Analysts, 2022 American Home Comfort Studies
(Available at: www.decisionanalyst.com/Syndicated/HomeComfort/)
(Last accessed Jan. 3, 2023).
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AHRI stated that, based on contractor survey data submitted with
its comment, a condensing boiler is nearly twice as likely to be chosen
over a non-condensing model in new construction. (AHRI, No. 42 at p. 3)
In response, DOE notes that for the preliminary analysis, DOE already
assigned a greater fraction of condensing boilers to the new
construction market. However, for the NOPR, DOE increased its fraction
of condensing boilers assigned to the new construction market further
to match the data provided in the 2022 AHRI contractor survey.
AGA, APGA, and NPGA stated that DOE should place greater emphasis
on providing an argument for the plausibility and magnitude of any
market failure related to the energy efficiency gap in its analyses.
These commenters added that for some commercial goods in particular,
there should be a presumption that market actors behave rationally,
unless DOE can provide evidence or argument to the contrary. (AGA,
APGA, and NPGA, No. 38 at p. 4)
In contrast to the preceding comments, NYSERDA stated that DOE's
assignment of boiler efficiency in the no-new-standards case, using
State-level market data in conjunction with the 2015 RECS and the 2019
American Home Comfort Study, is thorough and robust and that DOE has
appropriately used its wide discretion in this matter to conduct a
reasonable and rigorous analysis of consumer purchasing decisions.
(NYSERDA, No. 33 at p. 3) The Joint Commenters also expressed the view
that DOE's assignment of efficiency levels in the no-new-standards case
reasonably reflects actual consumer behavior and that the Department's
assignment of boiler efficiency in the no-new-standards case is not
entirely random. Specifically, the Joint Commenters stated that DOE
used State-level market data to preferentially assign higher-efficiency
boilers to States with higher fractions of high-efficiency boiler
shipments, and within each State, DOE used the 2015 RECS and the 2019
American Home Comfort Study to account for subgroups that could select
higher-efficiency boilers more often, such as homes with higher square
footage. Further, the Joint Commenters pointed out that there are
various market failures, as well as aspects of consumer preference,
that significantly impact how products are chosen by consumers, and
there are often misaligned incentives in rental properties, where the
landlord purchases and installs the boiler while the renter is
responsible for paying the utility bill. Additionally, the Joint
Commenters stated that information about the purchase price,
installation cost, and projected energy costs of boilers is not always
transparent, so consumers are likely to make decisions that do not
result in the highest net present value for their specific scenario.
(Joint Commenters, No. 35 at p. 3)
In response, for this NOPR, DOE continued to assign boiler
efficiency to households in the no-new-standards case in two steps,
first at the State level and then at the building-specific level.
[[Page 55167]]
However, DOE's approach was modified to include other household
characteristics. The market share of each efficiency level at the State
level is based on historical shipments data (from the 2012 AHRI and
2013-2021 HARDI data) and to assign the efficiency at the building-
specific level, DOE carefully considered any available data that might
improve assignment of boiler efficiency in the LCC analysis. First, DOE
examined the 2013-2021 HARDI data of gas boiler input capacity by
efficiency level and region. DOE did not find a significant correlation
between input capacity and condensing boiler market share in a given
region, a correlation which might be expected a priori since buildings
with larger boiler input capacity are more likely to be larger and have
greater energy consumption. DOE next considered the Gas Technology
Institute (GTI) data for 21 Illinois households, which included the
efficiency of the boiler (AFUE), size of the boiler (input capacity),
square footage of the house, and annual energy use.\89\ Recognizing the
relatively small sample size, DOE notes that these data exhibit no
significant correlations between boiler efficiency and other household
characteristics (with most boiler installations in this sample being
non-condensing boilers with high energy use). DOE also considered other
data of boiler efficiency compared to household characteristics for
other parts of the country, including the NEEA Database and permit
data.\90\ These data also suggest fairly weak correlation between
boiler efficiency and household characteristics or economic factors.
Finally, DOE considered the 2022 AHCS survey data. From these data, DOE
did find a statistically significant correlation: Households with
larger square footage exhibited a higher fraction of High or Super-High
efficiency equipment installed.
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\89\ Gas Technology Institute (GTI), Empirical Analysis of
Natural Gas Furnace Sizing and Operation, GTI-16/0003 (Nov. 2016)
(Available at: www.regulations.gov/document/EERE-2014-BT-STD-0031-0309) (Last accessed Jan. 3, 2023).
\90\ See neea.org/data/residential-building-stock-assessment
(Last accessed Jan. 3, 2023).
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While DOE acknowledges that economic factors may play a role when
consumers, commercial building owners, or builders decide on what type
of boiler to install, assignment of boiler efficiency for a given
installation, based solely on economic measures such as life-cycle cost
or simple payback period, most likely would not fully and accurately
reflect actual real-world installations. There are a number of market
failures discussed in the economics literature that illustrate how
purchasing decisions with respect to energy efficiency are unlikely to
be perfectly correlated with energy use, as described below. DOE
maintains that the method of assignment, which is in part random, is a
reasonable approach. It simulates behavior in the boiler market, where
market failures result in purchasing decisions not being perfectly
aligned with economic interests, and it does so more realistically than
relying only on apparent cost-effectiveness criteria derived from the
limited information in CBECS or RECS. DOE further emphasizes that its
approach does not assume that all purchasers of boilers make
economically irrational decisions (i.e., the lack of a correlation is
not the same as a negative correlation). As part of the random
assignment, some homes or buildings with large heating loads will be
assigned higher-efficiency boilers, and some homes or buildings with
particularly low heating loads will be assigned baseline boilers, which
aligns with the available data. By using this approach, DOE
acknowledges the uncertainty inherent in the data and minimizes any
bias in the analysis by using random assignment, as opposed to assuming
certain market conditions that are unsupported by the available
evidence.
The following discussion provides more detail about the various
market failures that affect consumer boiler purchases. First, consumers
are motivated by more than simple financial trade-offs. There are
consumers who are willing to pay a premium for more energy-efficient
products because they are environmentally conscious.\91\ There are also
several behavioral factors that can influence the purchasing decisions
of complicated multi-attribute products, such as boilers. For example,
consumers (or decision makers in an organization) are highly influenced
by choice architecture, defined as the framing of the decision, the
surrounding circumstances of the purchase, the alternatives available,
and how they are presented for any given choice scenario.\92\ The same
consumer or decision maker may make different choices depending on the
characteristics of the decision context (e.g., the timing of the
purchase, competing demands for funds), which have nothing to do with
the characteristics of the alternatives themselves or their prices.
Consumers or decision makers also face a variety of other behavioral
phenomena including loss aversion, sensitivity to information salience,
and other forms of bounded rationality.\93\ Thaler, who won the Nobel
Prize in Economics in 2017 for his contributions to behavioral
economics, and Sunstein point out that these behavioral factors are
strongest when the decisions are complex and infrequent, when feedback
on the decision is muted and slow, and when there is a high degree of
information asymmetry.\94\ These characteristics describe almost all
purchasing situations of appliances and equipment, including boilers.
The installation of a new or replacement boiler is done very
infrequently, as evidenced by the mean lifetime of 24.6 years for
boilers. Additionally, it would take at least one full heating season
for any impacts on operating costs to be fully apparent. Further, if
the purchaser of the boiler is not the entity paying the energy costs
(e.g., a building owner and tenant), there may be little to no feedback
on the purchase. Additionally, there are systematic market failures
that are likely to contribute further complexity to how products are
chosen by consumers, as explained in the following paragraphs.
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\91\ Ward, D.O., Clark, C.D., Jensen, K.L., Yen, S.T., &
Russell, C.S. (2011): ``Factors influencing willingness-to pay for
the ENERGY STAR[supreg] label,'' Energy Policy, 39(3), 1450-1458
(Available at: www.sciencedirect.com/science/article/abs/pii/S0301421510009171) (Last accessed Jan. 3, 2023).
\92\ Thaler, R.H., Sunstein, C.R., and Balz, J.P. (2014),
``Choice Architecture'' in The Behavioral Foundations of Public
Policy, Eldar Shafir (ed).
\93\ Thaler, R.H., and Bernartzi, S. (2004), ``Save More
Tomorrow: Using Behavioral Economics in Increase Employee Savings,''
Journal of Political Economy 112(1), S164-S187. See also Klemick,
H., et al. (2015) ``Heavy-Duty Trucking and the Energy Efficiency
Paradox: Evidence from Focus Groups and Interviews,'' Transportation
Research Part A: Policy & Practice, 77, 154-166. (providing evidence
that loss aversion and other market failures can affect otherwise
profit-maximizing firms).
\94\ Thaler, R.H., and Sunstein, C.R. (2008), Nudge: Improving
Decisions on Health, Wealth, and Happiness. New Haven, CT: Yale
University Press.
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The first of these market failures--the split-incentive or
principal-agent problem--is likely to affect boilers more than many
other types of appliances. The principal-agent problem is a market
failure that results when the consumer that purchases the equipment
does not internalize all of the costs associated with operating the
equipment. Instead, the user of the product, who has no control over
the purchase decision, pays the operating costs. There is a high
likelihood of split-incentive problems in the case of rental properties
where the landlord makes the choice of what boiler to install, whereas
the renter is responsible for paying energy bills. In the LCC sample,
about 30 percent of households with a boiler are renters. These
fractions are significantly higher for low-income households (see
section IV.I of this document). In new construction, builders influence
the type of boiler used in many homes but
[[Page 55168]]
do not pay operating costs. Finally, contractors install a large share
of boilers in replacement situations, and they can exert a high degree
of influence over the type of boiler purchased by suggesting certain
designs or models for the replacement.
In addition to the split-incentive problem, there are other market
failures that are likely to affect the choice of boiler efficiency made
by consumers. For example, emergency replacements of essential
equipment such as boilers are strongly biased toward like-for-like
replacement (i.e., replacing the non-functioning equipment with a
similar or identical product). Time is a constraining factor during
emergency replacements and consumers may not consider the full range of
available options on the market, despite their availability. The
consideration of alternative product options is far more likely for
planned replacements and installations in new construction.
Additionally, Davis and Metcalf \95\ conducted an experiment
demonstrating that the nature of the information available to consumers
from EnergyGuide labels posted on air conditioning equipment results in
an inefficient allocation of energy efficiency across households with
different usage levels. Their findings indicate that households are
likely to make decisions regarding the efficiency of the climate-
control equipment of their homes that do not result in the highest net
present value for their specific usage pattern (i.e., their decision is
based on imperfect information and, therefore, is not necessarily
optimal). Also, most consumers did not properly understand the labels
(specifically whether energy consumption and cost estimates were
national averages or specific to their State). As such, consumers did
not make the most informed decisions.
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\95\ Davis, L.W., and G.E. Metcalf (2016): ``Does better
information lead to better choices? Evidence from energy-efficiency
labels,'' Journal of the Association of Environmental and Resource
Economists, 3(3), 589-625 (Available at: www.journals.uchicago.edu/doi/full/10.1086/686252) (Last accessed Jan. 3, 2023).
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In part because of the way information is presented, and in part
because of the way consumers process information, there is also a
market failure consisting of a systematic bias in the perception of
equipment energy usage, which can affect consumer choices. Attari,
Krantz, and Weber \96\ show that consumers tend to underestimate the
energy use of large energy-intensive appliances, but overestimate the
energy use of small appliances. Therefore, it is likely that consumers
systematically underestimate the energy use associated with boilers,
resulting in less cost-effective boiler purchases.
---------------------------------------------------------------------------
\96\ Attari, S.Z., M.L. DeKay, C.I. Davidson, and W. Bruine de
Bruin (2010): ``Public perceptions of energy consumption and
savings.'' Proceedings of the National Academy of Sciences 107(37),
16054-16059 (Available at: www.pnas.org/content/107/37/16054) (Last
accessed Jan. 3, 2023).
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These market failures affect a sizeable share of the consumer
population. A study by Houde \97\ indicates that there is a significant
subset of consumers that appear to purchase appliances without taking
into account their energy efficiency and operating costs at all.
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\97\ Houde, S. (2018): ``How Consumers Respond to Environmental
Certification and the Value of Energy Information,'' The RAND
Journal of Economics, 49 (2), 453-477 (Available at:
onlinelibrary.wiley.com/doi/full/10.1111/1756-2171.12231) (Last
accessed Jan. 3, 2023).
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There are market failures relevant to boilers installed in
commercial applications as well. It is often assumed that because
commercial and industrial customers are businesses that have trained or
experienced individuals making decisions regarding investments in cost-
saving measures, some of the commonly observed market failures present
in the general population of residential customers should not be as
prevalent in a commercial setting. However, there are many
characteristics of organizational structure and historic circumstance
in commercial settings that can lead to underinvestment in energy
efficiency.
First, a recognized problem in commercial settings is the
principal-agent problem, where the building owner (or building
developer) selects the equipment and the tenant (or subsequent building
owner) pays for energy costs.98 99 Indeed, more than a
quarter of commercial buildings in the CBECS 2018 sample are occupied
at least in part by a tenant, not the building owner (indicating that,
in DOE's experience, the building owner likely is not responsible for
paying energy costs). Additionally, some commercial buildings have
multiple tenants. There are other similar misaligned incentives
embedded in the organizational structure within a given firm or
business that can also impact the choice of a boiler. For example, if
one department or individual within an organization is responsible for
capital expenditures (and therefore equipment selection) while a
separate department or individual is responsible for paying the energy
bills, a market failure similar to the principal-agent problem can
result.\100\ Additionally, managers may have other responsibilities and
often have other incentives besides operating cost minimization, such
as satisfying shareholder expectations, which can sometimes be focused
on short-term returns.\101\ Decision-making related to commercial
buildings is highly complex and involves gathering information from and
for a variety of different market actors. It is common to see
conflicting goals across various actors within the same organization,
as well as information asymmetries between market actors in the energy
efficiency context in commercial building construction.\102\
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\98\ Vernon, D., and Meier, A. (2012), ``Identification and
quantification of principal-agent problems affecting energy
efficiency investments and use decisions in the trucking industry,''
Energy Policy, 49, 266-273.
\99\ Blum, H. and Sathaye, J. (2010), ``Quantitative Analysis of
the Principal-Agent Problem in Commercial Buildings in the U.S.:
Focus on Central Space Heating and Cooling,'' Lawrence Berkeley
National Laboratory, LBNL-3557E (Available at: escholarship.org/uc/item/6p1525mg) (Last accessed Jan. 3, 2023).
\100\ Prindle, B., Sathaye, J., Murtishaw, S., Crossley, D.,
Watt, G., Hughes, J., and de Visser, E. (2007), ``Quantifying the
effects of market failures in the end-use of energy,'' Final Draft
Report Prepared for International Energy Agency (Available from
International Energy Agency, Head of Publications Service, 9 rue de
la Federation, 75739 Paris, Cedex 15 France).
\101\ Bushee, B. J. (1998), ``The influence of institutional
investors on myopic R&D investment behavior,'' Accounting Review,
305-333.
DeCanio, S.J. (1993), ``Barriers Within Firms to Energy
Efficient Investments,'' Energy Policy, 21(9), 906-914 (explaining
the connection between short-termism and underinvestment in energy
efficiency).
\102\ International Energy Agency (IEA). (2007). Mind the Gap:
Quantifying Principal-Agent Problems in Energy Efficiency. OECD Pub.
(Available at: www.iea.org/reports/mind-the-gap) (Last accessed Jan.
3, 2023).
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Second, the nature of the organizational structure and design can
influence priorities for capital budgeting, resulting in choices that
do not necessarily maximize profitability.\103\ Even factors as simple
as unmotivated staff or lack of priority-setting and/or a lack of a
long-term energy strategy can have a sizable effect on the likelihood
that an energy-efficient investment will be undertaken.\104\ U.S. tax
rules for
[[Page 55169]]
commercial buildings may incentivize lower capital expenditures, since
capital costs must be depreciated over many years, whereas operating
costs can be fully deducted from taxable income or passed through
directly to building tenants.\105\
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\103\ DeCanio, S.J. (1994). ``Agency and control problems in US
corporations: the case of energy-efficient investment projects,''
Journal of the Economics of Business, 1(1), 105-124.
Stole, L.A., and Zwiebel, J. (1996). ``Organizational design and
technology choice under intrafirm bargaining,'' The American
Economic Review, 195-222.
\104\ Rohdin, P., and Thollander, P. (2006). ``Barriers to and
driving forces for energy efficiency in the non-energy intensive
manufacturing industry in Sweden,'' Energy, 31(12), 1836-1844.
Takahashi, M and Asano, H (2007). ``Energy Use Affected by
Principal-Agent Problem in Japanese Commercial Office Space
Leasing,'' In Quantifying the Effects of Market Failures in the End-
Use of Energy. American Council for an Energy-Efficient Economy.
February 2007.
Visser, E and Harmelink, M (2007). ``The Case of Energy Use in
Commercial Offices in the Netherlands,'' In Quantifying the Effects
of Market Failures in the End-Use of Energy. American Council for an
Energy-Efficient Economy. February 2007.
Bjorndalen, J. and Bugge, J. (2007). ``Market Barriers Related
to Commercial Office Space Leasing in Norway,'' In Quantifying the
Effects of Market Failures in the End-Use of Energy. American
Council for an Energy-Efficient Economy. February 2007.
Schleich, J. (2009). ``Barriers to energy efficiency: A
comparison across the German commercial and services sector,''
Ecological Economics, 68(7), 2150-2159.
Muthulingam, S., et al. (2013), ``Energy Efficiency in Small and
Medium-Sized Manufacturing Firms,'' Manufacturing & Service
Operations Management, 15(4), 596-612 (Finding that manager
inattention contributed to the non-adoption of energy efficiency
initiatives).
Boyd, G.A., Curtis, E.M. (2014), ``Evidence of an `energy
management gap' in US manufacturing: Spillovers from firm management
practices to energy efficiency,'' Journal of Environmental Economics
and Management, 68(3), 463-479.
\105\ Lovins, A. (1992), Energy-Efficient Buildings:
Institutional Barriers and Opportunities (Available at: rmi.org/insight/energy-efficient-buildings-institutional-barriers-and-opportunities/) (Last accessed Jan. 3, 2023).
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Third, there are asymmetric information and other potential market
failures in financial markets in general, which can affect decisions by
firms with regard to their choice among alternative investment options,
with energy efficiency being one such option.\106\ Asymmetric
information in financial markets is particularly pronounced with regard
to energy efficiency investments.\107\ There is a dearth of information
about risk and volatility related to energy efficiency investments, and
energy efficiency investment metrics may not be as visible to
investment managers,\108\ which can bias firms towards more certain or
familiar options. This market failure results not because the returns
from energy efficiency as an investment are inherently riskier, but
because information about the risk itself tends not to be available in
the same way it is for other types of investment, like stocks or bonds.
In some cases, energy efficiency is not a formal investment category
used by financial managers, and if there is a formal category for
energy efficiency within the investment portfolio options assessed by
financial managers, they are seen as weakly strategic and not seen as
likely to increase competitive advantage.\109\ This information
asymmetry extends to commercial investors, lenders, and real-estate
financing, which is biased against new and perhaps unfamiliar
technology (even though it may be economically beneficial).\110\
Another market failure known as the first-mover disadvantage can
exacerbate this bias against adopting new technologies, as the
successful integration of new technology in a particular context by one
actor generates information about cost-savings, and other actors in the
market can then benefit from that information by following suit; yet
because the first to adopt a new technology bears the risk but cannot
keep to themselves all the informational benefits, firms may
inefficiently underinvest in new technologies.\111\
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\106\ Fazzari, S.M., Hubbard, R.G., Petersen, B.C., Blinder,
A.S., and Poterba, J.M. (1988). ``Financing constraints and
corporate investment,'' Brookings Papers on Economic Activity,
1988(1), 141-206.
Cummins, J.G., Hassett, K.A., Hubbard, R.G., Hall, R.E., and
Caballero, R.J. (1994). ``A reconsideration of investment behavior
using tax reforms as natural experiments,'' Brookings Papers on
Economic Activity, 1994(2), 1-74.
DeCanio, S.J., and Watkins, W.E. (1998). ``Investment in energy
efficiency: do the characteristics of firms matter?'' Review of
Economics and Statistics, 80(1), 95-107.
Hubbard R.G. and Kashyap A. (1992). ``Internal Net Worth and the
Investment Process: An Application to U.S. Agriculture,'' Journal of
Political Economy, 100, 506-534.
\107\ Mills, E., Kromer, S., Weiss, G., and Mathew, P. A.
(2006). ``From volatility to value: analysing and managing financial
and performance risk in energy savings projects,'' Energy Policy,
34(2), 188-199.
Jollands, N., Waide, P., Ellis, M., Onoda, T., Laustsen, J.,
Tanaka, K., and Meier, A. (2010). ``The 25 IEA energy efficiency
policy recommendations to the G8 Gleneagles Plan of Action,'' Energy
Policy, 38(11), 6409-6418.
\108\ Reed, J.H., Johnson, K., Riggert, J., and Oh, A.D. (2004),
``Who plays and who decides: The structure and operation of the
commercial building market,'' U.S. Department of Energy Office of
Building Technology, State and Community Programs (Available at:
www1.eere.energy.gov/buildings/publications/pdfs/commercial_initiative/who_plays_who_decides.pdf) (Last accessed Jan.
3, 2023).
\109\ Cooremans, C. (2012). ``Investment in energy efficiency:
do the characteristics of investments matter?'' Energy Efficiency,
5(4), 497-518.
\110\ Lovins 1992, op. cit. The Atmospheric Fund (2017), Money
on the table: Why investors miss out on the energy efficiency market
(Available at: taf.ca/publications/money-table-investors-energy-
efficiency-market/) (Last accessed Jan. 3, 2023).
\111\ Blumstein, C. and Taylor, M. (2013), Rethinking the
Energy-Efficiency Gap: Producers, Intermediaries, and Innovation.
Energy Institute at Haas Working Paper 243 (Available at:
haas.berkeley.edu/wp-content/uploads/WP243.pdf) (Last accessed Jan.
3, 2023).
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In sum, the commercial and industrial sectors face many market
failures that can result in an under-investment in energy efficiency.
This means that discount rates implied by hurdle rates \112\ and
required payback periods of many firms are higher than the appropriate
cost of capital for the investment.\113\ The preceding arguments for
the existence of market failures in the commercial and industrial
sectors are corroborated by empirical evidence. One study in particular
showed evidence of substantial gains in energy efficiency that could
have been achieved without negative repercussions on profitability, but
the investments had not been undertaken by firms.\114\ The study found
that multiple organizational and institutional factors caused firms to
require shorter payback periods and higher returns than the cost of
capital for alternative investments of similar risk. Another study
demonstrated similar results with firms requiring very short payback
periods of 1-2 years in order to adopt energy-saving projects, implying
hurdle rates of 50 to 100 percent, despite the potential economic
benefits.\115\ A number of other case studies similarly demonstrate the
existence of market failures preventing the adoption of energy-
efficient technologies in a variety of commercial sectors around the
world, including office buildings,\116\ supermarkets,\117\ and the
electric motor market.\118\
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\112\ A hurdle rate is the minimum rate of return on a project
or investment required by an organization or investor. It is
determined by assessing capital costs, operating costs, and an
estimate of risks and opportunities.
\113\ DeCanio 1994, op. cit.
\114\ DeCanio, S.J. (1998). ``The Efficiency Paradox:
Bureaucratic and Organizational Barriers to Profitable Energy-Saving
Investments,'' Energy Policy, 26(5), 441-454.
\115\ Andersen, S.T., and Newell, R.G. (2004). ``Information
programs for technology adoption: the case of energy-efficiency
audits,'' Resource and Energy Economics, 26, 27-50.
\116\ Prindle 2007, op. cit. Howarth, R.B., Haddad, B.M., and
Paton, B. (2000). ``The economics of energy efficiency: insights
from voluntary participation programs,'' Energy Policy, 28, 477-486.
\117\ Klemick, H., Kopits, E., Wolverton, A. (2017). ``Potential
Barriers to Improving Energy Efficiency in Commercial Buildings: The
Case of Supermarket Refrigeration,'' Journal of Benefit-Cost
Analysis, 8(1), 115-145.
\118\ de Almeida, E.L.F. (1998), ``Energy efficiency and the
limits of market forces: The example of the electric motor market in
France'', Energy Policy, 26(8), 643-653.
Xenergy, Inc. (1998), United States Industrial Electric Motor
Systems Market Opportunity Assessment (Available at: www.energy.gov/sites/default/files/2014/04/f15/mtrmkt.pdf) (Last accessed Jan. 3,
2023).
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The existence of market failures in the residential and commercial
sectors is well supported by the economics literature and by a number
of case studies. If DOE developed an efficiency distribution that
assigned boiler efficiency in the no-new-standards case solely
according to energy use or economic considerations such as life-cycle
cost or payback period, the resulting distribution of efficiencies
[[Page 55170]]
within the building sample would not reflect any of the market failures
or behavioral factors above. Thus, DOE concludes such a distribution
would not be representative of the consumer boiler market. Further,
even if a specific household/building/organization is not subject to
the market failures above, the purchasing decision of boiler efficiency
can be highly complex and influenced by a number of factors not
captured by the building characteristics available in the RECS or CBECS
samples. These factors can lead to households or building owners
choosing a boiler efficiency that deviates from the efficiency
predicted using only energy use or economic considerations such as
life-cycle cost or payback period (as calculated using the information
from RECS 2015 or CBECS 2018). However, DOE intends to investigate this
issue further, and it welcomes suggestions as to how it might improve
its assignment of boiler efficiency in its analyses.
See chapter 8 of the NOPR TSD for further information on the
derivation of the efficiency distributions.
9. Payback Period Analysis
The payback period is the amount of time (expressed in years) it
takes the consumer to recover the additional installed cost of more-
efficient products, compared to baseline products, through energy cost
savings. Payback periods that exceed the life of the product mean that
the increased total installed cost is not recovered in reduced
operating expenses.
The inputs to the PBP calculation for each efficiency level are the
change in total installed cost of the product and the change in the
first-year annual operating expenditures relative to the baseline. DOE
refers to this as a ``simple PBP'' because it does not consider changes
over time in operating cost savings. The PBP calculation uses the same
inputs as the LCC analysis when deriving first-year operating costs.
As noted previously, EPCA 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 first year's energy savings resulting from the standard,
as calculated under the applicable test procedure. (42 U.S.C.
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE
determined the value of the first year's energy savings by calculating
the energy savings in accordance with the applicable DOE test
procedure, and multiplying those savings by the average energy price
projection for the year in which compliance with the amended standards
would be required.
G. Shipments Analysis
DOE uses projections of annual product shipments to calculate the
national impacts of potential amended or new energy conservation
standards on energy use, NPV, and future manufacturer cash flows.\119\
The shipments model takes an accounting approach, tracking market
shares of each product class and the vintage of units in the stock.
Stock accounting uses product shipments as inputs to estimate the age
distribution of in-service product stocks for all years. The age
distribution of in-service product stocks is a key input to
calculations of both the NES and NPV, because operating costs for any
year depend on the age distribution of the stock.
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\119\ DOE uses data on manufacturer shipments as a proxy for
national sales, as aggregate data on sales are lacking. In general,
one would expect a close correspondence between shipments and sales.
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DOE developed shipment projections based on historical data and an
analysis of key market drivers for each product. DOE estimated consumer
boiler shipments by projecting shipments in three market segments: (1)
replacement of existing consumer boilers; (2) new housing; and (3) new
owners in buildings that did not previously have a consumer boiler or
existing boiler owners that are adding an additional consumer
boiler.\120\
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\120\ The new owners primarily consist of households that add or
switch to a different space heating option during a major remodel.
Because DOE calculates new owners as the residual between its
shipments model compared to historical shipments, new owners also
include shipments that switch away from boiler product class to
another.
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To project boiler replacement shipments, DOE developed retirement
functions from boiler lifetime estimates and applied them to the
existing products in the housing stock, which are tracked by vintage.
DOE calculated replacement shipments using historical shipments and the
lifetime estimates. Annual historical shipments sources are: (1)
Appliance Magazine; \121\ (2) multiple AHRI data submittals (2003-
2012); (3) BRG Building Solutions 2022 report; (4) ENERGY STAR unit
shipments data; \122\ (5) 2013-2021 HARDI shipments; and (6) the 2016
Consumer Boiler Final Rule. In addition, DOE adjusted replacement
shipments by taking into account demolitions, using the estimated
changes to the housing stock from AEO 2023.
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\121\ Appliance Magazine. Appliance Historical Statistical
Review: 1954-2012. 2014. UBM Canon.
\122\ ENERGY STAR, Unit Shipments data 2010-2021. multiple
reports (Available at: www.energystar.gov/partner_resources/products_partner_resources/brand_owner_resources/unit_shipment_data)
(Last accessed Jan. 3, 2023).
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To project shipments to the new housing market, DOE used the AEO
2023 housing starts and commercial building floor space projections to
estimate future numbers of new homes and commercial building floor
space. DOE then used data from U.S. Census Characteristics of New
Housing,123 124 Home Innovation Research Labs Annual Builder
Practices Survey,\125\ RECS 2020 housing characteristics data, AHS
2021, and CBECS 2018 building characteristics data to estimate new
construction boiler saturations by consumer boiler product class.
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\123\ U.S. Census, Characteristics of New Housing from 1999-2021
(Available at: www.census.gov/construction/chars/) (Last accessed
Jan. 3, 2023).
\124\ U.S. Census, Characteristics of New Housing (Multi-Family
Units) from 1973-2021 (Available at: www.census.gov/construction/chars/mfu.html) (Last accessed Jan. 3, 2023).
\125\ Home Innovation Research Labs (independent subsidiary of
the National Association of Home Builders (NAHB). Annual Builder
Practices Survey (2015-2019) (Available at: www.homeinnovation.com/trends_and_reports/data/new_construction) (Last accessed Jan. 3,
2023).
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DOE estimated shipments to the new owners market based on the
residual shipments from the calculated replacement and new construction
shipments compared to historical shipments in the last five years
(2017-2021 for this NOPR). DOE compared this with data from Decision
Analysts' 2002 to 2022 American Home Comfort Study \126\ and 2022 BRG
data, which showed similar historical fractions of new owners. DOE
assumed that the new owner fraction in 2030 would be the be equal to
the 10-year average of the historical data (2012-2021) and then
decrease to zero by the end of the analysis period (2059). If the
resulting fraction of new owners is negative, DOE assumed that it was
primarily due to equipment switching or non-replacement and added this
number to replacements (thus reducing the replacements value).
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\126\ Decision Analysts, 2002, 2004, 2006, 2008, 2010, 2013,
2016, 2019, and 2022 American Home Comfort Study (Available at:
www.decisionanalyst.com/Syndicated/HomeComfort/) (Last accessed Jan.
3, 2023).
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BWC commented that DOE's projections may be overstated because they
do not appear to account for how State and local policies will impact
the shipments of boilers. As an example, BWC stated that proposed
actions by the California Air Resources Board, as well as a few
California Air Districts, will push the market away from gas-fired
boilers. In addition, BWC stated that there is similar activity in some
of the Northeastern States, such as the New
[[Page 55171]]
Jersey Department of Environmental Protection's all-electric boiler
proposal and New York City's all-electric ordinance. (BWC, No. 39 at
pp. 2-3) WMT noted that the market is increasingly transitioning
towards higher efficiencies without Federal prompting and that this
transition is occurring in specific areas and regions where higher-
efficiency boilers provide the most financial benefit and the
application allows for it. (WMT, No. 32 at p. 11)
For the preliminary analysis, assumptions regarding future policies
encouraging higher-efficiency equipment, electrification of households,
and electric boilers were speculative at that time, so such policies
were not incorporated into the shipments projection. Current
requirements in many parts of California for low NOX boilers
could increase the cost of these boilers, but it is currently unclear
if it will be enough to drive shipments towards other space heating
options (including heat pumps). Thus, it is very uncertain to what
extent installations of heat pumps would increase at the expense of
consumer boiler shipments. DOE agrees that ongoing electrification
efforts at various levels of government could impact consumer decisions
to switch away from fossil-fuel appliances such as boilers (including
recently passed Federal rebates and incentives \127\ and proposed 2030
emission standards from the California Air Resource Board \128\), but
the Department has limited data on the potential fraction of shipments
that might switch from gas- or oil-fired boilers to electric space
heating options in the no-new-standards case. For the NOPR analysis,
however, DOE was able to refine its shipments analysis and reduce the
fraction of gas-fired boilers projected in the future based on most
updated saturation data. See chapter 9 of the NOPR TSD for further
details.
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\127\ The High-Efficiency Electric Home Rebate Act (HEEHRA)
provides point-of-sale consumer rebates to enable low- and moderate-
income households to electrify their homes. HEEHRA covers 100
percent of electrification project costs (up to item-specific caps)
for low-income households and 50 percent of costs (up to item-
specific caps) for moderate-income households. The Energy Efficient
Home Improvement credit, or 25C, allows households to deduct from
their taxes up to 30 percent of the cost of upgrades to their homes,
including installing heat pumps, insulation, and importantly,
upgrading their breaker boxes to accommodate additional electric
load.
\128\ See ww2.arb.ca.gov/sites/default/files/2022-08/2022_State_SIP_Strategy.pdf; p. 101. The CARB vote that plans to ban
gas furnaces and water heaters by 2030, was not the final phase in
the process and requires State agencies to draft a rule for phasing
out gas-fueled appliances, and then the rule will be under final
consideration in 2025.
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DOE requests comments on its approach for taking into account
electrification efforts in its shipment analysis. DOE also requests
comments on other local, State, and Federal policies that may impact
the shipments projection of consumer boilers.
AGA, APGA, and NPGA stated that allowing only condensing gas
boilers would take away consumer choice. Particularly in the
replacement market and where condensing boilers cannot be installed or
are cost prohibitive, these commenters argued that consumers will
either try to repair the existing gas boiler or change out the gas
boiler with an more energy-intensive product such as an electric
boiler. (AGA, APGA, and NPGA, No. 38 at p. 3) Similarly, PB Heat stated
that increasing the minimum efficiency to condensing levels will drive
middle- and lower-income consumers to repair older equipment in order
to avoid the high cost of installing a condensing boiler. (PB Heat, No.
34 at p. 2) AHRI stated that the majority of boilers are used in
replacement installations and that these replacement locations cannot
easily be modified to meet the requirements of condensing equipment,
and in some cases, accommodation of condensing equipment is not
possible. Therefore, AHRI argued that a condensing standard could
potentially lead to increased cases of fuel switching. (AHRI, No. 40 at
p. 2)
In response, DOE agrees that a fraction of consumers could elect to
repair instead of replace their equipment due to higher efficiency
standards. The NOPR analysis accounted for the impact of increased
product price for the considered efficiency levels on shipments by
incorporating relative price elasticity in the shipments model. This
approach gives some weight to the operating cost savings from higher-
efficiency products. A price elasticity of demand less than zero
reflects the expectation that demand will decrease when prices
increase. To model the impact of the increase in relative price from a
particular standard level on residential boiler shipments, DOE assumed
that the shipments that do not occur represent consumers that would
repair their product rather than replace it, extending the life of the
product on average by six years in those cases.
For the NOPR, DOE evaluated the potential for switching from gas-
fired and oil-fired hot water boilers to other heating systems in
response to amended energy conservation standards. The main alternative
to hot water boilers would be installation of an electric boiler, a
forced-air furnace, a heat pump, or a mini-split heat pump. These
alternatives would require significant installation costs such as
adding ductwork or an electrical upgrade, and an electric boiler would
have very high relative energy costs. Given that the increase in
installed cost of boilers meeting the amended standards, relative to
the no-new-standards case, is small, DOE has concluded that consumer
switching away from hot water boilers due to amended standards would be
rare. Therefore, DOE did not analyze fuel switching for consumer
boilers for the NOPR.
See chapter 9 of the NOPR TSD for further information on the
development of shipments.
H. National Impact Analysis
The NIA assesses the national energy savings (NES) and the NPV from
a national perspective of total consumer costs and savings that would
be expected to result from new or amended standards at specific
efficiency levels.\129\ (``Consumer'' in this context refers to
consumers of the product being regulated.) DOE calculates the NES and
NPV for the potential standard levels considered based on projections
of annual product shipments, along with the annual energy consumption
and total installed cost data from the energy use and LCC analyses. For
the present analysis, DOE projected the energy savings, operating cost
savings, product costs, and NPV of consumer benefits over the lifetime
of consumer boilers sold from 2030 through 2059.
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\129\ The NIA accounts for impacts in the 50 States and U.S.
territories.
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DOE evaluates the impacts of new or amended standards by comparing
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each
product class in the absence of new or amended energy conservation
standards. For this projection, DOE considers historical trends in
efficiency and various forces that are likely to affect the mix of
efficiencies over time. DOE compares the no-new-standards case with
projections characterizing the market for each product class if DOE
adopted new or amended standards at specific energy efficiency levels
(i.e., the TSLs or standards cases) for that class. For the standards
cases, DOE considers how a given standard would likely affect the
market shares of products with efficiencies greater than the standard.
DOE uses a spreadsheet model to calculate the energy savings and
the national consumer costs and savings from each TSL. Interested
parties can review DOE's analyses by changing
[[Page 55172]]
various input quantities within the spreadsheet. The NIA spreadsheet
model uses typical values (as opposed to probability distributions) as
inputs.
Table IV.11 summarizes the inputs and methods DOE used for the NIA
analysis for the NOPR. Discussion of these inputs and methods follows
the table. See chapter 10 of the NOPR TSD for further details.
Table IV.11--Summary of Inputs and Methods for the National Impact
Analysis
------------------------------------------------------------------------
Inputs Method
------------------------------------------------------------------------
Shipments.................... Annual shipments from shipments model.
Compliance Date of Standard.. 2030.
Efficiency Trends............ No-new-standards case: Based on
historical data. Standards cases: Roll-
up in the compliance year and then DOE
estimated growth in shipment-weighted
efficiency in all the standards cases.
Annual Energy Consumption per Annual weighted-average values are a
Unit. function of energy use at each TSL.
Total Installed Cost per Unit Annual weighted-average values are a
function of cost at each TSL.
Incorporates projection of future product
prices based on historical data.
Annual Energy Cost per Unit.. Annual weighted-average values as a
function of the annual energy
consumption per unit and energy prices.
Repair and Maintenance Cost Based on RSMeans data and other sources.
per Unit.
Energy Price Trends.......... AEO2023 projections (to 2050) and
extrapolation thereafter.
Energy Site-to-Primary and A time-series conversion factor based on
FFC Conversion. AEO2023.
Discount Rate................ 3 percent and 7 percent.
Present Year................. 2023.
------------------------------------------------------------------------
1. Product Efficiency Trends
A key component of the NIA is the trend in energy efficiency
projected for the no-new-standards case and each of the standards
cases. Section IV.F.8 of this document describes how DOE developed an
energy efficiency distribution for the no-new-standards case (which
yields a shipment-weighted average efficiency) for each of the
considered product classes for the first full year of anticipated
compliance with an amended or new standard. To project the trend in
efficiency absent amended standards for consumer boilers over the
entire shipments projection period, DOE used available historical
shipments data and manufacturer input. The approach is further
described in chapter 10 of the NOPR TSD.
For the standards cases, DOE used a ``roll-up'' scenario to
establish the shipment-weighted efficiency for the year that standards
are assumed to become effective (2030). In this scenario, the market
shares of products in the no-new-standards case that do not meet the
standard under consideration would ``roll up'' to meet the new standard
level, and the market share of products above the standard would remain
unchanged.
To develop standards-case efficiency trends after 2030, DOE used
historical shipment data and current boiler model availability by
efficiency level (see chapter 8 of the NOPR TSD). DOE estimated growth
in shipment-weighted efficiency by assuming that the implementation of
ENERGY STAR's performance criteria and other incentives would gradually
increase the market shares of higher-efficiency consumer boilers. DOE
also took into account increased incentives for higher-efficiency
equipment and electrification efforts.
Crown and U.S. Boilers stated that they expect the growth of
condensing boiler market share to slow as the share of remaining non-
condensing boiler sales are increasingly confined to difficult
installations, as well as situations where the use of condensing
boilers makes no economic or technical sense. However, these commenters
do not agree with DOE's projected rate of growth decline, a key
parameter which would impact the calculation of benefits attributable
to an amended standard. (Crown, No. 30 at pp. 15-16; U.S. Boilers, No.
31 at pp. 16-17) AHRI expressed concern that the Department's future
shipments model is overly aggressive and suggested that the future
shipment projections should be reconsidered at the higher efficiency
levels. (AHRI, No. 40 at p. 2)
In response, DOE reviewed recent shipments trends and incentives.
Based on the latest data, DOE was able to reassess its growth in
condensing boiler shipments, which slightly decreased the projected
market share of condensing boilers for use in this NOPR as compared to
the preliminary analysis.
DOE requests comments on its approach for developing efficiency
trends beyond 2030.
2. National Energy Savings
The national energy savings analysis involves a comparison of
national energy consumption of the considered products between each
potential standards case (trial standard level (TSL)) and the 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). DOE calculated annual NES based on the difference in
national energy consumption for the no-new standards case and for each
higher-efficiency standard case. DOE estimated energy consumption and
savings based on site energy and converted the electricity consumption
and savings to primary energy (i.e., the energy consumed by power
plants to generate site electricity) using annual conversion factors
derived from AEO2023. Cumulative energy savings are the sum of the NES
for each year over the timeframe of the analysis.
Use of higher-efficiency products is sometimes associated with a
direct rebound effect, which refers to an increase in utilization of
the product due to the increase in efficiency. DOE did not find any
data on the rebound effect specific to consumer boilers. Consequently,
DOE applied a rebound effect of 10 percent for consumer boilers used in
residential applications based on studies of other residential products
and 0 percent for consumer boilers used in commercial applications. The
calculated NES at each efficiency level is, therefore, reduced by 10
percent in residential applications. DOE also included the rebound
effect in the NPV analysis by accounting for the additional net benefit
from increased consumer boiler usage, as described in section IV.H.3 of
this document.
DOE requests comments and any data on the potential for direct
rebound.
In 2011, in response to the recommendations of a committee on
[[Page 55173]]
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy
Efficiency Standards'' appointed by the National Academy of Sciences,
DOE announced its intention to use 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 which DOE explained its determination
that EIA's National Energy Modeling System (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). NEMS is a public domain,
multi-sector, partial equilibrium model of the U.S. energy sector \130\
that EIA uses to prepare its Annual Energy Outlook. The FFC factors
incorporate losses in production and delivery in the case of natural
gas (including fugitive emissions) and additional energy used to
produce and deliver the various fuels used by power plants. The
approach used for deriving FFC measures of energy use and emissions is
described in appendix 10B of the NOPR TSD.
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\130\ For more information on NEMS, refer to The National Energy
Modeling System: An Overview 2018, DOE/EIA-0383(2018) (April 2019)
(Available at: www.eia.gov/forecasts/aeo/index.cfm) (Last accessed
Jan. 3, 2023).
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3. Net Present Value Analysis
The inputs for determining the NPV of the total costs and benefits
experienced by consumers are: (1) total annual installed cost; (2)
total annual operating costs (energy costs and repair and maintenance
costs), and (3) a discount factor to calculate the present value of
costs and savings. DOE calculates net savings each year as the
difference between the no-new-standards case and each standards case in
terms of total savings in operating costs versus total increases in
installed costs. DOE calculates operating cost savings over the
lifetime of each product shipped during the projection period.
As discussed in section IV.F.1 of this document, DOE developed
consumer boiler price trends based on historical PPI data. DOE applied
the same trends to project prices for each product class at each
considered efficiency level. To evaluate the effect of uncertainty
regarding the price trend estimates, DOE investigated the impact of
different product price projections on the consumer NPV for the
considered TSLs for consumer boilers. In addition to the default
constant price trend, DOE considered two product price sensitivity
cases: (1) a high-price case based on an exponential fit of deflated
heating equipment PPI from 1980 to 2021 and (2) a low-price case based
on an exponential fit of deflated steel heating boiler PPI from 1980 to
1998 (partially extrapolated). The derivation of these price trends and
the results of these sensitivity cases are described in appendix 10C of
the NOPR TSD.
The energy cost savings are calculated using the estimated energy
savings in each year and the projected price of the appropriate form of
energy. To estimate energy prices in future years, DOE multiplied the
average regional energy prices by the projection of annual national-
average residential and commercial energy price changes in the
Reference case from AEO 2023, which has an end year of 2050. To
estimate price trends after 2050, DOE used a constant value derived
from the average value between 2046 through 2050. As part of the NIA,
DOE also analyzed scenarios that used inputs from variants of the AEO
2023 Reference case that have lower and higher economic growth. Those
cases have lower and higher energy price trends compared to the
Reference case. NIA results based on these cases are presented in
appendix 10D of the NOPR TSD.
In considering the consumer welfare gained due to the direct
rebound effect, DOE accounted for change in consumer surplus attributed
to additional cooling from the purchase of a more-efficient unit.
Overall consumer welfare is generally understood to be enhanced from
rebound (i.e., a measure of the enjoyment the boiler consumer receives
through additional heating comfort). The net consumer impact of the
rebound effect is included in the calculation of operating cost savings
in the consumer NPV results. See appendix 10E of the NOPR TSD for
details on DOE's treatment of the monetary valuation of the rebound
effect.
DOE requests comments on its approach to monetizing the impact of
the rebound effect.
In calculating the NPV, DOE multiplies the net savings in future
years by a discount factor to determine their present value. For this
NOPR, DOE estimated 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.\131\ The discount rates for the determination of NPV are in
contrast to the discount rates used in the LCC analysis, which are
designed to reflect a consumer's perspective. The 7-percent real value
is an estimate of the average before-tax rate of return to private
capital in the U.S. economy. The 3-percent real value represents the
``social rate of time preference,'' which is the rate at which society
discounts future consumption flows to their present value.
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\131\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis (Sept. 17, 2003) Section E (Available at:
obamawhitehouse.archives.gov/omb/circulars_a004_a-4/) (Last accessed
Jan. 3, 2023).
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I. Consumer Subgroup Analysis
In analyzing the potential impact of new or amended energy
conservation standards on consumers, DOE evaluates the impact on
identifiable subgroups of consumers that may be disproportionately
affected by a new or amended national standard. The purpose of a
subgroup analysis is to determine the extent of any such
disproportional impacts. DOE evaluates impacts on particular subgroups
of consumers by analyzing the LCC impacts and PBP for those particular
consumers from alternative standard levels. For this NOPR, DOE analyzed
the impacts of the considered standard levels on three subgroups: (1)
low-income households; (2) senior-only households, and (3) small
businesses. The analysis used subsets of the RECS 2015 and CBECS 2018
samples composed of households or commercial settings that meet the
criteria for the three subgroups. DOE used the LCC and PBP spreadsheet
model to estimate the impacts of the considered efficiency levels on
these subgroups. Chapter 11 in the NOPR TSD describes the consumer
subgroup analysis.
J. Manufacturer Impact Analysis
1. Overview
DOE performed an MIA to estimate the financial impacts of amended
energy conservation standards on manufacturers of consumer boilers and
to estimate the potential impacts of such standards on direct
employment and manufacturing capacity. The MIA has both quantitative
and qualitative aspects and includes analyses of projected industry
cash flows, the INPV, investments in research and development (R&D) and
manufacturing capital, and domestic manufacturing employment.
Additionally, the MIA seeks to determine how amended energy
conservation standards might affect
[[Page 55174]]
manufacturing employment, capacity, and competition, as well as how
standards contribute to overall regulatory burden. Finally, the MIA
serves to identify any disproportionate impacts on manufacturer
subgroups, including small business manufacturers.
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 include data on the
industry cost structure, unit production costs, product shipments,
gross margin percentages (i.e., manufacturer markups), and investments
in R&D and manufacturing capital required to produce compliant
products. The key GRIM outputs are the INPV, which is the sum of
industry annual cash flows over the analysis period, discounted using
the industry-weighted average cost of capital, and the impact to
domestic manufacturing employment. The model uses standard accounting
principles to estimate the impacts of more-stringent energy
conservation standards on a given industry by comparing changes in INPV
and domestic manufacturing employment between a no-new-standards case
and the various standards cases (i.e., TSLs). To capture the
uncertainty relating to manufacturer pricing strategies following
amended standards, the GRIM estimates a range of possible impacts under
different manufacturer markup scenarios.
The qualitative part of the MIA addresses manufacturer
characteristics and market trends. Specifically, the MIA considers such
factors as a potential standard's impact on manufacturing capacity,
competition within the industry, the cumulative impact of other DOE and
non-DOE regulations, and impacts on manufacturer subgroups. The
complete MIA is outlined in chapter 12 of the NOPR TSD.
DOE conducted the MIA for this rulemaking in three phases. In Phase
1 of the MIA, DOE prepared a profile of the consumer boiler
manufacturing industry based on the market and technology assessment,
preliminary manufacturer interviews, and publicly-available
information. This included a top-down analysis of consumer boiler
manufacturers that DOE used to derive preliminary financial inputs for
the GRIM (e.g., revenues; materials, labor, overhead, and depreciation
expenses; selling, general, and administrative expenses (SG&A); and R&D
expenses). DOE also used public sources of information to further
calibrate its initial characterization of the consumer boiler
manufacturing industry, including company filings of form 10-K from the
SEC,\132\ corporate annual reports, the U.S. Census Bureau's Annual
Survey of Manufactures (ASM),\133\ and reports from Dun &
Bradstreet.\134\
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\132\ U.S. Securities and Exchange Commission, Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system (Available at:
www.sec.gov/edgar/search/) (Last accessed Jan. 3, 2023).
\133\ U.S. Census Bureau, Annual Survey of Manufactures.
``Summary Statistics for Industry Groups and Industries in the U.S
(2021)'' (Available at: www.census.gov/data/tables/time-series/econ/asm/2018-2021-asm.html) (Last accessed Jan. 3, 2023).
\134\ The Dun & Bradstreet Hoovers login is available at:
app.dnbhoovers.com (Last accessed Jan. 3, 2023).
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In Phase 2 of the MIA, DOE prepared a framework industry cash-flow
analysis to quantify the potential impacts of amended energy
conservation standards. The GRIM uses several factors to determine a
series of annual cash flows starting with the announcement of the
standard and extending over a 30-year period following the compliance
date of the standard. These factors include annual expected revenues,
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures.
In general, energy conservation standards can affect manufacturer cash
flow in three distinct ways: (1) creating a need for increased
investment; (2) raising production costs per unit, and (3) altering
revenue due to higher per-unit prices and changes in sales volumes.
In addition, during Phase 2, DOE developed interview guides to
distribute to manufacturers of consumer boilers in order to develop
other key GRIM inputs, including product and capital conversion costs,
and to gather additional information on the anticipated effects of
energy conservation standards on revenues, direct employment, capital
assets, industry competitiveness, and subgroup impacts.
In Phase 3 of the MIA, DOE conducted structured, detailed
interviews with representative manufacturers. During these interviews,
DOE discussed engineering, manufacturing, procurement, and financial
topics to validate assumptions used in the GRIM and to identify key
issues or concerns. See section IV.J.3 of this document for a
description of the key issues raised by manufacturers during the
interviews. As part of Phase 3, DOE also evaluated subgroups of
manufacturers that may be disproportionately impacted by amended
standards or that may not be accurately represented by the average cost
assumptions used to develop the industry cash-flow analysis. Such
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers, niche players, and/or manufacturers exhibiting a
cost structure that largely differs from the industry average. DOE
identified two manufacturer subgroups for a separate impact analysis:
(1) small business manufacturers and (2) OEMs that own domestic foundry
assets. The small business subgroup is discussed in section VI.B,
``Review under the Regulatory Flexibility Act,'' and the OEMs that own
domestic foundry assets subgroup is discussed in section V.B.2.d of
this document and in chapter 12 of the NOPR TSD.
2. Government Regulatory Impact Model and Key Inputs
DOE uses the GRIM to quantify the changes in cash flow due to
amended standards that result in a higher or lower industry value. The
GRIM uses a standard, annual discounted cash-flow analysis that
incorporates manufacturer costs, markups, shipments, and industry
financial information as inputs. The GRIM models changes in costs,
distribution of shipments, investments, and manufacturer margins that
could result from amended energy conservation standards. The GRIM
spreadsheet uses the inputs to arrive at a series of annual cash flows,
beginning in 2023 (the base year of the analysis) and continuing to
2059. DOE calculated INPVs by summing the stream of annual discounted
cash flows during this period. For manufacturers of consumer boilers,
DOE used a real discount rate of 9.7 percent, which was derived from
industry financials and then modified according to feedback received
during manufacturer interviews.
The GRIM calculates cash flows using standard accounting principles
and compares changes in INPV between the no-new-standards case and each
standards case. The difference in INPV between the no-new-standards
case and a standards case represents the financial impact of the
amended energy conservation standard on manufacturers. As discussed
previously, DOE developed critical GRIM inputs using a number of
sources, including publicly-available data, results of the engineering
analysis, results of the shipments analysis, and information gathered
from industry stakeholders during the course of manufacturer
interviews. The GRIM results are presented in section V.B.2. Additional
details about the GRIM, the discount rate, and other financial
parameters can be found in chapter 12 of the NOPR TSD.
[[Page 55175]]
a. Manufacturer Production Costs
Manufacturing more-efficient products is typically more expensive
than manufacturing baseline products due to the use of more complex
components, which are typically more costly than baseline components.
The changes in the MPCs of covered products can affect the revenues,
gross margins, and cash flow of the industry. For this rulemaking, DOE
relied on the efficiency-level approach. This approach ensures that the
efficiency levels considered in the engineering analysis are attainable
using technologies which are commercially available and viable for
consumer boilers. As such, DOE was able to conduct teardown analyses on
consumer boilers which meet each efficiency level, and, thus, ascertain
a list of representative design options which manufacturers are most
likely to employ in order to achieve these efficiencies. For a complete
description of the MPCs, see chapter 5 of the NOPR TSD or section IV.C
of this document.
b. Shipments Projections
The GRIM estimates manufacturer revenues based on total unit
shipment projections and the distribution of those shipments 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 projections derived from the
shipments analysis from 2023 (the base year) to 2059 (the end year of
the analysis period). See chapter 9 of the NOPR TSD or section IV.G of
this document for additional details.
c. Product and Capital Conversion Costs
Amended energy conservation standards could cause manufacturers to
incur 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
investments in research, development, testing, marketing, and other
non-capitalized costs necessary to make product designs comply with
amended energy conservation standards. Capital conversion costs are
investments in property, plant, and equipment necessary to adapt or
change existing production facilities such that new compliant product
designs can be fabricated and assembled.
DOE based its estimates of the product conversion costs necessary
to meet the varying efficiency levels on information from manufacturer
interviews, design pathways analyzed in the engineering analysis, and
market share and model count information. During confidential
interviews, DOE asked manufacturers to estimate the redesign effort and
engineering resources required at various efficiency levels to quantify
the product conversion costs. Manufacturer data were aggregated to
better reflect the industry as a whole and to protect confidential
information. DOE scaled product conversion costs by the number of
models that would require redesign to account for the portion of
companies that were not interviewed. Such approach allows DOE to arrive
at an industry-wide conversion cost estimate.
DOE relied on information derived from manufacturer interviews and
the engineering analysis to evaluate the level of capital conversion
costs manufacturers would likely incur at the analyzed efficiency
levels. During interviews, manufacturers provided estimates and
descriptions of the required tooling and plant changes that would be
necessary to upgrade product lines to meet the various efficiency
levels. DOE used estimates of capital expenditure requirements derived
from the product teardown analysis and engineering analysis to validate
manufacturer feedback. For non-condensing efficiency levels above
baseline, DOE estimated that manufacturers would require new tooling
for some new casting designs. For efficiency levels requiring
condensing technology, DOE estimated that manufacturers with a
significant volume of non-condensing gas-fired hot water boilers would
incur large capital conversion costs to develop additional assembly
lines for condensing boilers. Based on manufacturer feedback, DOE
assumed manufacturers would continue to source condensing heat
exchangers and would not shift to in-house manufacturing of condensing
heat exchangers. DOE estimated industry capital conversion costs by
extrapolating the interviewed manufacturers' capital conversion costs
for each product class to account for the market share of companies
that were not interviewed.
In general, DOE assumes all conversion-related investments occur
between the year of publication of the final rule and the year by which
manufacturers must comply with the amended standard. The conversion
cost figures used in the GRIM can be found in section V.B.2 of this
document. For additional information on the estimated capital and
product conversion costs, see chapter 12 of the NOPR TSD.
d. Manufacturer Markup Scenarios
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 manufacturer markups to the MPCs
estimated in the engineering analysis for each product class and
efficiency level. Modifying these manufacturer markups in the standards
case yields different sets of impacts on manufacturers. For the MIA,
DOE modeled two standards-case scenarios to represent uncertainty
regarding the potential impacts on prices and profitability for
manufacturers following the implementation of amended energy
conservation standards: (1) a preservation of gross margin percentage
scenario; and (2) a preservation of operating profit scenario. These
scenarios lead to different manufacturer markup values that, when
applied to the MPCs, result in varying revenue and cash-flow impacts on
manufacturers.
Under the preservation of gross margin percentage scenario, DOE
applied a single uniform ``gross margin percentage'' markup across all
product classes and all efficiency levels (including baseline
efficiency), 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 manufacturer production costs
increase with efficiency, this scenario implies that the per-unit
dollar profit will increase. DOE assumed a gross margin percentage of
29 percent for all product classes.\135\ Manufacturers tend to believe
it is optimistic to assume that they would be able to maintain the same
gross margin percentage as their production costs increase,
particularly for minimally-efficient products. Therefore, this scenario
represents a high bound of industry profitability under an amended
energy conservation standard.
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\135\ The gross margin percentage of 29 percent is based on a
manufacturer markup of 1.41.
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Under the preservation of operating profit scenario, as the cost of
production goes up under a standards case, manufacturers are generally
required to reduce their manufacturer markups to a level that maintains
base-case operating profit. DOE implemented this scenario
[[Page 55176]]
in the GRIM by lowering the manufacturer markups at each TSL to yield
approximately the same earnings before interest and taxes in the
standards case as in the no-new-standards case in the year after the
expected compliance date of the amended energy conservation standards.
The implicit assumption behind this scenario is that the industry can
only maintain its operating profit in absolute dollars after the
standard takes effect. Therefore, operating profit in percentage terms
is reduced between the no-new-standard case and the standards cases.
This scenario represents a lower bound of industry profitability under
an amended energy conservation standard.
A comparison of industry financial impacts under the two
manufacturer markup scenarios is presented in section V.B.2 of this
document.
3. Manufacturer Interviews
DOE interviewed manufacturers representing approximately 45 percent
of the domestic consumer boiler shipments. Participants included a
cross-section of domestic-based and foreign-based OEMs. Participants
included manufacturers with a wide range of market shares and product
class offerings.
In interviews, DOE asked manufacturers to describe their major
concerns regarding potential more-stringent energy conservation
standards for consumer boilers. The following section highlights
manufacturer concerns that helped inform the projected potential
impacts of an amended standard on the industry. Manufacturer interviews
are conducted by DOE consultants under non-disclosure agreements
(NDAs), so the Department does not document these discussions in the
same way that it does public comments, in terms of providing comment
summaries and DOE's responses throughout the rest of this document.
a. The Replacement Market
In interviews, several manufacturers discussed the potential
challenges and benefits of moving to a condensing standard for consumer
boilers.
Several manufacturers estimated that, on average, between 80 to 90
percent of consumer boiler sales are through the replacement market,
rather than the new construction channel. They noted that since
condensing and non-condensing products require different venting
infrastructure, a condensing standard could lead to higher installation
costs for the consumer, as well as technical and/or safety challenges
with installation and operation, in certain cases. Some manufacturers
stated that since the current consumer boiler market is structured
around the legacy venting infrastructures that exist in most homes,
raising standards on gas-fired hot water boilers above 84-percent AFUE
would be very disruptive to the market.
Other manufacturers noted that while it may be expensive to replace
a non-condensing boiler with a condensing boiler in some instances,
there are pathways to complete installations safely. They requested
that DOE account for the higher installation costs in analyses, rather
than creating separate product classes for non-condensing consumer
boilers.
4. Discussion of MIA Comments
AHRI noted that small OEMs will be impacted by this rulemaking,
especially with respect to cast-iron boilers. (AHRI, No. 40 at p. 6)
AHRI recommended that the Department should give more weight to the
consideration of State-level impact on consumers and small
manufacturers instead of the use of a national average value for those
subgroups. (AHRI, No. 40 at p. 2)
In response, DOE evaluated subgroups of manufacturers that may be
disproportionately impacted by amended standards, including small
business manufacturers. DOE identified three small, domestic OEMs of
covered consumer boilers. Regarding the impact on small manufacturers,
see section VI.B of this document for a discussion of the potential
impact of amended energy conservation standards for consumer boilers on
the three small OEMs identified. The distributional impacts of a
potential standard, which capture State-level differences, are part of
the LCC analysis (see section IV.F of this document). Specific
subgroups, including small businesses, are part of the subgroup
analysis (see section IV.I of this document). The aggregate national
impacts are part of the NIA (see section IV.H of this document). All of
these analyses are considered by DOE when making a determination of
economic justification, per EPCA requirements.
In response to the May 2022 Preliminary Analysis, Crown, U.S.
Boiler, WMT, PB Heat, BWC, and AHRI stated that the adoption of a
condensing standard will likely have a disproportionate, negative
impact on domestic manufacturers (Crown, No. 30 at pp. 16-17; U.S.
Boiler, No. 31 at pp 17-18; WMT, No. 32 at p. 12; PB Heat, No. 34 at p.
2; BWC, No. 39 at p. 4; AHRI, No. 40 at p. 7) Crown, U.S. Boiler, and
WMT emphasized that, in particular, manufacturers with foundries would
be disproportionally affected by potential amended energy conservation
standards for consumer boilers. (Crown, No. 30 at pp. 16-17; U.S.
Boiler, No. 31 at pp 17-18; WMT, No. 32 at p. 12) Stakeholders
commented on a range of potential negative impacts of more stringent
standards, including: (1) increases in cast-iron prices in other boiler
types; (2) possible foundry closures; (3) potential job losses
associated with foundry operation, casting, and assembly, which could
lead to a reduction in domestic manufacturing employment; and (4)
significant stranded assets. The following paragraphs discuss these
stakeholder concerns in detail.
Crown, U.S. Boiler, WMT, and AHRI commented that raising the gas-
fired hot water standard to a condensing level would result in
increased manufacturing costs for the other cast-iron product classes,
even if the standards for those classes were to be left unchanged.
(Crown, No. 30 at pp. 5-6; U.S. Boiler, No. 31 at pp. 5-6; WMT, No. 32
at p. 12; AHRI, No. 40 at p. 7) Crown and U.S. Boiler stated that this
is because the cast-iron foundries producing heat exchangers for non-
condensing boilers have large, fixed costs that would no longer be
shared with gas-fired hot water consumer boilers. (Crown, No. 30 at pp.
5-6; U.S. Boiler, No. 31 at pp. 5-6) WMT noted that the cost structure
of cast-iron boiler manufacturers is different from most other
businesses. WMT stated that because of the similarity of cast-iron heat
exchanger designs between product classes, a reduction in the annual
volume of the larger product class (i.e., gas-fired hot water) will
have a significant cost impact upon the lower-volume product classes.
(WMT, No. 32 at p. 12) AHRI claimed that eliminating non-condensing
gas-fired boilers will cause an increase in the cost of cast-iron heat
exchangers, which would largely impact the steam boiler replacement
market. Furthermore, AHRI asserted that due to the similarity of cast
iron heat exchangers for hot water boilers and steam boilers, a
reduction in the annual volume of the gas-fired hot water category will
have a significant cost impact upon the smaller product categories of
gas-fired steam, oil-fired hot water, and oil-fired steam boilers.
(AHRI, No. 40 at p. 7)
As noted in section IV.C.2 of this document, research indicates
that most consumer boiler OEMs use third-party foundries for their
boiler castings. For the consumer boiler OEMs that own foundry assets,
DOE analyzes the disproportionate impacts of a condensing standard on
those
[[Page 55177]]
manufacturers in section V.B.2.d of this document, ``Impacts on
Subgroups of Manufacturers.'' As discussed in detail in section V.B.2.d
of this document, DOE used the engineering analysis to estimate the
depreciation and overhead associated with an average gas-fired hot
water cast-iron heat exchanger. Next, DOE used the shipments analysis
and estimated market share of boilers produced by vertically integrated
OEMs (i.e., consumer boiler OEMs with foundry assets and in-house
casting) to estimate the amount depreciation and overhead that would
potentially need to be reallocated to the remaining cast-iron product
classes under a condensing standard. DOE then modeled two manufacturer
markup scenarios to understand the range of potential impacts for
foundry-owners. This modeling resulted in higher production costs and
reduced profitability for foundry-owners. See section V.B.2.d of this
document for further details.
Crown, U.S. Boiler, and WMT indicated that some foundries may no
longer be commercially viable under a condensing gas-fired hot water
standard. (Crown, No. 30 at pp. 5-6; U.S. Boiler, No. 31 at pp. 5-6;
WMT, No. 32 at p. 12) Crown and U.S. Boiler indicated that foundry
closure could lead to reduced availability of gas-fired steam, oil-
fired hot water, and/or oil-fired steam boilers and higher costs for
new boilers and replacement parts. (Crown, No. 30 at pp. 5-6; U.S.
Boiler, No. 31 at pp. 5-6) WMT stated that an increase in efficiency
standards would result in, ``closing of at least one cast iron foundry
within the United States.'' (WMT, No. 32 at p. 12) Crown and U.S.
Boiler noted that foundries engaged in manufacturing cast-iron boilers
are almost exclusively located in the U.S., including their casting
supplier, Casting Solutions, located in Zanesville, Ohio. (Crown, No.
30 at p. 16; U.S. Boiler, No. 31 at p. 17)
In response, DOE initially identified three foundries in the United
States that supply castings for the domestic consumer boiler market.
DOE identified these foundries using publicly-available information and
verified the information in confidential manufacturer interviews. Of
these three foundries, two are owned by consumer boiler OEMs. The
remaining foundry, located in Waupaca, Wisconsin, provides castings for
a range of markets (e.g., automotive, rail, industrial). In the GRIM,
DOE assumes both OEMs maintain their foundries under a condensing
standard. The subgroup analysis modeling resulted in higher production
costs and reduced profitability for foundry-owners. DOE discusses the
potential impacts of amended standards on OEMs that own foundry assets
in section V.B.2.d of this document.
Crown, U.S. Boiler, WMT, PB Heat, BWC, and AHRI all asserted that
amended standards would lead to a loss of American jobs and the need to
import heat exchangers for consumer boilers from overseas. (Crown, No.
30 at pp. 16-17; U.S. Boiler, No. 31 at pp. 17-18; WMT, No. 32 at p.
12; PB Heat, No. 34 at p. 2; BWC, No. 39 at p. 4; AHRI, No. 40 at p. 7)
Crown and U.S. Boiler stated that raising standards for gas-fired
hot water consumer boilers would have devasting impacts on cast-iron
manufacturers. As a specific example, they discussed that their casting
provider, Casting Solutions (a division of their parent company,
Burnham Holdings, Inc. (BHI)) currently employs over 100 people, with
most of them being union manufacturing workers. The commenters argued
that in addition to potential foundry job losses, there are other
manufacturing jobs associated with machining castings and assembling
cast-iron boilers at several BHI divisions that would be at risk,
including approximately 89 jobs at U.S. Boiler's manufacturing facility
and approximately 30 jobs at Crown's manufacturing facility, which is
located in a ``depressed inner-city Philadelphia neighborhood.''
(Crown, No. 30 at pp. 16-17; U.S. Boiler, No. 31 at pp. 17-18)
BWC recommended that DOE should account for the substantial
percentage of high-efficiency consumer boilers that are produced by
foreign manufacturers as part of this rulemaking, as well as key
components in condensing boilers, such as stainless-steel heat
exchangers. (BWC, No. 39 at p. 4) AHRI urged the Department to examine
the impact on jobs as a result of a condensing rule, as well as
examining the cost of importing heat exchangers from foreign sources
(including increased shipping costs and any tariffs). (AHRI, No. 40 at
p. 7)
Regarding the potential job losses associated with a potential
condensing standard for consumer boilers, DOE analyzes the potential
impact of amended standards on domestic direct employment as part of
the MIA. DOE estimates that over 90 percent of non-condensing consumer
boilers, including key components such as cast-iron heat exchangers,
are manufactured in the United States, whereas approximately 60 percent
of condensing consumer boilers are manufactured in the United States.
DOE recognizes that key components for condensing gas-fired hot water
boilers, such as stainless-steel condensing heat exchangers are
manufactured outside of the United States. Furthermore, developing an
in-house condensing heat exchanger production line would require large
upfront investments, which may not be cost-effective given the
relatively low levels of domestic gas-fired boiler sales compared to
other markets. Therefore, DOE has tentatively concluded that setting a
condensing standard for gas-fired hot water boilers, which accounts for
approximately 75 percent of annual boiler shipments, would likely lead
to a reduction in domestic direct employment in the consumer boiler
industry in the range of 14 to 61 jobs, depending on the adopted
standard level. See section V.B.2.b of this document for analysis of
impacts on direct employment.
Regarding the cost of importing heat exchangers from foreign
sources, manufacturers provided feedback on the current cost of
imported heat exchangers, which includes inbound freight costs and
tariffs, during manufacturer interviews. DOE incorporated this feedback
into its analysis when developing its MPCs, and, thus, these impacts
are accounted for as a portion of the cost for purchased parts. See
section IV.C.2 of this document for additional details on the cost
analysis and MPCs.
Crown, U.S. Boiler, and WMT asserted that adoption of a condensing
standard, at a minimum, would strand millions of dollars in assets,
including gas-fired hot water cast-iron section patterns. (Crown, No.
30 at p. 16; U.S. Boiler, No. 31 at p. 17; WMT, No. 32 at p. 12)
In response, DOE incorporates the estimated stranded assets (i.e.,
the residual un-depreciated value of tooling and equipment that would
have enjoyed longer use if amended energy conservation standard had not
made them obsolete) for each analyzed standard case into its model. In
the GRIM, the remaining book value of existing tooling and equipment,
the value of which is affected by the amended energy conservation
standards, acts as a tax shield that mitigates decreases in cash flow
from operations in the year of the write-down. To estimate potential
stranded assets, DOE relied on manufacturer feedback, SEC 10-K filings
of relevant consumer boiler OEMs, and results of the engineering
analysis. See chapter 12 of the NOPR TSD for additional details on
stranded assets.
WMT indicated that cumulative regulatory burden is experienced from
rulemakings pertaining to consumer boilers, commercial water heaters,
small electric motors, furnace fans, and others. (WMT, No. 32 at p. 12)
AHRI requested that DOE evaluate the regulatory burden
[[Page 55178]]
that will be placed on consumer as well as manufacturers. (AHRI, No. 40
at p. 2)
Rheem stated that due to the numerous products facing amended
standards, an overwhelming majority of manufactures will face increased
burden in the coming years for product redesigns and compliance. The
commenter urged DOE to place more emphasis on identifying and
mitigating manufacturers burden when amending energy conservation
standards for water heating, boilers, and pool heating products and
equipment. Rheem also supported AHRI's comments on cumulative burden on
consumers, noting the increased financial burden placed on them due to
amended standards (e.g., higher purchase prices, higher repair rates).
(Rheem, No. 37 at p. 6)
In response, DOE notes that it analyzes cumulative regulatory
burden pursuant to section 13(g) of appendix A. See section V.B.2.e of
this document for a list of DOE regulations that affect consumer boiler
manufacturers that could take effect approximately three years before
or after the expected 2030 compliance date of amended energy
conservation standards for consumer boilers. At the time of
publication, DOE notes that amended energy conservation standards have
not been proposed for furnace fans.\136\ Regarding small electric
motors, as detailed in the notice of proposed determination published
in the Federal Register on February 6, 2023, DOE has tentatively
determined that more-stringent energy conservation standards would not
be cost-effective. 88 FR 7629. If DOE proposes or finalizes any energy
conservation standards for these products prior to finalizing energy
conservation standards for consumer boilers, DOE will include the
energy conservation standards for these other products as part of its
consideration of cumulative regulatory burden for this consumer
boiler's rulemaking.
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\136\ See www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=54 (Last accessed Jan. 3, 2023).
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Although DOE does not analyze the cumulative burden on consumers,
section V.B.1.a of this document discusses the economic impact of
amended standards on individual consumers, which is the main impact
consumers will face with a finalized energy conservation standards.
K. Emissions Analysis
The emissions analysis consists of two components. The first
component estimates the effect of potential energy conservation
standards on power sector and site (where applicable) combustion
emissions of CO2, NOX, SO2, and Hg.
The second component estimates the impacts of potential standards on
emissions of two additional greenhouse gases, CH4 and
N2O, as well as the reductions to emissions of other gases
due to ``upstream'' activities in the fuel production chain. These
upstream activities comprise extraction, processing, and transporting
fuels to the site of combustion.
The analysis of electric power sector emissions of CO2,
NOX, SO2, and Hg uses emissions factors intended
to represent the marginal impacts of the change in electricity
consumption associated with amended or new standards. The methodology
is based on results published for the AEO, including a set of side
cases that implement a variety of efficiency-related policies. The
methodology is described in appendix 13A in the NOPR TSD. The analysis
presented in this document uses projections from AEO 2023. Power sector
emissions of CH4 and N2O from fuel combustion are
estimated using Emission Factors for Greenhouse Gas Inventories
published by the Environmental Protection Agency (EPA).\137\
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\137\ Available at www.epa.gov/system/files/documents/2023-03/ghg_emission_factors_hub.pdf (Last accessed May 3, 2023).
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The on-site operation of consumer boilers requires combustion of
fossil fuels and results in emissions of CO2,
NOX, SO2 CH4 and N2O where
these products are used. Site emissions of these gases were estimated
using Emission Factors for Greenhouse Gas Inventories and, for
NOX and SO2 emissions intensity factors from an
EPA publication.\138\
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\138\ U.S. Environmental Protection Agency, External Combustion
Sources. In Compilation of Air Pollutant Emission Factors. AP-42.
Fifth Edition. Volume I: Stationary Point and Area Sources. Chapter
1. (Available at: www.epa.gov/ttn/chief/ap42/) (Last
accessed Jan. 3, 2023).
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FFC upstream emissions, which include emissions from fuel
combustion during extraction, processing, and transportation of fuels,
and ``fugitive'' emissions (direct leakage to the atmosphere) of
CH4 and CO2, are estimated based on the
methodology described in chapter 15 of the NOPR TSD.
The emissions intensity factors are expressed in terms of physical
units per MWh or MMBtu of site energy savings. For power sector
emissions, specific emissions intensity factors are calculated by
sector and end use. Total emissions reductions are estimated using the
energy savings calculated in the national impact analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
DOE's no-new-standards case for the electric power sector reflects
the AEO, which incorporates the projected impacts of existing air
quality regulations on emissions. AEO 2023 generally represents current
legislation and environmental regulations, including recent government
actions, that were in place at the time of preparation of AEO 2023,
including the emissions control programs discussed in the following
paragraphs.\139\
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\139\ For further information, see the Assumptions to AEO 2023
report that sets forth the major assumptions used to generate the
projections in the Annual Energy Outlook (Available at: www.eia.gov/outlooks/aeo/assumptions/) (Last accessed May 3, 2023).
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SO2 emissions from affected electric generating units
(EGUs) are subject to nationwide and regional emissions cap-and-trade
programs. Title IV of the Clean Air Act sets an annual emissions cap on
SO2 for affected EGUs in the 48 contiguous States and the
District of Columbia (DC). (42 U.S.C. 7651 et seq.) SO2
emissions from numerous States in the eastern half of the United States
are also limited under the Cross-State Air Pollution Rule (CSAPR). 76
FR 48208 (August 8, 2011). CSAPR requires these States to reduce
certain emissions, including annual SO2 emissions, and went
into effect as of January 1, 2015.\140\ AEO 2023 incorporates
implementation of CSAPR, including the update to the CSAPR ozone season
program emission budgets and target dates issued in 2016. 81 FR 74504
(Oct. 26, 2016). Compliance with CSAPR is 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 an efficiency standard could be used to permit offsetting
increases in SO2 emissions by another regulated EGU.
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\140\ CSAPR requires States to address annual emissions of
SO2 and NOX, precursors to the formation of
fine particulate matter (PM2.5) pollution, in order to
address the interstate transport of pollution with respect to the
1997 and 2006 PM2.5 National Ambient Air Quality
Standards (NAAQS). CSAPR also requires certain States to address the
ozone season (May-September) emissions of NOX, a
precursor to the formation of ozone pollution, in order to address
the interstate transport of ozone pollution with respect to the 1997
ozone NAAQS. 76 FR 48208 (August 8, 2011). EPA subsequently
published a supplemental rule that included an additional five
States in the CSAPR ozone season program (76 FR 80760 (Dec. 27,
2011)) (Supplemental Rule).
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However, beginning in 2016, SO2 emissions began to fall
as a result of the Mercury and Air Toxics Standards
[[Page 55179]]
(MATS) for power plants. 77 FR 9304 (Feb. 16, 2012). In the MATS final
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
are being reduced as a result of the control technologies installed on
coal-fired power plants to comply with the MATS requirements for acid
gas. In order to continue operating, coal power plants must have either
flue gas desulfurization or dry sorbent injection systems installed.
Both technologies, which are used to reduce acid gas emissions, also
reduce SO2 emissions. Because of the emissions reductions
under the MATS, it is unlikely that excess SO2 emissions
allowances resulting from the lower electricity demand would be needed
or used to permit offsetting increases in SO2 emissions by
another regulated EGU. Therefore, energy conservation standards that
decrease electricity generation would generally reduce SO2
emissions. DOE estimated SO2 emissions reduction using
emissions factors based on AEO 2023.
CSAPR also established limits on NOX emissions for
numerous States in the eastern half of the United States. Energy
conservation standards would have little effect on NOX
emissions in those States covered by CSAPR emissions limits if excess
NOX emissions allowances resulting from the lower
electricity demand could be used to permit offsetting increases in
NOX emissions from other EGUs. In such case, NOX
emissions would remain near the limit even if electricity generation
goes down. A different case could possibly result, depending on the
configuration of the power sector in the different regions and the need
for allowances, such that NOX emissions might not remain at
the limit in the case of lower electricity demand. In this case, energy
conservation standards might reduce NOX emissions in covered
States. Despite this possibility, DOE has chosen to be conservative in
its analysis and has maintained the assumption that standards will not
reduce NOX emissions in States covered by CSAPR. Energy
conservation standards would be expected to reduce NOX
emissions in the States not covered by CSAPR. DOE used AEO 2023 data to
derive NOX emissions factors for the group of States not
covered by CSAPR.
The MATS limit mercury emissions from power plants, but they do not
include emissions caps, and, as such, DOE's energy conservation
standards would be expected to slightly reduce Hg emissions. DOE
estimated mercury emissions reduction using emissions factors based on
AEO 2023, which incorporates the MATS.
WMT expressed concern over the reliance upon the emissions impact
analysis in the energy conservation standards rulemaking due to its
potential to be controversial in light of the Supreme Court ruling on
West Virginia v. EPA and the ``major question doctrine'' cited therein.
(WMT, No. 32 at p. 2) In response, DOE maintains that environmental and
public health benefits associated with the more efficient use of energy
are important to take into account when considering the need for
national energy conservation, which is required by EPCA. (42 U.S.C.
6295(o)(2)(B)(i)(VI)) In addition, DOE's emissions impact analysis is
consistent with its Procedures, Interpretations, and Policies for
Consideration in New or Revised Energy Conservation Standards and Test
Procedures for Consumer Products and Commercial/Industrial
Equipment.\141\ Furthermore, DOE considers potential emissions and
related health benefits as a separate analysis from the consumer,
manufacturer, and national impact analyses. As discussed in section V.C
of this document, DOE's proposed standards are justified under EPCA
even without consideration of those additional emissions and health
benefits.
---------------------------------------------------------------------------
\141\ See www.regulations.gov/document/EERE-2021-BT-STD-0003-0075.
---------------------------------------------------------------------------
L. Monetizing Emissions Impacts
As part of the development of this proposed rule, for the purpose
of complying with the requirements of Executive Order 12866, DOE
considered the estimated monetary benefits from the reduced emissions
of CO2, CH4, N2O, NOX, and
SO2 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 products shipped in
the projection period for each TSL. This section summarizes the basis
for the values used for monetizing the emissions benefits and presents
the values considered in this NOPR.
To monetize the benefits of reducing GHG emissions, this analysis
uses the interim estimates presented in the Technical Support Document:
Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates
Under Executive Order 13990 published in February 2021 by the IWG.
1. Monetization of Greenhouse Gas Emissions
DOE estimates the monetized benefits of the reductions in emissions
of CO2, CH4, and N2O by using a
measure of the social cost (SC) of each pollutant (e.g., SC-
CO2). These estimates represent the monetary value of the
net harm to society associated with a marginal increase in emissions of
these pollutants in a given year, or the benefit of avoiding that
increase. These estimates are intended to include (but are not limited
to) climate-change-related changes in net agricultural productivity,
human health, property damages from increased flood risk, disruption of
energy systems, risk of conflict, environmental migration, and the
value of ecosystem services.
DOE exercises its own judgment in presenting monetized climate
benefits as recommended by applicable Executive orders, and DOE would
reach the same conclusion presented in this proposed rulemaking in the
absence of the social cost of greenhouse gases. That is, the social
costs of greenhouse gases, whether measured using the February 2021
interim estimates presented by the Interagency Working Group on the
Social Cost of Greenhouse Gases or by another means, did not affect the
rule ultimately proposed by DOE.
DOE estimated the global social benefits of CO2,
CH4, and N2O reductions using SC-GHG values that
were based on the interim values presented in the Technical Support
Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim
Estimates under Executive Order 13990, published in February 2021 by
the IWG. The SC-GHGs is the monetary value of the net harm to society
associated with a marginal increase in emissions in a given year, or
the benefit of avoiding that increase. In principle, SC-GHGs includes
the value of all climate change impacts, including (but not limited to)
changes in net agricultural productivity, human health effects,
property damage from increased flood risk and natural disasters,
disruption of energy systems, risk of conflict, environmental
migration, and the value of ecosystem services. The SC-GHGs, therefore,
reflects the societal value of reducing emissions of the gas in
question by one metric ton. The SC-GHGs is the theoretically
appropriate value to use in conducting benefit-cost analyses of
policies that affect CO2, N2O, and CH4
emissions. As a member of the IWG involved in the development of the
February 2021 SC-GHG TSD, DOE
[[Page 55180]]
agrees that the interim SC-GHG estimates represent the most appropriate
estimate of the SC-GHG until revised estimates have been developed
reflecting the latest, peer-reviewed science.
The SC-GHG estimates presented here were developed over many years,
using transparent process, peer-reviewed methodologies, the best
science available at the time of that process, and with input from the
public. Specifically, in 2009, the IWG, that included the DOE and other
Executive Branch agencies and offices, was established to ensure that
agencies were using the best available science and to promote
consistency in the social cost of carbon (SC-CO2) values
used across agencies. The IWG published SC-CO2 estimates in
2010 that were developed from an ensemble of three widely cited
integrated assessment models (IAMs) that estimate global climate
damages using highly aggregated representations of climate processes
and the global economy combined into a single modeling framework. The
three IAMs were run using a common set of input assumptions in each
model for future population, economic, and CO2 emissions
growth, as well as equilibrium climate sensitivity--a measure of the
globally averaged temperature response to increased atmospheric
CO2 concentrations. These estimates were updated in 2013
based on new versions of each IAM. In August 2016, the IWG published
estimates of the social cost of methane (SC-CH4) and nitrous
oxide (SC-N2O) using methodologies that are consistent with
the methodology underlying the SC-CO2 estimates. The
modeling approach that extends the IWG SC-CO2 methodology to
non-CO2 GHGs has undergone multiple stages of peer review.
The SC-CH4 and SC-N2O estimates were developed by
Marten et al.\142\ and underwent a standard double-blind peer review
process prior to journal publication. In 2015, as part of the response
to public comments received to a 2013 solicitation for comments on the
SC-CO2 estimates, the IWG announced a National Academies of
Sciences, Engineering, and Medicine review of the SC-CO2
estimates to offer advice on how to approach future updates to ensure
that the estimates continue to reflect the best available science and
methodologies. In January 2017, the National Academies released their
final report, ``Valuing Climate Damages: Updating Estimation of the
Social Cost of Carbon Dioxide,'' and recommended specific criteria for
future updates to the SC-CO2 estimates, a modeling framework
to satisfy the specified criteria, and both near-term updates and
longer-term research needs pertaining to various components of the
estimation process (National Academies, 2017).\143\ Shortly thereafter,
in March 2017, President Trump issued Executive Order 13783, which
disbanded the IWG, withdrew the previous TSDs, and directed agencies to
ensure SC-CO2 estimates used in regulatory analyses are
consistent with the guidance contained in OMB's Circular A-4,
``including with respect to the consideration of domestic versus
international impacts and the consideration of appropriate discount
rates'' (E.O. 13783, Section 5(c)). Benefit-cost analyses following
E.O. 13783 used SC-GHG estimates that attempted to focus on the U.S.-
specific share of climate change damages as estimated by the models and
were calculated using two discount rates recommended by Circular A-4, 3
percent and 7 percent. All other methodological decisions and model
versions used in SC-GHG calculations remained the same as those used by
the IWG in 2010 and 2013, respectively.
---------------------------------------------------------------------------
\142\ Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. Newbold,
and A. Wolverton, Incremental CH4 and N2O mitigation benefits
consistent with the U.S. Government's SC-CO2 estimates. Climate
Policy (2015) 15(2): pp. 272-298.
\143\ National Academies of Sciences, Engineering, and Medicine.
Valuing Climate Damages: Updating Estimation of the Social Cost of
Carbon Dioxide (2017) The National Academies Press: Washington, DC.
---------------------------------------------------------------------------
On January 20, 2021, President Biden issued Executive Order 13990,
which re-established the IWG and directed it to ensure that the U.S.
Government's estimates of the social cost of carbon and other
greenhouse gases reflect the best available science and the
recommendations of the National Academies (2017). The IWG was tasked
with first reviewing the SC-GHG estimates currently used in Federal
analyses and publishing interim estimates within 30 days of the E.O.
that reflect the full impact of GHG emissions, including by taking
global damages into account. The interim SC-GHG estimates published in
February 2021 are used here to estimate the climate benefits for this
proposed rulemaking. The E.O. instructs the IWG to undertake a fuller
update of the SC-GHG estimates by January 2022 that takes into
consideration the advice of the National Academies (2017) and other
recent scientific literature. The February 2021 SC-GHG TSD provides a
complete discussion of the IWG's initial review conducted under E.O.
13990. In particular, the IWG found that the SC-GHG estimates used
under E.O. 13783 fail to reflect the full impact of GHG emissions in
multiple ways.
First, the IWG found that the SC-GHG estimates used under E.O.
13783 fail to fully capture many climate impacts that affect the
welfare of U.S. citizens and residents, and those impacts are better
reflected by global measures of the SC-GHG. Examples of omitted effects
from the E.O. 13783 estimates include direct effects on U.S. citizens,
assets, and investments located abroad, supply chains, U.S. military
assets and interests abroad, and tourism, as well as spillover pathways
such as economic and political destabilization and global migration
that can lead to adverse impacts on U.S. national security, public
health, and humanitarian concerns. In addition, assessing the benefits
of U.S. GHG mitigation activities requires consideration of how those
actions may affect mitigation activities by other countries, as those
international mitigation actions will provide a benefit to U.S.
citizens and residents by mitigating climate impacts that affect U.S.
citizens and residents. A wide range of scientific and economic experts
have emphasized the issue of reciprocity as support for considering
global damages of GHG emissions. If the United States does not consider
impacts on other countries, it is difficult to convince other countries
to consider the impacts of their emissions on the United States. The
only way to achieve an efficient allocation of resources for emissions
reduction on a global basis--and so benefit the U.S. and its citizens--
is for all countries to base their policies on global estimates of
damages. As a member of the IWG involved in the development of the
February 2021 SC-GHG TSD, DOE agrees with this assessment, and,
therefore, in this proposed rule, DOE centers attention on a global
measure of SC-GHG. This approach is the same as that taken in DOE
regulatory analyses from 2012 through 2016. A robust estimate of
climate damages that accrue only to U.S. citizens and residents does
not currently exist in the literature. As explained in the February
2021 TSD, existing estimates are both incomplete and an underestimate
of total damages that accrue to the citizens and residents of the U.S.
because they do not fully capture the regional interactions and
spillovers discussed above, nor do they include all of the important
physical, ecological, and economic impacts of climate change recognized
in the climate change literature. As noted in the February 2021 SC-GHG
TSD, the
[[Page 55181]]
IWG will continue to review developments in the literature, including
more robust methodologies for estimating a U.S.-specific SC-GHG value,
and explore ways to better inform the public of the full range of
carbon impacts. As a member of the IWG, DOE will continue to follow
developments in the literature pertaining to this issue.
Second, the IWG found that the use of the social rate of return on
capital (7 percent under current OMB Circular A-4 guidance) to discount
the future benefits of reducing GHG emissions inappropriately
underestimates the impacts of climate change for the purposes of
estimating the SC-GHG. Consistent with the findings of the National
Academies (2017) and the economic literature, the IWG continued to
conclude that the consumption rate of interest is the theoretically
appropriate discount rate in an intergenerational context,\144\ and
recommended that discount rate uncertainty and relevant aspects of
intergenerational ethical considerations be accounted for in selecting
future discount rates.
---------------------------------------------------------------------------
\144\ Interagency Working Group on Social Cost of Carbon, Social
Cost of Carbon for Regulatory Impact Analysis under Executive Order
12866 (2010) United States Government (Last accessed Jan. 3, 2023)
(Available at: www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf); Interagency Working Group on Social Cost of
Carbon. Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order 12866 (2013) (Last accessed
April 15, 2022) (Available at: www.federalregister.gov/documents/2013/11/26/2013-28242/technical-support-document-technical-update-of-the-social-cost-of-carbon-for-regulatory-impact); Interagency
Working Group on Social Cost of Greenhouse Gases, United States
Government. Technical Support Document: Technical Update on the
Social Cost of Carbon for Regulatory Impact Analysis-Under Executive
Order 12866 (August 2016) (Last accessed Jan. 3, 2023) (Available
at: www.epa.gov/sites/default/files/2016-12/documents/sc_co2_tsd_august_2016.pdf); Interagency Working Group on Social
Cost of Greenhouse Gases, United States Government. Addendum to
Technical Support Document on Social Cost of Carbon for Regulatory
Impact Analysis under Executive Order 12866: Application of the
Methodology to Estimate the Social Cost of Methane and the Social
Cost of Nitrous Oxide (August 2016) (Available at: www.epa.gov/sites/default/files/2016-12/documents/addendum_to_sc-ghg_tsd_august_2016.pdf) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
Furthermore, the damage estimates developed for use in the SC-GHG
are estimated in consumption-equivalent terms, and so an application of
OMB Circular A-4's guidance for regulatory analysis would then use the
consumption discount rate to calculate the SC-GHG. DOE agrees with this
assessment and will continue to follow developments in the literature
pertaining to this issue. DOE also notes that while OMB Circular A-4,
as published in 2003, recommends using 3-percent and 7-percent discount
rates as ``default'' values, Circular A-4 also reminds agencies that
``different regulations may call for different emphases in the
analysis, depending on the nature and complexity of the regulatory
issues and the sensitivity of the benefit and cost estimates to the key
assumptions.'' On discounting, Circular A-4 recognizes that ``special
ethical considerations arise when comparing benefits and costs across
generations,'' and Circular A-4 acknowledges that analyses may
appropriately ``discount future costs and consumption benefits . . . at
a lower rate than for intragenerational analysis.'' In the 2015
Response to Comments on the Social Cost of Carbon for Regulatory Impact
Analysis, OMB, DOE, and the other IWG members recognized that
``Circular A-4 is a living document'' and ``the use of 7 percent is not
considered appropriate for intergenerational discounting. There is wide
support for this view in the academic literature, and it is recognized
in Circular A-4 itself.'' Thus, DOE concludes that a 7-percent discount
rate is not appropriate to apply to value the social cost of greenhouse
gases in the analysis presented in this analysis.
To calculate the present and annualized values of climate benefits,
DOE uses the same discount rate as the rate used to discount the value
of damages from future GHG emissions, for internal consistency. That
approach to discounting follows the same approach that the February
2021 TSD recommends ``to ensure internal consistency--i.e., future
damages from climate change using the SC-GHG at 2.5 percent should be
discounted to the base year of the analysis using the same 2.5 percent
rate.'' DOE has also consulted the National Academies' 2017
recommendations on how SC-GHG estimates can ``be combined in RIAs with
other cost and benefits estimates that may use different discount
rates.'' The National Academies reviewed ``several options,'' including
``presenting all discount rate combinations of other costs and benefits
with [SC-GHG] estimates.''
As a member of the IWG involved in the development of the February
2021 SC-GHG TSD, DOE agrees with this assessment and will continue to
follow developments in the literature pertaining to this issue. While
the IWG works to assess how best to incorporate the latest, peer
reviewed science to develop an updated set of SC-GHG estimates, it set
the interim estimates to be the most recent estimates developed by the
IWG prior to the group being disbanded in 2017. The estimates rely on
the same models and harmonized inputs and are calculated using a range
of discount rates. As explained in the February 2021 SC-GHG TSD, the
IWG has recommended that agencies revert to the same set of four values
drawn from the SC-GHG distributions based on three discount rates as
were used in regulatory analyses between 2010 and 2016 and were subject
to public comment. For each discount rate, the IWG combined the
distributions across models and socioeconomic emissions scenarios
(applying equal weight to each) and then selected a set of four values
recommended for use in benefit-cost analyses: an average value
resulting from the model runs for each of three discount rates (2.5
percent, 3 percent, and 5 percent), plus a fourth value, selected as
the 95th percentile of estimates based on a 3-percent discount rate.
The fourth value was included to provide information on potentially
higher-than-expected economic impacts from climate change. As explained
in the February 2021 SC-GHG TSD, and DOE agrees, this update reflects
the immediate need to have an operational SC-GHG for use in regulatory
benefit-cost analyses and other applications that was developed using a
transparent process, peer-reviewed methodologies, and the science
available at the time of that process. Those estimates were subject to
public comment in the context of dozens of proposed rulemakings, as
well as in a dedicated public comment period in 2013.
There are a number of limitations and uncertainties associated with
the SC-GHG estimates. First, the current scientific and economic
understanding of discounting approaches suggests discount rates
appropriate for intergenerational analysis in the context of climate
change are likely to be less than 3 percent, near 2 percent or
lower.\145\ Second, the IAMs used to produce these interim estimates do
not include all of the important physical, ecological, and economic
impacts of climate change recognized in the climate change literature
and the science underlying their ``damage functions''--i.e., the core
parts of the IAMs that map global mean temperature changes and other
physical impacts of climate change into economic (both market and
nonmarket) damages--lags behind the most recent research. For example,
limitations include the
[[Page 55182]]
incomplete treatment of catastrophic and non-catastrophic impacts in
the integrated assessment models, their incomplete treatment of
adaptation and technological change, the incomplete way in which inter-
regional and intersectoral linkages are modeled, uncertainty in the
extrapolation of damages to high temperatures, and inadequate
representation of the relationship between the discount rate and
uncertainty in economic growth over long time horizons. Likewise, the
socioeconomic and emissions scenarios used as inputs to the models do
not reflect new information from the last decade of scenario generation
or the full range of projections. The modeling limitations do not all
work in the same direction in terms of their influence on the SC-
CO2 estimates. However, as discussed in the February 2021
TSD, the IWG has recommended that, taken together, the limitations
suggest that the interim SC-GHG estimates used in this proposed rule
likely underestimate the damages from GHG emissions. DOE concurs with
this assessment.
---------------------------------------------------------------------------
\145\ Interagency Working Group on Social Cost of Greenhouse
Gases (IWG) (2021) Technical Support Document: Social Cost of
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive
Order 13990. February. United States Government. (Available at
www.whitehouse.gov/briefing-room/blog/2021/02/26/a-return-to-science-evidence-based-estimates-of-the-benefits-of-reducing-climate-pollution/) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
DOE's derivations of the SC-GHG (i.e., SC-CO2, SC-
N2O, and SC-CH4) values used for this NOPR are
discussed in the following sections, and the results of DOE's analyses
estimating the benefits of the reductions in emissions of these GHGs
are presented in section V.B.8 of this document.
a. Social Cost of Carbon
The SC-CO2 values used for this NOPR were based on the
values developed for the IWG's February 2021 TSD, which are shown in
Table IV.4 in five-year increments from 2020 to 2050. The set of annual
values that DOE used, which was adapted from estimates published by
EPA,\146\ is presented in Appendix 14-A of the NOPR TSD. These
estimates are based on methods, assumptions, and parameters identical
to the estimates published by the IWG (which were based on EPA
modeling), and include values for 2051 to 2070. DOE expects additional
climate benefits to accrue for products still operating after 2070, but
a lack of available SC-CO2 estimates for emissions years
beyond 2070 prevents DOE from monetizing these potential benefits in
this analysis.
---------------------------------------------------------------------------
\146\ See EPA, Revised 2023 and Later Model Year Light-Duty
Vehicle GHG Emissions Standards: Regulatory Impact Analysis,
Washington, DC, December 2021. Available at nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P1013ORN.pdf (last accessed February 21, 2023).
---------------------------------------------------------------------------
For purposes of capturing the uncertainties involved in regulatory
impact analysis, DOE has determined it is appropriate include all four
sets of SC-CO2 values, as recommended by the IWG.\147\
---------------------------------------------------------------------------
\147\ For example, the February 2021 TSD discusses how the
understanding of discounting approaches suggests that discount rates
appropriate for intergenerational analysis in the context of climate
change may be lower than 3 percent.
Table IV.12--Annual SC-CO2 Values From 2021 Interagency Update, 2020-2050
[2020$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
Discount rate and statistic
---------------------------------------------------------------
5% 3% 2.5% 3%
Year ---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
2020............................................ 14 51 76 152
2025............................................ 17 56 83 169
2030............................................ 19 62 89 187
2035............................................ 22 67 96 206
2040............................................ 25 73 103 225
2045............................................ 28 79 110 242
2050............................................ 32 85 116 260
----------------------------------------------------------------------------------------------------------------
DOE multiplied the CO2 emissions reduction estimated for
each year by the SC-CO2 value for that year in each of the
four cases. DOE adjusted the values to 2022$ using the implicit price
deflator for gross domestic product (GDP) from the Bureau of Economic
Analysis. 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 SC-
CO2 values in each case.
b. Social Cost of Methane and Nitrous Oxide
The SC-CH4 and SC-N2O values used for this
NOPR were based on the values developed for the February 2021 TSD.
Table IV.13 shows the updated sets of SC-CH4 and SC-
N2O estimates from the latest interagency update in 5-year
increments from 2020 to 2050. The full set of annual values used is
presented in appendix 14-A of the NOPR TSD. To capture the
uncertainties involved in regulatory impact analysis, DOE has
determined it is appropriate to include all four sets of SC-
CH4 and SC-N2O values, as recommended by the IWG.
DOE derived values after 2050 using the approach described above for
the SC-CO2.
Table IV.13--Annual SC-CH4 and SC-N2O Values From 2021 Interagency Update, 2020-2050
[2020$ per metric ton]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SC-CH4 SC-N2O
-------------------------------------------------------------------------------------------------------------------------------
Discount rate and statistic Discount rate and statistic
-------------------------------------------------------------------------------------------------------------------------------
Year 5% 3% 2.5% 3% 5% 3% 2.5% 3%
-------------------------------------------------------------------------------------------------------------------------------
95th 95th
Average Average Average percentile Average Average Average percentile
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2020............................................................ 670 1,500 2,000 3,900 5,800 18,000 27,000 48,000
2025............................................................ 800 1,700 2,200 4,500 6,800 21,000 30,000 54,000
2030............................................................ 940 2,000 2,500 5,200 7,800 23,000 33,000 60,000
2035............................................................ 1,100 2,200 2,800 6,000 9,000 25,000 36,000 67,000
2040............................................................ 1,300 2,500 3,100 6,700 10,000 28,000 39,000 74,000
[[Page 55183]]
2045............................................................ 1,500 2,800 3,500 7,500 12,000 30,000 42,000 81,000
2050............................................................ 1,700 3,100 3,800 8,200 13,000 33,000 45,000 88,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
DOE multiplied the CH4 and N2O emissions
reduction estimated for each year by the SC-CH4 and SC-
N2O estimates for that year in each of the cases. DOE
adjusted the values to 2022$ using the implicit price deflator for
gross domestic product (GDP) from the Bureau of Economic Analysis. To
calculate a present value of the stream of monetary values, DOE
discounted the values in each of the cases using the specific discount
rate that had been used to obtain the SC-CH4 and SC-
N2O estimates in each case.
2. Monetization of Other Emissions Impacts
For the NOPR, DOE estimated the monetized value of NOX
and SO2 emissions reductions from electricity generation
using the latest benefit-per-ton estimates for that sector from the
EPA's Benefits Mapping and Analysis Program.\148\ DOE used EPA's values
for PM2.5-related benefits associated with NOX
and SO2 and for ozone-related benefits associated with
NOX for 2025, 2030, and 2040, calculated with discount rates
of 3 percent and 7 percent. DOE used linear interpolation to define
values for the years not given in the 2025 to 2040 period; for years
beyond 2040, the values are held constant. DOE combined the EPA
regional benefit per ton estimates with regional information on
electricity consumption and emissions from AEO 2023 to define weighted-
average national values for NOX and SO2 (see
appendix 14B of the NOPR TSD).
---------------------------------------------------------------------------
\148\ Estimating the Benefit per Ton of Reducing
PM2.5 Precursors from 17 Sectors, February 2018
(Available at www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors) (Last
accessed May 3, 2023).
---------------------------------------------------------------------------
DOE also estimated the monetized value of NOX and
SO2 emissions reductions from site use of natural gas in
consumer boilers using benefit-per-ton estimates from the EPA's
Benefits Mapping and Analysis Program.\149\ Although none of the
sectors covered by EPA refers specifically to residential and
commercial buildings, the sector called ``area sources'' would be a
reasonable proxy for residential and commercial buildings.\150\ The EPA
document provides high and low estimates for 2025 and 2030 at 3- and 7-
percent discount rates.\151\ DOE used the same linear interpolation and
extrapolation as it did with the values for electricity generation.
---------------------------------------------------------------------------
\149\ Estimating the Benefit per Ton of Reducing
PM2.5 and Ozone Precursors from 21 Sectors, April 2023
(Available at www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors) (Last
accessed May 3, 2023).
\150\ ``Area sources'' represents all emission sources for which
States do not have exact (point) locations in their emissions
inventories. Because exact locations would tend to be associated
with larger sources, ``area sources'' would be fairly representative
of small, dispersed sources like homes and businesses.
\151\ ``Area sources'' are a category in the 2018 document from
EPA, but are not used in the latest document cited above. See:
www.epa.gov/sites/default/files/2018-02/documents/sourceapportionmentbpttsd_2018.pdf.
---------------------------------------------------------------------------
DOE multiplied the site emissions reduction (in tons) in each year
by the associated $/ton values, and then discounted each series using
discount rates of 3 percent and 7 percent as appropriate.
M. Utility Impact Analysis
The utility impact analysis estimates the changes in installed
electrical capacity and generation projected to result for each
considered TSL. The analysis is based on published output from the NEMS
associated with AEO 2023. NEMS produces the AEO Reference case, as well
as a number of side cases, that estimate the economy-wide impacts of
changes to energy supply and demand. For the current analysis, impacts
are quantified by comparing the levels of electricity sector
generation, installed capacity, fuel consumption, and emissions in the
AEO 2023 Reference case and various side cases. Details of the
methodology are provided in the appendices to chapters 13 and 15 of the
NOPR TSD.
The output of this analysis is a set of time-dependent coefficients
that capture the change in electricity generation, primary fuel
consumption, installed capacity, and power sector emissions due to a
unit reduction in demand for a given end use. These coefficients are
multiplied by the stream of electricity savings calculated in the NIA
to provide estimates of selected utility impacts of potential new or
amended energy conservation standards.
DOE notes that the utility impact analysis as applied to electric
utilities only estimates the change to capacity and generation as a
result of a standard, as modeled in NEMS, and there is no gas utility
analog. DOE further notes that the impact to natural gas utility sales
is equivalent to the natural gas saved by the proposed standard and
includes those results in chapter 15 of the NOPR TSD
N. Employment Impact Analysis
DOE considers employment impacts in the domestic economy as one
factor in selecting a proposed standard. Employment impacts from new or
amended energy conservation standards include both 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 net jobs created or eliminated in the national economy,
other than in the manufacturing sector being regulated, caused by: (1)
reduced spending by consumers on energy; (2) reduced spending on new
energy supply by the utility industry; (3) increased consumer spending
on the products to which the new standards apply and other goods and
services, 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
[[Page 55184]]
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.\152\
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, the BLS
data suggest that net national employment may increase due to shifts in
economic activity resulting from energy conservation standards.
---------------------------------------------------------------------------
\152\ See U.S. Department of Commerce-Bureau of Economic
Analysis, Regional Multipliers: A User Handbook for the Regional
Input-Output Modeling System (RIMS II) (1997) U.S. Government
Printing Office: Washington, DC (Available at:
searchworks.stanford.edu/view/8436340) (Last accessed Jan. 3, 2023).
---------------------------------------------------------------------------
DOE estimated indirect national employment impacts for the standard
levels considered in this NOPR using an input/output model of the U.S.
economy called Impact of Sector Energy Technologies version 4
(ImSET).\153\ 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
187 sectors most relevant to industrial, commercial, and residential
building energy use.
---------------------------------------------------------------------------
\153\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W.
Schultz, ImSET 4.0: Impact of Sector Energy Technologies Model
Description and User Guide (2015) Pacific Northwest National
Laboratory: Richland, WA. PNNL-24563.
---------------------------------------------------------------------------
DOE notes that ImSET is not a general equilibrium forecasting
model, and that there are uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Because ImSET does not incorporate price changes, the
employment effects predicted by ImSET may over-estimate actual job
impacts over the long run for this rule. Therefore, DOE used ImSET only
to generate results for near-term timeframes (2030-2035), where these
uncertainties are reduced. For more details on the employment impact
analysis, see chapter 16 of the NOPR TSD.
V. Analytical Results and Conclusions
The following section addresses the results from DOE's analyses
with respect to the considered energy conservation standards for
consumer boilers. It addresses the TSLs examined by DOE, the projected
impacts of each of these levels if adopted as energy conservation
standards for consumer boilers, and the standards levels that DOE is
proposing to adopt in this NOPR. Additional details regarding DOE's
analyses are contained in the NOPR TSD supporting this document.
A. Trial Standard Levels
In general, DOE typically evaluates potential new or amended
standards for products and equipment by grouping individual efficiency
levels for each class into TSLs. Use of TSLs allows DOE to identify and
consider manufacturer cost interactions between the product classes, to
the extent that there are such interactions, and market cross-
elasticity from consumer purchasing decisions that may change when
different standard levels are set.
In the analysis conducted for this NOPR, DOE analyzed the benefits
and burdens of four TSLs for consumer boilers. DOE developed TSLs that
combine efficiency levels for each analyzed product class. DOE presents
the results for the TSLs in this document, while the results for all
efficiency levels that DOE analyzed are in the NOPR TSD.
Table V.1 presents the TSLs and the corresponding efficiency levels
that DOE has identified for potential amended energy conservation
standards for consumer boilers. TSL 4 represents the maximum
technologically feasible (``max-tech'') energy efficiency for all
product classes. TSL 3 represents the max-tech energy efficiency for
oil-fired hot water and steam boilers, condensing technology for gas-
fired hot water boilers (but not max-tech), and baseline energy
efficiency for gas-fired steam boilers. TSL 3 represents the highest
efficiency level for each product class with a positive NPV at both 3
percent and 7 percent discount rate. TSL 2 represents baseline energy
efficiency for gas-fired and oil-fired steam boilers and an
intermediate energy efficiency for gas-fired and oil-fired hot water
boilers. At TSL 2, gas-fired hot water boilers still require condensing
technology. TSL 1 represents baseline energy efficiency for gas-fired
and oil-fired steam boilers and the minimum improvement in energy
efficiency for gas-fired and oil-fired hot water boilers.
Table V.1--Trial Standard Levels for Consumer Boilers
----------------------------------------------------------------------------------------------------------------
Trial standard level
Product class ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Efficiency level
---------------------------------------------------------------
Gas-fired Hot Water............................. 1 2 3 4
Gas-fired Steam................................. Baseline Baseline Baseline 1
Oil-fired Hot Water............................. 1 1 2 2
Oil-fired Steam................................. Baseline Baseline 1 1
----------------------------------------------------------------------------------------------------------------
DOE constructed the TSLs for this NOPR to include ELs
representative of ELs with similar characteristics (i.e., using similar
technologies and/or efficiencies, and having roughly comparable
equipment availability). The use of representative ELs provided for
greater distinction between the TSLs. While representative ELs were
included in the TSLs, DOE considered all efficiency levels as part of
its analysis.\154\
---------------------------------------------------------------------------
\154\ Efficiency levels that were analyzed for this NOPR are
discussed in section IV.C.1 of this document. Results by efficiency
level are presented in chapters 8, 10, and 12 of the NOPR TSD.
---------------------------------------------------------------------------
[[Page 55185]]
B. Economic Justification and Energy Savings
1. Economic Impacts on Individual Consumers
DOE analyzed the economic impacts on consumer boiler consumers by
looking at the effects that potential amended standards at each TSL
would have on the LCC and PBP. DOE also examined the impacts of
potential standards on selected consumer subgroups. These analyses are
discussed in the following sections.
a. Life-Cycle Cost and Payback Period
In general, higher-efficiency products affect consumers in two
ways: (1) purchase price increases and (2) annual operating costs
decrease. Inputs used for calculating the LCC and PBP include total
installed costs (i.e., product price plus installation costs), and
operating costs (i.e., annual energy use, energy prices, energy price
trends, repair costs, and maintenance costs). The LCC calculation also
uses product lifetime and a discount rate. Chapter 8 of the NOPR TSD
provides detailed information on the LCC and PBP analyses.
Table V.2 through Table V.9 show the LCC and PBP results for the
TSLs considered for each product class. In the first of each pair of
tables, the simple payback is measured relative to the baseline
product. In the second table, impacts are measured relative to the
efficiency distribution in the no-new-standards case in the compliance
year (see section IV.F.8 of this document). Because some consumers
purchase products with higher efficiency in the no-new-standards case,
the average savings are less than the difference between the average
LCC of the baseline product and the average LCC at each TSL. The
savings refer only to consumers who are affected by a standard at a
given TSL. Those who already purchase a product with efficiency at or
above a given TSL are not affected. Consumers for whom the LCC
increases at a given TSL experience a net cost.
Table V.2--Average LCC and PBP Results for Gas-Fired Hot Water Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2022$)
----------------------------------------------------
First Simple Average
TSL Efficiency level Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline...................... 6,214 1,344 22,808 29,023 ........... 26.9
1......................................... 1............................. 6,483 1,335 22,659 29,141 29.2 26.9
2......................................... 2............................. 6,482 1,265 21,676 28,159 3.4 26.9
3......................................... 3............................. 6,543 1,221 20,956 27,499 2.7 26.9
4......................................... 4............................. 7,506 1,214 20,842 28,348 9.9 26.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.3--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
Efficiency -------------------------------------------------------
TSL level Average LCC savings * Percentage of consumers that
(2022$) experience net cost
----------------------------------------------------------------------------------------------------------------
1....................................... 1 (193) 11
2....................................... 2 275 13
3....................................... 3 768 11
4....................................... 4 (526) 78
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative (-) values.
Table V.4--Average LCC and PBP Results for Gas-Fired Steam Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average costs (2022$)
----------------------------------------------------
First Simple Average
TSL Efficiency level Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
1,2,3..................................... Baseline...................... 6,008 1,078 16,872 22,881 ........... 23.7
4......................................... 1............................. 6,192 1,069 16,738 22,930 20.4 23.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
[[Page 55186]]
Table V.5--Average LCC Savings Relative to the No-New-Standards Case for Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
Efficiency ---------------------------------------------------------
TSL level Average LCC savings * Percentage of consumers that
(2022$) experience net cost
----------------------------------------------------------------------------------------------------------------
4.................................... 1 (53) 56
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Note: Parentheses indicate negative (-) values.
Table V.6--Average LCC and PBP Results for Oil-Fired Hot Water Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average Costs (2022$)
----------------------------------------------------
First Simple Average
TSL Efficiency level Installed year's Lifetime payback lifetime
cost operating operating LCC (years) (years)
cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline...................... 6,945 2,783 44,601 51,546 ........... 25.6
1,2....................................... 1............................. 7,042 2,753 44,129 51,171 3.3 25.6
3,4....................................... 2............................. 7,137 2,724 43,667 50,804 3.3 25.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.7--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Hot Water Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
Efficiency -------------------------------------------------------
TSL level Average LCC savings * Percentage of consumers that
(2022$) experience net cost
----------------------------------------------------------------------------------------------------------------
1,2..................................... 1 374 4
3,4..................................... 2 666 4
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
Table V.8--Average LCC and PBP Results for Oil-fired Steam Boilers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average Costs (2022$)
------------------------------------------------------------------------ Simple payback Average
TSL Efficiency level First year's Lifetime (years) lifetime
Installed cost operating cost operating cost LCC (years)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1,2.......................... Baseline........ 6,977........... 2,726........... 36,398.......... 43,374.......... --............. 19.6
3,4.......................... 1............... 7,202........... 2,685........... 35,860.......... 43,062.......... 5.5............ 19.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
baseline product.
Table V.9--Average LCC Savings Relative to the No-New-Standards Case for Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
Life-cycle cost savings
Efficiency ---------------------------------------------------------
TSL level Average LCC savings * Percentage of consumers that
(2022$) experience net cost
----------------------------------------------------------------------------------------------------------------
3,4.................................. 1 310 14
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.
b. Consumer Subgroup Analysis
In the consumer subgroup analysis, DOE estimated the impact of the
considered TSLs on low-income households, senior-only households, and
small business. Table V.10 through Table V.13 compares the average LCC
savings and PBP at each efficiency level for the consumer subgroups
with similar metrics for the entire consumer sample for each product
class of consumer boilers. Chapter 11 of the NOPR TSD presents the
complete LCC and PBP results for the subgroups.
[[Page 55187]]
Table V.10--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Gas-Fired Hot Water
Boilers
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only Small
TSL households households businesses All households
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1............................................... (100) (267) (34) (193)
2............................................... 326 190 530 275
3............................................... 643 545 777 768
4............................................... (161) (559) (541) (526)
----------------------------------------------------------------------------------------------------------------
Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1............................................... 29.1 41.5 12.8 29.2
2............................................... 0.8 1.5 1.6 3.4
3............................................... 0.9 1.6 1.4 2.7
4............................................... 7.4 11.5 4.4 9.9
----------------------------------------------------------------------------------------------------------------
Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1............................................... 11 9 5 12
2............................................... 13 14 5 14
3............................................... 21 25 17 29
4............................................... 31 18 8 15
----------------------------------------------------------------------------------------------------------------
Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1............................................... 7 14 4 11
2............................................... 10 14 6 13
3............................................... 9 13 6 11
4............................................... 34 70 83 78
----------------------------------------------------------------------------------------------------------------
Table V.11--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Gas-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only Small
TSL households households businesses All households
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1,2,3........................................... NA NA NA NA
4............................................... 14 (69) 26 (53)
----------------------------------------------------------------------------------------------------------------
Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1,2,3........................................... NA NA NA NA
4............................................... 14.7 25.8 7.3 20.4
----------------------------------------------------------------------------------------------------------------
Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1,2,3........................................... NA NA NA NA
4............................................... 37 25 64 29
----------------------------------------------------------------------------------------------------------------
Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1,2,3........................................... NA NA NA NA
4............................................... 25 58 19 56
----------------------------------------------------------------------------------------------------------------
Table V.12--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Oil-Fired Hot Water
Boilers
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only Small
TSL households households businesses All households
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1,2............................................. 334 324 438 374
3,4............................................. 603 569 771 666
----------------------------------------------------------------------------------------------------------------
Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1,2............................................. 1.3 2.9 1.8 3.3
[[Page 55188]]
3,4............................................. 1.3 2.9 1.8 3.3
----------------------------------------------------------------------------------------------------------------
Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1,2............................................. 70 71 61 70
3,4............................................. 85 89 74 86
----------------------------------------------------------------------------------------------------------------
Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1,2............................................. 1 2 15 4
3,4............................................. 1 2 19 4
----------------------------------------------------------------------------------------------------------------
Table V.13--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households; Oil-Fired Steam Boilers
----------------------------------------------------------------------------------------------------------------
Low-income Senior-only Small
TSL households households businesses All households
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
1,2............................................. NA NA NA NA
3,4............................................. 279 284 468 310
----------------------------------------------------------------------------------------------------------------
Payback Period (years)
----------------------------------------------------------------------------------------------------------------
1,2............................................. NA NA NA NA
3,4............................................. 3.2 4.7 3 5.5
----------------------------------------------------------------------------------------------------------------
Consumers with Net Benefit (%)
----------------------------------------------------------------------------------------------------------------
1,2............................................. NA NA NA NA
3,4............................................. 77 83 65 80
----------------------------------------------------------------------------------------------------------------
Consumers with Net Cost (%)
----------------------------------------------------------------------------------------------------------------
1,2............................................. NA NA NA NA
3,4............................................. 5 10 30 14
----------------------------------------------------------------------------------------------------------------
c. Rebuttable Presumption Payback
As discussed in section III.G.2 of this document, EPCA establishes
a rebuttable presumption that 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. In calculating a
rebuttable presumption payback period for each of the considered TSLs,
DOE used discrete values, and, as required by EPCA, based the energy
use calculation on the DOE test procedure for consumer boilers. In
contrast, the PBPs presented in section V.B.1.a of this document were
calculated using distributions that reflect the range of energy use in
the field.
Table V.14 presents the rebuttable-presumption payback periods for
the considered TSLs for consumer boilers. While DOE examined the
rebuttable-presumption criterion, it assessed whether the standard
levels considered for the NOPR are economically justified through a
more detailed analysis of the economic impacts of those levels,
pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range
of impacts to the consumer, manufacturer, Nation, and environment. The
results of that 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.
Table V.14--Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
Gas-fired hot Gas-fired Oil-fired hot Oil-fired
TSL water steam water steam
----------------------------------------------------------------------------------------------------------------
1............................................... 20.2 .............. 2.2 ..............
2............................................... 4.0 .............. 2.2 ..............
3............................................... 2.7 .............. 2.2 5.1
4............................................... 9.7 13.3 2.2 5.1
----------------------------------------------------------------------------------------------------------------
[[Page 55189]]
2. Economic Impacts on Manufacturers
DOE performed an MIA to estimate the impact of amended energy
conservation standards on manufacturers of consumer boilers. The
following section describes the expected impacts on manufacturers at
each considered TSL. Chapter 12 of the NOPR TSD explains the analysis
in further detail.
a. Industry Cash-Flow Analysis Results
In this section, DOE provides GRIM results from the analysis, which
examines changes in the industry that would result from a potential
standard. The following tables summarize the estimated financial
impacts (represented by changes in INPV) of potential amended energy
conservation standards on manufacturers of consumer boilers, as well as
the conversion costs that DOE estimates manufacturers of consumer
boilers would incur at each TSL. To evaluate the range of cash-flow
impacts on the consumer boiler industry, DOE analyzed two scenarios
using different assumptions that correspond to the range of anticipated
market responses to amended energy conservation standards: (1) the
preservation of gross margin percentage scenario; and (2) the
preservation of operating profit scenario. These are discussed in
further detail in section IV.J.2.d of this document.
The preservation of gross margin percentage scenario applies a
``gross margin percentage'' of 29 percent for all product classes and
all efficiency levels.\155\ This scenario assumes that a manufacturer's
per-unit dollar profit would increase as MPCs increase in the standards
cases and represents the likely upper-bound to industry profitability
under potential amended energy conservation standards.
---------------------------------------------------------------------------
\155\ The gross margin percentage of 29 percent is based on a
manufacturer markup of 1.41.
---------------------------------------------------------------------------
The preservation of operating profit scenario reflects
manufacturers' concerns about their inability to maintain margins as
MPCs increase to reach more-stringent efficiency levels. In this
scenario, while manufacturers make the necessary investments required
to convert their facilities to produce compliant products, operating
profit does not change in absolute dollars and decreases as a
percentage of revenue. The preservation of operating profit scenario
represents the likely lower (or more severe) bound to financial impacts
of potential amended standards on industry.
Each of the modeled scenario's results in a unique set of cash
flows and corresponding INPV for each TSL for consumer boiler
manufacturers. INPV is the sum of the discounted cash flows to the
industry from the base year through the end of the analysis period
(2023-2059). The ``change in INPV'' results refer to the difference in
industry value between the no-new-standards case and standards case at
each TSL. To provide perspective on the short-run cash-flow impact, DOE
includes a comparison of free cash flow between the no-new-standards
case and the standards case at each TSL in the year before amended
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 no-new-standards case.
Conversion costs are one-time investments for manufacturers to
bring their manufacturing facilities (i.e., capital conversion costs)
and product designs (i.e., product conversion costs) into compliance
with potential amended standards. As described in section IV.J.2.c of
this document, conversion cost investments occur between the year of
publication of the final rule and the year by which manufacturers must
comply with a new or amended standard. The conversion costs can have a
significant impact on the short-term cash flow on the industry and
generally result in lower free cash flow in the period between the
publication of the final rule and the compliance date of potential
amended standards. Conversion costs are independent of the manufacturer
markup scenarios and are not presented as a range in this analysis.
Table V.15 presents the overall estimated industry MIA results at
each analyzed TSL. Table V.16, Table V.17, Table V.18, and Table V.19
present the estimated MIA results at each analyzed TSL for gas-fired
hot water, gas-fired steam, oil-fired hot water, and oil-fired steam
product classes, respectively. See chapter 12 of the NOPR TSD for a
discussion of cash-flow analysis results by product class.
Table V.15--Manufacturer Impact Analysis of Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new-
Unit standards case TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2022$ millions.............. 532.0 514.1 to 517.1 487.0 to 504.8 469.7 to 491.2 411.9 to 527.6
Change in INPV *.......................... 2022$ millions.............. .............. (17.9) to (45.0) to (62.2) to (120.0) to
%........................... .............. (14.9) (27.2) (40.7) (4.3)
(3.4) to (2.8) (8.5) to (5.1) (11.7) to (22.6) to
(7.7) (0.8)
Free Cash Flow (2029) *................... 2022$ millions.............. 47.2 34.6 17.4 5.5 (22.2)
Change in Free Cash Flow (2029) *......... %........................... .............. (26.7) (63.2) (88.4) (147.0)
Capital Conversion Costs.................. 2022$ millions.............. .............. 12.7 55.1 74.5 98.6
Product Conversion Costs.................. 2022$ millions.............. .............. 19.6 14.4 23.5 71.5
Total Conversion Costs.................... 2022$ millions.............. .............. 32.3 69.5 98.0 170.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.
Table V.16--Manufacturer Impact Analysis of Gas-Fired Hot Water Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new-
Unit standards case TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2022$ millions.............. 409.4 399.1 to 401.5 371.9 to 389.0 364.6 to 384.4 316.7 to 428.9
Change in INPV *.......................... 2022$ millions.............. .............. (10.3) to (37.5) to (44.9) to (92.8) to 19.5
%........................... .............. (8.0) (20.4) (25.0) (22.7) to 4.8
(2.5) to (1.9) (9.2) to (5.0) (11.0) to
(6.1)
Capital Conversion Costs.................. 2022$ millions.............. .............. 8.1 50.5 62.2 77.9
Product Conversion Costs.................. 2022$ millions.............. .............. 9.9 4.7 3.1 39.5
[[Page 55190]]
Total Conversion Costs.................... 2022$ millions.............. .............. 17.9 55.1 65.2 117.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.
Table V.17--Manufacturer Impact Analysis of Gas-Fired Steam Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new-
Unit standards case TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2022$ millions.............. 41.7 41.7 41.7 41.7 30.8 to 32.5
Change in INPV *.......................... 2022$ millions.............. .............. .............. .............. .............. (10.9) to
%........................... .............. .............. .............. .............. (9.3)
(26.2) to
(22.2)
Capital Conversion Costs.................. 2022$ millions.............. .............. .............. .............. .............. 8.4
Product Conversion Costs.................. 2022$ millions.............. .............. .............. .............. .............. 11.5
Total Conversion Costs.................... 2022$ millions.............. .............. .............. .............. .............. 19.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.
Table V.18--Manufacturer Impact Analysis of Oil-Fired Hot Water Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new-
Unit standards case TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2022$ millions.............. 73.5 65.9 to 66.6 65.9 to 66.6 60.0 to 61.4 60.0 to 61.4
Change in INPV *.......................... 2022$ millions.............. .............. (7.6) to (6.9) (7.6) to (6.9) (13.6) to (13.6) to
%........................... .............. (10.3) to (10.3) to (12.1) (12.1)
(9.4) (9.4) (18.4) to (18.4) to
(16.4) (16.4)
Capital Conversion Costs.................. 2022$ millions.............. .............. 4.7 4.7 8.4 8.4
Product Conversion Costs.................. 2022$ millions.............. .............. 9.7 9.7 17.2 17.2
Total Conversion Costs.................... 2022$ millions.............. .............. 14.4 14.4 25.6 25.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.
Table V.19--Manufacturer Impact Analysis of Oil-Fired Steam Consumer Boiler Industry Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new-
Unit standards case TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2022$ millions.............. 7.5 7.5 7.5 3.4 to 3.6 3.4 to 3.6
Change in INPV *.......................... 2022$ millions.............. .............. .............. .............. (4.1) to (4.0) (4.1) to (4.0)
%........................... .............. .............. .............. (54.6) to (54.6) to
(52.7) (52.7)
Capital Conversion Costs.................. 2022$ millions.............. .............. .............. .............. 3.9 3.9
Product Conversion Costs.................. 2022$ millions.............. .............. .............. .............. 3.3 3.3
Total Conversion Costs.................... 2022$ millions.............. .............. .............. .............. 7.2 7.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Parentheses denote negative (-) values.
At TSL 4, the standard represents the max-tech efficiencies for all
boiler product classes. At this level, DOE estimates the change in INPV
would range from -22.6 to -0.8 percent. At TSL 4, free cash flow is
estimated to decrease to -$22.0 million, which represents a decrease of
approximately 147.0 percent compared to the no-new-standards case value
of $47.2 million in the year 2029, the year before the anticipated
compliance date. DOE's shipments analysis estimates approximately 10
percent of current shipments meet this level. DOE estimates capital
conversion costs of $98.6 million and product conversion of costs of
$71.5 million. Industry conversion costs total $170.1 million.
At TSL 4, the large conversion costs result in a free cash flow
dropping below zero in the years before the standards year. The
negative free cash flow calculation indicates manufacturers may need to
access cash reserves or outside capital to finance conversion efforts.
At TSL 4, the shipment-weighted average MPC for all consumer
boilers is expected to increase by 41.4 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers
in 2030. In the preservation of gross margin percentage scenario (in
which manufacturers can fully pass along this cost increase), the
increase in cashflow from the higher MSP is outweighed by the $170.1
million in conversion costs, causing a slightly negative change in INPV
at TSL 4 under this scenario. Under the preservation of operating
profit scenario, the manufacturer markup decreases in 2031, the year
after the anticipated compliance date. This reduction in the
manufacturer markup and the $170.1 million in conversion costs incurred
by manufacturers cause a large negative change in INPV at TSL 4 under
the preservation of operating profit scenario.
The design options analyzed at TSL 4 for gas-fired hot water
boilers, which
[[Page 55191]]
accounts for approximately 75 percent of industry shipments, included
implementing a condensing stainless-steel heat exchanger with increased
heat exchanger surface area and improvements in geometry as compared to
the designs analyzed at TSL 3 (95 percent AFUE) and a premix,
modulating burner.
Out of the 24 gas-fired hot water boiler OEMs, only six OEMs offer
models that meet the efficiencies required by TSL 4. At this level, all
gas-fired hot water boilers must transition to the max-tech condensing
technology. This is a significant technological shift and may be
challenging for many manufacturers. Less than 5 percent of gas-fired
hot water model listings can meet the 96-percent AFUE required. At this
level, DOE estimates the change in INPV for the gas-fired hot water
boiler industry would range from -2.5 to 1.9 percent.
With approximately 95 percent of all model offerings currently on
the market rendered obsolete, all 24 manufacturers would need to re-
evaluate and redesign their portfolio of gas-fired hot water product
offerings. Many OEMs that have extensive condensing gas-fired hot water
product offerings do not have any models that can meet max-tech. Even
OEMs that offer some max-tech models today would need to allocate
extensive technical resources to provide max-tech offerings across the
full range of capacities to serve their customers. Manufacturers that
are heavily invested in the non-condensing market would likely need to
re-orient their role in the market and determine how to compete in a
marketplace where there is only one efficiency level.
Traditionally, manufacturers have designed their product lines to
support a range of models with varying input capacities, and the
efficiency has varied between models within the line. In reviewing
available models, DOE found that manufacturers generally only have one
or two input capacities optimized to achieve 96-percent AFUE within
each product line, while the remaining input capacities are at a lower
AFUE. This suggests that manufacturers may have to individually
redesign each model within product lines to ensure all models can
achieve the max-tech level. A model-by-model redesign would necessitate
a significant increase in design effort for manufacturers.
Additionally, in confidential interviews, some manufacturers who source
condensing heat exchangers expressed concern that the relatively lower
shipment volumes of boilers in the U.S. market--compared to
international markets for boilers--could make it difficult to find
suppliers willing to produce heat exchanger designs that would allow
all models within their gas-fired hot water product lines to meet 96-
percent AFUE, as each heat exchanger design would need to be optimized
for a given input capacity. DOE estimates gas-fired hot water boiler
product conversion costs of $3.1 million. The push toward new product
designs would also require changes to the manufacturing facilities.
Manufacturers would need to extend or add additional assembly lines to
accommodate the growth in condensing gas-fired hot water boiler sales.
Furthermore, manufacturers that are heavily invested in the non-
condensing market would likely have need to make the most significant
capital investments, such as new production lines and updates to the
factory floor. DOE estimates gas-fired hot water boiler capital
conversion costs of $65.2 million.
For the remaining product classes (gas-fired steam, oil-fired hot
water, oil-fired steam), the design options analyzed mainly included
increasing heat exchanger surface area relative to lower efficiency
levels. The max-tech efficiency level at TSL 4 for these three product
classes does not require a shift to condensing designs and does not
dramatically alter the manufacturing process. Gas-fired steam shipments
account for approximately 10 percent of current industry shipments.
Oil-fired hot water shipments account for approximately 14 percent of
current industry shipments. Oil-fired steam shipments account for
approximately 1 percent of current industry shipments.
All four gas-fired steam boiler OEMs offer some models that meet
the max-tech efficiencies. However, only 8 percent of gas-fired steam
model listings meet the efficiencies required by TSL 4. At this level,
DOE estimates the change in INPV for the gas-fired steam boiler
industry would range from -26.2 percent and -22.2 percent. DOE
estimates gas-fired steam boiler capital conversion costs of $8.4
million and gas-fired steam boiler product conversion of costs of $11.5
million.
Out of the 11 oil-fired hot water boiler OEMs, only two OEMs offer
models that meet the max-tech efficiencies. Approximately 3 percent of
oil-fired hot water model listings currently meet the TSL 4
efficiencies. At this level, DOE estimates the change in INPV for the
oil-fired hot water boiler industry would range from -18.4 percent and
-16.4 percent. DOE estimates oil-fired hot water boiler capital
conversion costs of $8.4 million and oil-fired hot water boiler product
conversion of costs of $17.2 million.
Out of the four oil-fired steam boiler OEMs, two OEMs offer models
that meet the max-tech efficiencies. Approximately 22 percent of oil-
fired steam model listings currently meet the TSL 4 efficiencies. At
this level, DOE estimates the change in INPV for the oil-fired steam
industry would range from -54.6 percent and -52.7 percent. DOE
estimates oil-fired steam boiler capital conversion costs of $3.9
million and oil-fired steam boiler product conversion of costs of $3.3
million.
The design options available to increase the efficiency of gas-
fired steam, oil-fired hot water, and oil-fired steam boilers are
similar. Manufacturers may be able to meet max-tech efficiency for some
models by adding additional heat exchanger sections. However, where
additional sections are not sufficient, manufacturers may need to
invest in the more time-intensive process of redesigning of the heat
exchanger and in new castings and tooling to achieve max-tech
efficiencies.
At TSL 3, the standard represents EL 3 for gas-fired hot water
boilers, baseline efficiency for gas-fired steam boilers, EL 2 for oil-
fired hot water boilers, and EL 1 for oil-fired steam boiler. At this
level, DOE estimates the change in INPV would range from -11.7 to -7.7
percent. At TSL 3, free cash flow is estimated to decrease to -$5.5
million, which represents a decrease of approximately 88.4 percent
compared to the no-new-standards case value of $47.2 million in the
year 2029, the year before the anticipated compliance year. DOE's
shipments analysis estimates approximately 57 percent of current
shipments meet this level.
The decrease in industry conversion costs compared to TSL 4 is
entirely driven by the lower efficiencies required for gas-fired hot
water and gas-fired steam boilers. As with TSL 4, manufacturers heavily
invested in non-condensing gas-fired hot water boilers would need to
develop or expand their condensing production capacity. However, unlike
TSL 4, most manufacturers currently offer products that meet the 95
percent AFUE required at this TSL. DOE estimates capital conversion
costs of $74.5 million and product conversion of costs of $23.5
million. Conversion costs total $98.0 million.
At TSL 3, the large conversion costs result in a free cash flow
dropping below zero in the years before the standards year. The
negative free cash flow calculation indicates manufacturers may need to
access cash reserves or outside capital to finance conversion efforts.
[[Page 55192]]
At TSL 3, the shipment-weighted average MPC for all consumer
boilers is expected to increase by 8.0 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers
in 2030. In the preservation of gross margin percentage scenario, the
increase in cashflow from the higher MSP is outweighed by the $98.0
million in conversion costs, causing a negative change in INPV at TSL 3
under this scenario. Under the preservation of operating profit
scenario, the manufacturer markup decreases in 2031, the year after the
anticipated compliance date. This reduction in the manufacturer markup
and the $98.0 million in conversion costs incurred by manufacturers
cause a negative change in INPV at TSL 3 under the preservation of
operating profit scenario.
The design options analyzed at TSL 3 for gas-fired hot water
boilers included implementing a condensing stainless-steel heat
exchanger with a premix modulating burner. Out of the 24 gas-fired hot
water boiler OEMs, 18 OEMs offer models that meet the efficiencies
required by TSL 3 (95-percent AFUE). Approximately 40 percent of gas-
fired hot water model listings currently meet TSL 3 efficiencies. At
this level, DOE estimates the change in INPV for the gas-fired hot
water industry would range from -11.0 percent and -6.1 percent. DOE
estimates gas-fired hot water boiler capital conversion costs of $62.2
million and gas-fired hot water boiler product conversion of costs of
$3.1 million. As with TSL 4, manufacturers heavily invested in non-
condensing gas-fired hot water boilers would need to develop or expand
their condensing production capacity, which would necessitate new
production lines and updates to the factory floor. However, unlike TSL
4, most manufacturers currently offer products that meet the 95-percent
AFUE required. Additionally, TSL 3 reduces the need to redesign by
optimizing design at the individual model level to meet amended
standards.
For gas-fired steam boilers, TSL 3 corresponds to the baseline
efficiency level (82 percent AFUE). As a result, when evaluating this
product class in isolation, DOE expects that the gas-fired steam
industry would incur zero conversion costs. For oil-fired hot water and
oil-fired steam boilers, the efficiency level required at TSL 3 is the
same as TSL 4. As a result, DOE expects that the estimated changes in
INPV and associated capital and product conversion costs for oil-fired
hot water and oil-fired steam boilers at TSL 3 would be the same as TSL
4.
At TSL 2, the standard represents EL 2 for gas-fired hot water
boilers, baseline efficiency for gas-fired steam boilers, EL 1 for oil-
fired hot water boilers, and baseline efficiency for oil-fired steam
boilers. At this level, DOE estimates the change in INPV would range
from -8.5 to -5.1 percent. At TSL 2, free cash flow is estimated to
decrease to $17.4 million, which represents a decrease of approximately
63.2 percent compared to the no-new-standards case value of $47.2
million in the year 2029, the year before the anticipated compliance
date. DOE's shipments analysis estimates approximately 70 percent of
current shipments meet this level.
The decrease in conversion costs compared to TSL 3 is entirely
driven by the lower efficiencies required for gas-fired hot water, oil-
fired hot water, and oil-fired steam boilers, which all together
account for 90 percent of current industry shipments. As with TSL 3 and
TSL 4, manufacturers heavily invested in non-condensing gas-fired hot
water boilers would need to develop or expand their condensing
production capacity. However, at TSL 2, more manufacturers currently
offer products that meet the 90-percent AFUE required. DOE estimates
capital conversion costs of $55.1 million and product conversion of
costs of $14.4 million. Conversion costs total $69.5 million.
At TSL 2, the shipment-weighted average MPC for all consumer
boilers is expected to increase by 6.8 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers
in 2030. In the preservation of gross margin percentage scenario, the
increase in cashflow from the higher MSP is slightly outweighed by the
$69.5 million in conversion costs, causing a negative change in INPV at
TSL 2 under this scenario. Under the preservation of operating profit
scenario, the manufacturer markup decreases in 2031, the year after the
anticipated compliance date. This reduction in the manufacturer markup
and the $69.5 million in conversion costs incurred by manufacturers
cause a negative change in INPV at TSL 2 under the preservation of
operating profit scenario.
The design options analyzed at TSL 2 for gas-fired hot water
boilers included implementing a condensing cast aluminum or stainless-
steel heat exchanger and modulating burner. Out of the 24 gas-fired hot
water boiler OEMs, 21 OEMs offer models that meet the efficiencies
required by TSL 2. Approximately 54 percent of gas-fired hot water
model listings currently meet TSL 2 efficiencies. At this level, DOE
estimates the change in INPV for the gas-fired hot water industry would
range from -9.2 percent to -5.0 percent. DOE estimates gas-fired hot
water boiler capital conversion costs of $50.5 million and gas-fired
hot water boiler product conversion of costs of $4.7 million. As with
TSL 3 and TSL 4, manufacturers heavily invested in non-condensing gas-
fired hot water boilers would need to develop or expand their
condensing production capacity. However, at TSL 2, more manufacturers
currently offer products that meet the 90-percent AFUE required.
Product conversion costs would be driven by the development and testing
necessary to develop compliant, cost-competitive products.
For gas-fired steam boilers and oil-fired steam boilers, TSL 2
corresponds to the baseline efficiency levels (82 percent AFUE and 85
percent AFUE, respectively). As a result, when evaluating these product
classes in isolation, DOE expects that the gas-fired steam and oil-
fired steam industries would incur zero conversion costs.
For oil-fired hot water boilers, TSL 2 corresponds to EL 1 (87
percent AFUE). The design options analyzed for oil-fired hot water
boilers included increasing the heat exchanger surface area beyond what
was analyzed at baseline but less than what was analyzed at max-tech
(EL 2). Out of the 11 oil-fired hot water boiler OEMs, 10 OEMs offer
models that meet the efficiencies required. Approximately 44 percent of
oil-fired hot water model listings currently meet TSL 2 efficiencies.
At this level, DOE estimates the change in INPV for the oil-fired hot
water industry would range from -10.3 percent to -9.4 percent. DOE
estimates oil-fired hot water boiler capital conversion costs of $4.7
million and oil-fired hot water boiler product conversion of costs of
$9.7 million. DOE expects that some manufacturers would need to invest
in new casting designs and tooling to meet TSL 2 efficiencies.
At TSL 1, the standard represents EL 1 for gas-fired hot water
boilers, baseline efficiency for gas-fired steam boilers, EL 1 for oil-
fired hot water boilers, and baseline efficiency for oil-fired steam
boilers. At this level, DOE estimates the change in INPV would range
from -3.4 to -2.8 percent. At TSL 1, free cash flow is estimated to
decrease to $34.6 million, which represents a decrease of approximately
26.7 percent compared to the no-new-standards case value of $47.2
million in the year 2029, the year before the anticipated compliance
date. DOE's shipments analysis estimates approximately 73 percent of
current shipments meet this level.
[[Page 55193]]
The decrease in conversion costs compared to TSL 2 is entirely
driven by the lower efficiency required for gas-fired hot water
boilers, which accounts for 75 percent of current industry shipments.
DOE estimates industry capital conversion costs of $12.7 million and
product conversion of costs of $19.6 million. Conversion costs total
$32.3 million.
At TSL 1, the shipment-weighted average MPC for all consumer
boilers is expected to increase by 1.2 percent relative to the no-new-
standards case shipment-weighted average MPC for all consumer boilers
in 2030. In the preservation of gross margin percentage scenario, the
increase in cashflow from the higher MSP is slightly outweighed by the
$32.3 million in conversion costs, causing a slightly negative change
in INPV at TSL 1 under this scenario. Under the preservation of
operating profit scenario, the manufacturer markup decreases in 2031,
the year after the anticipated compliance date. This reduction in the
manufacturer markup and the $32.3 million in conversion costs incurred
by manufacturers cause a slightly negative change in INPV at TSL 1
under the preservation of operating profit scenario.
The design options analyzed for gas-fired hot water boilers
included increasing heat exchanger surface area beyond what was
analyzed at the baseline efficiency. For gas-fired hot water boilers,
TSL 1 corresponds to EL 1 (85 percent AFUE). Out of the 24 gas-fired
hot water OEMs, 23 offer models that meet the TSL 1 efficiencies.
Approximately 67 percent of gas-fired hot water model listings
currently meet TSL 1 efficiencies. At this level, DOE estimates the
change in INPV for the gas-fired hot water industry would range from -
2.5 percent to -1.9 percent. DOE estimates gas-fired hot water boiler
capital conversion costs of $8.1 million and gas-fired hot water boiler
product conversion of costs of $9.9 million.
For gas-fired steam boilers and oil-fired steam boilers, TSL 1
corresponds to the baseline efficiency levels (82 percent AFUE and 85
percent AFUE, respectively). As a result, when evaluating these product
classes in isolation, DOE expects that the gas-fired steam and oil-
fired steam industries would incur zero conversion costs.
For oil-fired hot water boilers, the efficiency level required at
TSL 1 is the same as TSL 2. As a result, DOE expects that the estimated
changes in INPV and associated capital and product conversion costs for
oil-fired hot water boilers at TSL 1 would be the same as TSL 2.
DOE seeks comments, information, and data on the capital conversion
costs and product conversion costs estimated for each TSL.
b. Direct Impacts on Employment
To quantitatively assess the potential impacts of amended energy
conservation standards on direct employment in the consumer boiler
industry, DOE used the GRIM to estimate the domestic labor expenditures
and number of direct employees in the no-new-standards case and in each
of the standards cases (i.e., TSLs) during the analysis period. DOE
calculated these values using statistical data from the 2021 ASM,\156\
BLS employee compensation data,\157\ results of the engineering
analysis, DOE's CCD, and manufacturer interviews.
---------------------------------------------------------------------------
\156\ U.S. Census Bureau, Annual Survey of Manufactures,
``Summary Statistics for Industry Groups and Industries in the U.S.
(2021),'' (Available at: www.census.gov/data/tables/time-series/econ/asm/2018-2021-asm.html) (Last accessed Feb. 14, 2023).
\157\ U.S. Bureau of Labor Statistics ``Employer Costs for
Employee Compensation,'' (December 15, 2022) (Available at:
www.bls.gov/news.release/pdf/ecec.pdf) (Last accessed Feb. 14,
2023).
---------------------------------------------------------------------------
Labor expenditures related to product manufacturing depend on the
labor intensity of the product, the sales volume, and an assumption
that wages remain fixed in real terms over time. The labor expenditures
in each year are calculated by multiplying the total MPCs by the labor
percentage of the MPCs. The labor expenditures in the GRIM were then
converted to production employment levels by dividing production labor
expenditures by the average fully-burdened wage multiplied by the
average number of hours worked per year per production worker. To do
this, DOE relied on the ASM inputs: Production Workers Annual Wages,
Production Workers Annual Hours, Production Workers for Pay Period, and
Number of Employees. DOE also relied on the BLS employee compensation
data to determine the fully-burdened wage ratio. The fully-burdened
wage ratio factors in paid leave, supplemental pay, insurance,
retirement and savings, and legally-required benefits.
The number of production employees is then multiplied by the U.S.
labor percentage to convert production employment to domestic
production employment. The U.S. labor percentage represents the
industry fraction of domestic manufacturing production capacity for the
covered product. This value is derived from manufacturer interviews,
product database analysis, and publicly-available information. Research
indicates that over 90 percent of non-condensing gas-fired hot water,
gas-fired steam, oil-fired hot water, and oil-fired steam boilers are
manufactured in the United States. Research indicates that
approximately 60 percent of condensing gas-fired hot water boilers are
manufactured in the United States. Therefore, overall, DOE estimates
that 75 percent of covered consumer boilers are produced domestically.
In addition to where the boiler is physically assembled, DOE
considers whether the principal components (e.g., the heat exchanger)
are produced in-house and in the United States. For non-condensing gas-
fired hot water, gas-fired steam, oil-fired hot water, and oil-fired
steam boilers, DOE estimates that over 90 percent of the heat
exchangers are produced in the United States. However, DOE determined
that nearly all condensing gas-fired hot water heat exchangers are
purchased from overseas manufacturers. Therefore, the domestic labor
associated with condensing heat exchangers is significantly less than
the domestic labor associated with non-condensing heat exchangers.
The domestic production employees estimate covers production line
workers, including line supervisors, who are directly involved in
fabricating and assembling products within the OEM facility. Workers
performing services that are closely associated with production
operations, such as materials handling tasks using forklifts, are also
included as production labor.\158\ DOE's estimates only account for
production workers who manufacture the specific products covered by
this proposed rulemaking.
---------------------------------------------------------------------------
\158\ U.S. Census Bureau's Annual Survey of Manufactures,
``Definitions and Instructions for the Annual Survey of
Manufactures, MA-10000'' (Available at: www2.census.gov/programs-surveys/asm/technical-documentation/questionnaire/2021/instructions/MA_10000_Instructions.pdf) (Last accessed March 5, 2023).
---------------------------------------------------------------------------
Non-production workers account for the remainder of the direct
employment figure. The non-production employees estimate covers
domestic workers who are not directly involved in the production
process, such as sales, engineering, human resources, and
management.\159\ Using the number of domestic production workers
calculated above, non-production domestic employees are extrapolated by
multiplying the ratio of non-production workers in the industry
compared to production employees. DOE assumes that this employee
distribution ratio remains constant between the no-new-standards case
and standards cases.
---------------------------------------------------------------------------
\159\ Id.
---------------------------------------------------------------------------
Using the GRIM, DOE estimates that in the absence of new energy
[[Page 55194]]
conservation standards, there would be 526 domestic workers for
consumer boilers in 2030. Table V.20 shows the range of the impacts of
energy conservation standards on U.S. manufacturing employment in the
consumer boiler industry. The following discussion provides a
qualitative evaluation of the range of potential impacts presented in
Table V.20.
Table V.20--Domestic Direct Employment Impacts for Consumer Boiler Manufacturers in 2030
----------------------------------------------------------------------------------------------------------------
No-new-
standards case TSL 1 TSL 2 TSL 3 TSL 4
----------------------------------------------------------------------------------------------------------------
Direct Employment (Domestic 526 521 453 to 511 450 to 497 464 to 541
Production Workers + Domestic
Non-Production Workers)........
Potential Changes in Direct .............. (5) (15) to (73) (29) to (76) 15 to (62)
Employment Workers*............
----------------------------------------------------------------------------------------------------------------
*DOE presents a range of potential direct employment impacts.
Note: Parentheses indicate negative (-) values.
The direct employment impacts shown in Table V.20 represent the
potential domestic employment changes that could result following the
compliance date of amended energy conservation standards for the
consumer boilers covered in this proposal. The upper bound estimate
corresponds to a change in the number of domestic workers that results
from amended energy conservation standards if manufacturers continue to
produce the same scope of covered products within the United States
after compliance is required. Under a condensing gas-fired hot water
boiler standard (i.e., TSL 2 through TSL 4), manufacturers would likely
shift away from in-house production of heat exchangers, which results
in a decrease in direct employment at TSL 2 and TSL 3. TSL 4 shows
potential positive impacts on domestic direct employment levels as max-
tech boilers (96-percent AFUE) are more complex to manufacturer and
require significant additional production labor.
Manufacturers could choose to relocate production facilities
outside of the United States where conversion costs and production
costs are lower; however, DOE does not expect manufacturers to move
production to foreign locations as a result of amended energy
conservation standards due to shipping considerations. Alternatively,
some manufacturers could choose not to make the necessary investments
to meet the amended energy conservation standards across all product
classes. To avoid underestimating the potential job losses that could
result from an amended energy conservation standard, DOE's lower bound
scenario assumes domestic manufacturers do not expand their condensing
production capacity in the standards cases and are only able to
maintain current sales levels of condensing boilers in the standards
cases.
At TSLs that do not require condensing technology (i.e., TSL 1),
DOE does not expect that there would be significant changes in
production employment as a direct result of amended conservation
standards, as manufacturers would likely continue to produce a similar
scope of non-condensing heat exchangers and consumer boilers in the
United States. However, under a condensing standard (i.e., TSL 2
through TSL 4), manufacturers would shift from sourcing or producing
non-condensing heat exchangers for gas-fired hot water boilers, which
are typically manufactured in U.S. facilities, to sourcing condensing
heat exchangers that are typically manufactured in foreign countries.
Additional detail on the analysis of direct employment can be found
in chapter 12 of the NOPR TSD. DOE notes that the direct employment
impacts discussed in this section are independent of the indirect
employment impacts from the broader U.S. economy, which are documented
in chapter 16 of the NOPR TSD.
DOE seeks comments, information, and data on the potential direct
employment impacts estimated for each TSL.
c. Impacts on Manufacturing Capacity
Nearly all consumer boiler OEMs currently offer some gas-fired hot
water boiler models that meet the TSL 3 condensing level proposed (95-
percent AFUE). At TSL 3, 19 out of the 25 gas-fired hot water boiler
OEMs currently offer models that meet the proposed level or required
efficiency. DOE interviewed manufacturers representing approximately 45
percent of industry shipments. In interviews, manufacturers heavily
invested in non-condensing gas-fired hot water boilers stated that they
would need to expand their condensing production capacity, which would
necessitate new production lines and updates to the factory floor.
However, most manufacturers would be able to add capacity and adjust
product designs in the 5-year period between the announcement year of
the amended standard and the compliance year of the amended standard.
At max-tech, only 9 percent of gas-fired hot water boiler shipments
currently meet the efficiency required. In interviews, most
manufacturers stated that they would likely need to work with component
manufacturers to develop new heat exchanger designs to consistently
meet the max-tech efficiencies. Some manufacturers expressed concern
that the 5-year conversion period would be insufficient to develop a
cost-competitive heat exchanger that could reliably achieve 96-percent
AFUE.
DOE seeks comment on whether manufacturers expect that
manufacturing capacity or engineering resource constraints would limit
product availability to consumers in the timeframe of the amended
standards compliance date (2030).
d. Impacts on Subgroups of Manufacturers
Using average cost assumptions to develop industry cash-flow
estimates may not capture the differential impacts among subgroups of
manufacturers. Small manufacturers, niche players, or manufacturers
exhibiting a cost structure that differs substantially from the
industry average could be affected disproportionately. DOE investigated
small businesses as a manufacturer subgroup that could be
disproportionally impacted by amended energy conservation standards and
could merit additional analysis. DOE also identified OEMs that own
cast-iron foundries specializing in consumer boiler castings as a
potential manufacturer subgroup that could be adversely impacted by
amended energy conservation standards based on the results of the
industry characterization.
[[Page 55195]]
Small Businesses
DOE analyzes the impacts on small businesses in a separate analysis
in section VI.B of this document as part of the Regulatory Flexibility
Analysis. In summary, the SBA defines a ``small business'' as having
500 employees or less for North American Industry Classification System
(NAICS) 333414, ``Heating Equipment (except Warm Air Furnaces)
Manufacturing.'' Based on this classification, DOE identified three
domestic OEMs that qualify as a small business. For a discussion of the
impacts on the small business manufacturer subgroup, see the Regulatory
Flexibility Analysis in section VI.B of this document and chapter 12 of
the NOPR TSD.
Manufacturers That Own Domestic Foundries
In addition to the small business subgroup, DOE identified
vertically-integrated OEMs that own domestic foundries specializing in
consumer boiler castings as a subgroup that may experience differential
impacts under a condensing gas-fired hot water standard (i.e., TSL 2
through TSL 4).
Research indicates that most non-condensing boilers use cast-iron
heat exchangers. Based on manufacturer interviews, the engineering
analysis, and the database of consumer boilers developed as part of the
market assessment, DOE estimates that nearly all non-condensing cast-
iron heat exchangers are made in U.S. foundries. Furthermore, DOE
understands that nearly all condensing heat exchangers are manufactured
overseas. Under a condensing standard, there will be a significant
reduction in demand for consumer boiler cast-iron heat exchangers as
gas-fired hot water boilers account for approximately 45 percent of the
non-condensing consumer boiler shipments.
Most consumer boiler manufacturers currently rely on third-party
foundries for their consumer boiler castings. Based on a review of
public data and information gathered during confidential interviews,
DOE found that most boiler OEMs source their consumer boiler castings
from one third-party foundry in Waupaca, Wisconsin. DOE tentatively
concluded that this foundry's operations would not be impacted by the
reduction in cast-iron heat exchanger production since consumer boilers
account for a minimal part of their casting portfolio. However,
foundries owned by consumer boiler OEMs typically specialize in
consumer and commercial boiler casting and would be impacted by the
reduction in cast-iron heat exchanger production. DOE believes that 15
to 25 percent of all consumer boilers are produced by OEMs that own
foundry assets. For the purpose of this subgroup analysis, DOE modeled
20 percent of all consumer boilers being manufactured by OEMs that own
foundry assets.
In response to the May 2022 Preliminary Analysis, stakeholders
asserted that cast-iron foundries producing heat exchangers for non-
condensing boilers have large, fixed costs that could no longer be
amortized across gas-fired hot water consumer boilers sales under a
condensing standard. Stakeholders noted that cast-iron boiler
manufacturers, particularly those that own a foundry, could face a
range of potential negative impacts of more-stringent consumer boiler
standards, including: (1) increases in cast-iron prices in other boiler
types; (2) stranded assets; (3) potential job losses associated with
foundry operation, casting, and assembly, which could lead to a
reduction in domestic manufacturing employment; and (4) possible
foundry closures.
DOE used the subgroup analysis GRIM to assess the potential
financial impacts of a condensing standard on boiler OEMs with
foundries. In its analysis, DOE evaluated the financial viability of
these OEMs if the foundries remained operational but at reduced output
due to the shift away from cast-iron heat exchangers under a condensing
standard for gas-fired hot water consumer boilers. DOE also evaluated
potential increases in cast-iron MPCs for gas-fired steam, oil-fired
hot water, and oil-fired steam products, reduced profitability for
those products, and stranded assets associated with gas-fired hot water
products in the subgroup analysis GRIM. Additionally, DOE analyzed
potential job losses associated with foundry operation, casting, and
assembly in section V.B.2.b of this document.
DOE relied on the engineering analysis and the shipments analysis
to estimate the potential reallocation of fixed foundry overhead to the
remaining cast-iron shipments under a condensing standard. For foundry
owners, DOE estimated a potential reallocation of $20 per-unit to gas-
fired steam, oil-fired hot water, and oil-fired steam shipments under a
condensing standard. DOE also asked manufacturers during confidential
interviews to estimate the potential reallocation costs but did not
receive sufficient quantitative feedback to inform the analysis.
To derive the $20 reallocation cost, DOE first used the engineering
analysis to estimate the average per-unit overhead and depreciation
costs associated with gas-fired hot water cast-iron heat exchangers. To
avoid underestimating the fixed foundry costs, DOE considered all the
heat exchanger overhead and depreciation as fixed costs. DOE estimates
that the average per-unit overhead and depreciation costs associated
with gas-fired hot water cast-iron heat exchangers is approximately
$24. DOE then used the reference year shipments distribution by product
class from the shipments analysis, foundry market share assumptions,
and the product database to calculate the cumulative foundry overhead
and depreciation costs associated with gas-fired hot water cast-iron
heat exchangers and reallocated those cumulative costs evenly across
the remaining cast-iron product class shipments (i.e., gas-fired steam,
oil-fired hot water, and oil-fired steam). In the subgroup analysis
GRIM, this $20 reallocation cost was added to the MPCs for gas-fired
steam, oil-fired hot water, and oil-fired steam in the standards cases
where gas-fired hot water boilers would need to meet a condensing
level.
DOE requests comment on the $20 per-unit reallocation cost for gas-
fired steam, oil-fired hot water, and oil-fired steam boilers under a
condensing standard for gas-fired hot water boilers, as well as the
methodology used to derive the estimate.
As discussed in section IV.J.2.d of this document, the industry
GRIM included two manufacturer markup scenarios to represent
uncertainty regarding the potential impacts on prices and profitability
for manufacturers following the implementation of amended energy
conservation standards: (1) a preservation of gross margin percentage
scenario; and (2) a preservation of operating profit scenario. For the
subgroup analysis GRIM, DOE customized these scenarios to account for
the additional price and profitability impacts for foundry owners under
a condensing standard.
To establish an upper-bound to industry profitability under
potential amended standards, DOE maintained the same scenario, the
preservation of gross margin percentage scenario, as modeled in the
industry GRIM. The preservation of gross margin percentage applies a
``gross margin percentage'' of 29 percent for all product classes and
all efficiency levels.\160\ This scenario assumes that a foundry
owner's per-unit dollar profit would increase as MPCs increase in the
standards cases. Under a condensing standard, foundry owner's
[[Page 55196]]
dollar profit for a cast-iron unit (e.g., oil-fired hot water boiler)
would increase relative to non-foundry owners due to the $20 increase
in MPC.
---------------------------------------------------------------------------
\160\ The gross margin percentage of 29 percent is based on a
manufacturer markup of 1.41.
---------------------------------------------------------------------------
DOE modeled the preservation of market MSP scenario to establish
the conservative lower (or more severe) bound to foundry owner
profitability. To develop this scenario, DOE used the manufacturer
markups from the preservation of operating profit scenario developed in
the industry GRIM as a starting point. As discussed in section IV.J.2.d
of this document, the preservation of operating profit scenario
reflects manufacturers' concerns about their inability to maintain
margins as MPCs increase to reach more-stringent efficiency levels. For
the subgroup analysis GRIM, as foundry owners' cost of production goes
up for gas-fired steam, oil-fired hot water, and oil-fired steam
product classes, foundry owners reduce their manufacturer markups to a
level that maintains the industry average MSPs calibrated under the
preservation of operating profit scenario. In essence, foundry owners
cannot charge more than their competitors that do not have foundry
assets, and consequently, they have reduced profit on each unit sold.
DOE implemented this scenario in the subgroup analysis GRIM by lowering
the manufacturer markups for gas-fired steam, oil-fired hot water, and
oil-fired steam product classes at TSL 2 through TSL 4 to yield
approximately the same MSP in the standards case as in the standards
case in the industry GRIM. The implicit assumptions behind this are
that foundry owners cannot raise their MSP to offset price increases
that are a result of the loss of cast-iron gas-fired hot water sales
and have reduced operating profit in absolute dollars after the amended
standard takes effect.
These modeling assumptions are intended to reflect manufacturer
comments a condensing standard for gas-fired hot water boilers would
results in increases in cast-iron prices in other boiler types.
Table V.21--Manufacturer Impact Analysis Consumer Boiler Subgroup Results
--------------------------------------------------------------------------------------------------------------------------------------------------------
No-new-
Unit standards case TSL 1 TSL 2 TSL 3 TSL 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
INPV...................................... 2022$ millions.............. 101.2 097.6 to 098.2 089.5 to 094.3 086.2 to 091.7 074.9 to 098.2
Change in INPV *.......................... 2022$ millions.............. .............. (3.6) to (3.0) (9.0) to (4.2) (12.3) to (23.7) to
(6.9) (0.3)
%........................... .............. (3.5) to (3.0) (9.2) to (4.3) (12.5) to (24.0) to
(7.0) (0.3)
Free Cash Flow (2029) *................... 2022$ millions.............. 8.8 6.2 2.6 0.2 (5.4)
Change in Free Cash Flow (2029) *......... %........................... .............. (28.8) (70.0) (98.0) (162.9)
Capital Conversion Costs.................. 2022$ millions.............. .............. 2.5 11.0 14.9 19.7
Product Conversion Costs.................. 2022$ millions.............. .............. 3.9 2.9 4.7 14.3
Total Conversion Costs.................... 2022$ millions.............. .............. 6.5 13.9 19.6 34.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note: Parentheses indicate negative (-) values.
The subgroup analysis results indicate that manufacturers that own
domestic foundries would fare worse than competitors that do not own
domestic foundries under amended standards that require condensing
levels for gas-fired hot water boilers. This occurs because
manufacturers that own domestic foundries must recover foundry
investments over smaller number of sales, given that gas-fired hot
water boilers currently account for 45 percent of cast-iron boilers
covered under this rulemaking. That cost recovery takes the form of MPC
increases for gas-fired steam, oil-fired hot water, and oil-fired steam
boilers. Manufacturers that own foundries face reduced profitability,
as DOE assumes they cannot pass the foundry-related MPC increases onto
their customers. However, even with these additional cost increases,
DOE's modeling suggests that manufacturers that own foundries would be
able to continue to operate, albeit with reduced profitability and at
reduced INPV relative to the overall industry.
DOE requests comment on the potential impacts on consumer boiler
manufacturers that own domestic foundry assets including impacts but
not limited to those vital to national security or critical
infrastructure at the TSLs analyzed in this NOPR analysis.
e. Cumulative Regulatory Burden
One aspect of assessing manufacturer burden involves looking at the
cumulative impact of multiple DOE standards and the product-specific
regulatory actions of other Federal agencies that affect the
manufacturers of a covered product or equipment. While any one
regulation may not impose a significant burden on manufacturers, the
combined effects of several existing 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.
DOE evaluates product-specific regulations that will take effect
approximately three years before or after the estimated 2030 compliance
date of any amended energy conservation standards for consumer boilers.
This information is presented in Table V.22.
[[Page 55197]]
Table V.22--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting
Consumer Boiler Original Equipment Manufacturers
----------------------------------------------------------------------------------------------------------------
Industry
Number of OEMs Approx. Industry conversion
Federal energy conservation standard Number of affected by standards conversion costs/product
OEMs * today's rule ** compliance costs (millions revenue ***
year $) (%)
----------------------------------------------------------------------------------------------------------------
Commercial Water Heating 14 11 2026 $34.60 (2020$) 4.7
Equipment[dagger] 87 FR 30610(May
19, 2022)...........................
Consumer Furnaces [dagger] 87 FR 15 4 2029 150.6 (2020$) 1.4
40590 (July 7, 2022)................
Consumer Clothes Dryers [dagger] 87 15 1 2027 149.7(2020$) 1.8
FR 51734 (August 23, 2022)..........
Consumer Conventional Cooking 34 1 2027 183.4 (2021$) 1.2
Products 88 FR 6818 [dagger]
(February 1, 2023)..................
Residential Clothes Washers [dagger] 19 1 2027 690.8 (2021$) 5.2
88 FR 13520 (March 3, 2023).........
Refrigerators, Freezers, and 49 1 2027 1,323.6 (2021$) 3.8
Refrigerator-Freezers [dagger] 88 FR
12452 (February 27, 2023)...........
Room Air Conditioners 88 FR 34298 8 1 2026 24.8 (2021$) 0.4
(May 26, 2023)......................
Microwave Ovens 88 FR 39912 (June 20, 18 1 2026 46.1 (2021$) 0.7
2023)...............................
Miscellaneous Refrigeration Products 38 1 2029 126.9 (2021$) 3.1
[dagger] 88 FR 19382 (March 31,
2023)...............................
Dishwashers [dagger] 88 FR 32514 (May 22 1 2027 125.6 (2021$) 2.1
19, 2023)...........................
Consumer Pool Heaters 88 FR 34624 20 3 2028 48.4 (2021$) 1.5
(May 30, 2023)......................
----------------------------------------------------------------------------------------------------------------
* This column presents the total number of OEMs identified in the energy conservation standard rule that is
contributing to cumulative regulatory burden.
** This column presents the number of OEMs producing consumer boilers that are also listed as OEMs in the
identified energy conservation standard that is contributing to cumulative regulatory burden.
*** This column presents industry conversion costs as a percentage of product revenue during the conversion
period. Industry conversion costs are the upfront investments manufacturers must make to sell compliant
products/equipment. The revenue used for this calculation is the revenue from just the covered product/
equipment associated with each row. The conversion period is the time frame over which conversion costs are
made and lasts from the publication year of the final rule to the compliance year of the energy conservation
standard. The conversion period typically ranges from 3 to 5 years, depending on the rulemaking.
[dagger] These rulemakings are at the NOPR stage, and all values are subject to change until finalized through
publication of a final rule.
DOE requests information regarding the impact of cumulative
regulatory burden on manufacturers of consumer boilers associated with
multiple DOE standards or product-specific regulatory actions of other
Federal agencies in addition to state or local regulations.
3. National Impact Analysis
This section presents DOE's estimates of the national energy
savings and the NPV of consumer benefits that would result from each of
the TSLs considered as potential amended standards.
a. Significance of Energy Savings
To estimate the energy savings attributable to potential amended
standards for consumer boilers, DOE compared their energy consumption
under the no-new-standards case to their anticipated energy consumption
under each TSL. The savings are measured over the entire lifetime of
products purchased in the 30-year period that begins in the year of
anticipated compliance with amended standards (2030-2059). Table V.19
presents DOE's projections of the national energy savings for each TSL
considered for consumer boilers. The savings were calculated using the
approach described in section IV.H.2 of this document.
Table V.23--Cumulative National Energy Savings for Consumer Boilers; 30 Years of Shipments
[2030-2059]
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(quads)
---------------------------------------------------------------
Primary energy.................................. 0.05 0.31 0.61 0.73
FFC energy...................................... 0.06 0.36 0.68 0.83
----------------------------------------------------------------------------------------------------------------
OMB Circular A-4 \161\ requires agencies to present analytical
results, including separate schedules of the monetized benefits and
costs that show the type and timing of benefits and costs. Circular A-4
also directs agencies to consider the variability of key elements
underlying the estimates of benefits and costs. For this rulemaking,
DOE undertook a sensitivity analysis using 9 years, rather than 30
years, of product shipments. The choice of a 9-year period is a proxy
for the timeline in EPCA for the review of certain energy conservation
standards and potential revision of and compliance with such revised
standards.\162\ The review
[[Page 55198]]
timeframe established in EPCA is generally not synchronized with the
product lifetime, product manufacturing cycles, or other factors
specific to consumer boilers. Thus, such results are presented for
informational purposes only and are not indicative of any change in
DOE's analytical methodology. The NES sensitivity analysis results
based on a 9-year analytical period are presented in Table V.24. The
impacts are counted over the lifetime of consumer boilers purchased in
2030-2038.
---------------------------------------------------------------------------
\161\ U.S. Office of Management and Budget, Circular A-4:
Regulatory Analysis (Sept. 17, 2003) (Available at:
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (Last accessed March 7, 2023).
\162\ 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
products, the compliance period is 5 years rather than 3 years.
Table V.24--Cumulative National Energy Savings for Consumer Boilers; 9 Years of Shipments
[2030-2038]
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(quads)
---------------------------------------------------------------
Primary energy.................................. 0.02 0.13 0.24 0.27
FFC energy...................................... 0.03 0.15 0.27 0.30
----------------------------------------------------------------------------------------------------------------
b. Net Present Value of Consumer Costs and Benefits
DOE estimated the cumulative NPV of the total costs and savings for
consumers that would result from the TSLs considered for consumer
boilers. In accordance with OMB's guidelines on regulatory
analysis,\163\ DOE calculated NPV using both a 7-percent and a 3-
percent real discount rate. Table V.21 shows the consumer NPV results
with impacts counted over the lifetime of products purchased in 2030-
2059.
---------------------------------------------------------------------------
\163\ U.S. Office of Management and Budget, Circular A-4:
Regulatory Analysis (Sept. 17, 2003) (Available at:
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf) (Last accessed March 7, 2023).
Table V.25--Cumulative Net Present Value of Consumer Benefits for Consumer Boilers; 30 Years of Shipments
[2030-2059]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
---------------------------------------------------------------
3 percent....................................... 0.16 0.73 2.27 (2.15)
7 percent....................................... 0.01 0.19 0.72 (1.55)
----------------------------------------------------------------------------------------------------------------
The NPV results based on the aforementioned 9-year analytical
period are presented in Table V.22. The impacts are counted over the
lifetime of products purchased in 2030-2038. As mentioned previously,
such results are presented for informational purposes only and are not
indicative of any change in DOE's analytical methodology or decision
criteria.
Table V.26--Cumulative Net Present Value of Consumer Benefits for Consumer Boilers; 9 Years of Shipments
[2030-2038]
----------------------------------------------------------------------------------------------------------------
Trial standard level
Discount rate ---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
(billion 2022$)
---------------------------------------------------------------
3 percent....................................... 0.11 0.47 1.22 (0.41)
7 percent....................................... 0.01 0.15 0.47 (0.72)
----------------------------------------------------------------------------------------------------------------
The previous results reflect the use of a default trend to estimate
the change in price for consumer boilers over the analysis period (see
section IV.F.1 of this document). DOE also conducted a sensitivity
analysis that considered one scenario with a lower rate of price
decline than the reference case and one scenario with a higher rate of
price decline than the reference case. The results of these alternative
cases are presented in appendix 10C of the NOPR TSD. In the high-price-
decline case, the NPV of consumer benefits is higher than in the
default case. In the low-price-decline case, the NPV of consumer
benefits is lower than in the default case.
c. Indirect Impacts on Employment
It is estimated that that amended energy conservation standards for
consumer boilers would reduce energy expenditures for consumers of
those
[[Page 55199]]
products, with the resulting net savings being redirected to other
forms of economic activity. These expected shifts in spending and
economic activity could affect the demand for labor. As described in
section IV.N of this document, DOE used an input/output model of the
U.S. economy to estimate indirect employment impacts of the TSLs that
DOE considered. There are uncertainties involved in projecting
employment impacts, especially changes in the later years of the
analysis. Therefore, DOE generated results for near-term timeframes
(2030-2035), where these uncertainties are reduced.
The results suggest that the proposed standards would be likely to
have a negligible impact on the net demand for labor in the economy.
The net change in jobs is so small that it would be imperceptible in
national labor statistics and might be offset by other, unanticipated
effects on employment. Chapter 16 of the NOPR TSD presents detailed
results regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
As discussed in section III.G.1.d of this document, DOE has
tentatively concluded that the standards proposed in this NOPR would
not lessen the utility or performance of the consumer boilers under
consideration in this proposed rulemaking. Manufacturers of these
products currently offer units that meet or exceed the proposed
standards.
5. Impact of Any Lessening of Competition
DOE considered any lessening of competition that would be likely to
result from new or amended standards. As discussed in section III.G.1.e
of this document, the Attorney General determines the impact, if any,
of any lessening of competition likely to result from a proposed
standard, and transmits such determination in writing to the Secretary,
together with an analysis of the nature and extent of such impact. To
assist the Attorney General in making this determination, DOE has
provided DOJ with copies of this NOPR and the accompanying TSD for
review. DOE will consider DOJ's comments on the proposed rule in
determining whether to proceed to a final rule. DOE will publish and
respond to DOJ's comments in that document.
DOE invites comment from the public regarding the competitive
impacts that are likely to result from this proposed rule. In addition,
stakeholders may also provide comments separately to DOJ regarding
these potential impacts. See the ADDRESSES section for information
regarding how to send comments to DOJ.
6. Need of the Nation To Conserve Energy
Enhanced energy efficiency, where economically justified, improves
the Nation's energy security, strengthens the economy, and reduces the
environmental impacts (costs) of energy production. Chapter 15 in the
NOPR TSD presents the estimated impacts on electricity generating
capacity, relative to the no-new-standards case, for the TSLs that DOE
considered in this rulemaking.
Energy conservation resulting from potential energy conservation
standards for consume boilers is expected to yield environmental
benefits in the form of reduced emissions of certain air pollutants and
greenhouse gases. Table V.27 provides DOE's estimate of cumulative
emissions reductions expected to result from the TSLs considered in
this rulemaking. The emissions were calculated using the multipliers
discussed in section IV.K of this document. DOE reports annual
emissions reductions for each TSL in chapter 13 of the NOPR TSD.
Table V.27--Cumulative Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
Trial standard level
---------------------------------------------------------------
1 2 3 4
----------------------------------------------------------------------------------------------------------------
Power Sector Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 3.7 18 34 41
CH4 (thousand tons)............................. 0.10 0.38 0.75 0.89
N2O (thousand tons)............................. 0.05 0.07 0.16 0.17
NOX (thousand tons)............................. 3.3 16 30 36
SO2 (thousand tons)............................. 1.1 1.0 2.6 2.6
Hg (tons)....................................... (0.0002) (0.001) (0.001) (0.001)
----------------------------------------------------------------------------------------------------------------
Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 0.6 3 5 6
CH4 (thousand tons)............................. 30 241 437 531
N2O (thousand tons)............................. 0.00 0.01 0.01 0.02
NOX (thousand tons)............................. 7.8 40 75 89
SO2 (thousand tons)............................. 0.1 0.1 0.2 0.2
Hg (tons)....................................... 0.00001 0.000003 0.00001 0.00001
----------------------------------------------------------------------------------------------------------------
Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 4.3 21 39 47
CH4 (thousand tons)............................. 30 241 438 532
N2O (thousand tons)............................. 0.05 0.08 0.17 0.19
NOX (thousand tons)............................. 11 57 105 126
SO2 (thousand tons)............................. 1.2 1.1 2.7 2.8
Hg (tons)....................................... (0.0002) (0.001) (0.001) (0.001)
----------------------------------------------------------------------------------------------------------------
Note: Negative values in parentheses refer to an increase in emissions.
As part of the analysis for this proposed rulemaking, DOE estimated
monetary benefits likely to result from the reduced emissions of
CO2 that DOE estimated for each of the considered TSLs for
consumer boilers. Section IV.L
[[Page 55200]]
of this document discusses the SC-CO2 values that DOE used.
Table V.28 presents the value of CO2 emissions reduction at
each TSL for each of the SC-CO2 cases. The time-series of
annual values is presented for the proposed TSL in chapter 14 of the
NOPR TSD.
Table V.28--Present Value of CO2 Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
SC-CO2 case
---------------------------------------------------------------
Discount rate and statistics
---------------------------------------------------------------
TSL 5% 3% 2.5% 3%
---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
(million 2022$)
---------------------------------------------------------------
1............................................... 39 172 270 522
2............................................... 184 814 1,284 2,467
3............................................... 332 1,482 2,343 4,489
4............................................... 407 1,800 2,840 5,457
----------------------------------------------------------------------------------------------------------------
As discussed in section IV.L.1.b of this document, DOE estimated
the climate benefits likely to result from the reduced emissions of
methane and N2O that DOE estimated for each of the
considered TSLs for consumer boilers. Table V.29 presents the value of
the CH4 emissions reduction at each TSL, and Table V.30
presents the value of the N2O emissions reduction at each
TSL. The time-series of annual values is presented for the proposed TSL
in chapter 14 of the NOPR TSD.
Table V.29--Present Value of Methane Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
SC-CH4 case
---------------------------------------------------------------
Discount rate and statistics
---------------------------------------------------------------
TSL 5% 3% 2.5% 3%
---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
(million 2022$)
---------------------------------------------------------------
1............................................... 13 40 56 106
2............................................... 99 306 431 811
3............................................... 174 544 767 1,438
4............................................... 217 671 944 1,778
----------------------------------------------------------------------------------------------------------------
Table V.30--Present Value of Nitrous Oxide Emissions Reduction for Consumer Boilers Shipped in 2030-2059
----------------------------------------------------------------------------------------------------------------
SC-N2O case
---------------------------------------------------------------
Discount rate and statistics
---------------------------------------------------------------
TSL 5% 3% 2.5% 3%
---------------------------------------------------------------
95th
Average Average Average percentile
----------------------------------------------------------------------------------------------------------------
(million 2022$)
---------------------------------------------------------------
1............................................... 0.2 0.7 1.1 1.8
2............................................... 0.3 1.1 1.7 2.9
3............................................... 0.6 2.3 3.7 6.2
4............................................... 0.6 2.6 4.0 6.9
----------------------------------------------------------------------------------------------------------------
DOE is well aware that scientific and economic knowledge about the
contribution of CO2 and other GHG emissions to changes in
the future global climate and the potential resulting damages to the
global and U.S. economy continues to evolve rapidly. DOE, together with
other Federal agencies, will continue to review 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.
DOE notes that the proposed standards would be economically justified
even without inclusion of monetized benefits of reduced GHG emissions.
DOE also estimated the monetary value of the health benefits
associated with NOX and SO2 emissions reductions
anticipated to result from the considered TSLs for consumer boilers.
The dollar-per-ton values that DOE used are discussed in section IV.L
of this document. Table V.31 presents the
[[Page 55201]]
present value for NOX emissions reduction for each TSL
calculated using 7-percent and 3-percent discount rates, and Table V.32
presents similar results for SO2 emissions reductions. The
results in these tables reflect application of EPA's low dollar-per-ton
values, which DOE used to be conservative. The time-series of annual
values is presented for the proposed TSL in chapter 14 of the NOPR TSD.
Table V.31--Present Value of NOX Emissions Reduction for Consumer
Boilers Shipped in 2030-2059
------------------------------------------------------------------------
TSL 7% Discount rate 3% Discount rate
------------------------------------------------------------------------
(million 2022$)
------------------------------------------------------------------------
1............................... 132 359
2............................... 625 1,791
3............................... 1,102 3,251
4............................... 1,389 3,967
------------------------------------------------------------------------
Table V.32--Present Value of SO2 Emissions Reduction for Consumer
Boilers Shipped in 2030-2059
------------------------------------------------------------------------
TSL 7% Discount rate 3% Discount rate
------------------------------------------------------------------------
(million 2022$)
------------------------------------------------------------------------
1............................... 14 41
2............................... 12 34
3............................... 34 94
4............................... 35 98
------------------------------------------------------------------------
Not all the public health and environmental benefits from the
reduction of greenhouse gases, NOX, and SO2 are
captured in the values above, and additional unquantified benefits from
the reductions of those pollutants as well as from the reduction of
direct PM and other co-pollutants may be significant. DOE has not
included monetary benefits of the reduction of Hg emissions because the
amount of reduction is very small.
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)(VII)) No
other factors were considered in this analysis.
8. Summary of Economic Impacts
Table V.33 presents the NPV values that result from adding the
estimates of the potential economic benefits resulting from reduced
GHG, NOX, and SO2 emissions to the NPV of
consumer benefits calculated for each TSL considered in this
rulemaking. The consumer benefits are domestic U.S. monetary savings
that occur as a result of purchasing the covered consumer boilers, and
are measured for the lifetime of products shipped in 2030-2059. The
climate benefits associated with reduced GHG emissions resulting from
the adopted standards are global benefits, and are also calculated
based on the lifetime of consumer boilers shipped in 2030-2059.
Table V.33--Consumer NPV Combined With Present Value of Climate Benefits and Health Benefits
----------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4
----------------------------------------------------------------------------------------------------------------
Using 3% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
5% Average SC-GHG case.......................... 0.6 2.8 6.1 2.5
3% Average SC-GHG case.......................... 0.8 3.7 7.6 4.4
2.5% Average SC-GHG case........................ 0.9 4.3 8.7 5.7
3% 95th percentile SC-GHG case.................. 1.2 5.8 11.5 9.2
----------------------------------------------------------------------------------------------------------------
Using 7% Discount Rate for Consumer NPV and Health Benefits (billion 2022$)
----------------------------------------------------------------------------------------------------------------
5% Average SC-GHG case.......................... 0.2 1.1 2.4 0.5
3% Average SC-GHG case.......................... 0.4 2.0 3.9 2.3
2.5% Average SC-GHG case........................ 0.5 2.5 5.0 3.7
3% 95th percentile SC-GHG case.................. 0.8 4.1 7.8 7.1
----------------------------------------------------------------------------------------------------------------
C. Conclusion
When considering new or amended energy conservation standards, the
standards that DOE adopts for any type (or class) of covered product
must be designed to achieve the maximum improvement in energy
efficiency that the Secretary determines is technologically feasible
and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining
whether a standard is economically justified, the Secretary must
determine whether the benefits of the standard exceed its burdens by,
to the greatest extent practicable, considering the seven statutory
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or
amended standard must also result in significant conservation of
energy. (42 U.S.C. 6295(o)(3)(B))
For this NOPR, DOE considered the impacts of amended standards for
consumer boilers at each TSL, beginning with the maximum
technologically feasible level, to determine whether that
[[Page 55202]]
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. DOE refers to this process as
the ``walk-down'' analysis.
To aid the reader as DOE discusses the benefits and/or burdens of
each TSL, tables in this section present a summary of the results of
DOE's quantitative analysis for each TSL. 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.
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 or informational asymmetries; (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, between renters and owners, or
builders and purchasers, or between current and subsequent owners).
Having less than perfect foresight and a high degree of uncertainty
about the future, consumers may trade off these types of investments at
a higher-than-expected rate between current consumption and uncertain
future energy cost savings.
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 the
purchase of a product in the standards case, this decreases sales for
product manufacturers, and the impact on manufacturers attributed to
lost revenue 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
shipments and changes in the volume of product purchases in chapter 9
of the NOPR TSD. However, DOE's current analysis does not explicitly
control for heterogeneity in consumer preferences, preferences across
subcategories of products or specific features, or consumer price
sensitivity variation according to household income.\164\
---------------------------------------------------------------------------
\164\ P.C. Reiss and M.W. White. Household Electricity Demand,
Revisited. Review of Economic Studies. 2005. 72(3): pp. 853-883.
doi: 10.1111/0034-6527.00354.
---------------------------------------------------------------------------
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 energy conservation
standards, and potential enhancements to the methodology by which these
impacts are defined and estimated in the regulatory process.\165\ 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 in future rulemakings.
---------------------------------------------------------------------------
\165\ Sanstad, A.H., Notes on the Economics of Household Energy
Consumption and Technology Choice (2010) Lawrence Berkeley National
Laboratory (Available at: www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf) (Last accessed Jan.
3, 2023).
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1. Benefits and Burdens of TSLs Considered for Consumer Boiler
Standards
Table V.34 and Table V.35 summarize the quantitative impacts
estimated for each TSL for consumer boilers. The national impacts are
measured over the lifetime of consumer boilers purchased in the 30-year
period that begins in the anticipated year of compliance with amended
standards (2030-2059). The energy savings, emissions reductions, and
value of emissions reductions refer to full-fuel-cycle results. DOE is
presenting monetized benefits in accordance with the applicable
Executive Orders, and DOE would reach the same conclusion presented in
this notice of proposed rulemaking in the absence of the social cost of
greenhouse gases, including the Interim Estimates presented by the
Interagency Working Group. The efficiency levels contained in each TSL
are described in section V.A of this document.
Table V.34--Summary of Analytical Results for Consumer Boilers TSLs: National Impacts
----------------------------------------------------------------------------------------------------------------
Category TSL 1 TSL 2 TSL 3 TSL 4
----------------------------------------------------------------------------------------------------------------
Cumulative FFC National Energy Savings
----------------------------------------------------------------------------------------------------------------
Quads........................................... 0.06 0.36 0.68 0.83
----------------------------------------------------------------------------------------------------------------
Cumulative FFC Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)....................... 4 21 39 47
CH4 (thousand tons)............................. 30 241 438 532
N2O (thousand tons)............................. 0.05 0.08 0.17 0.19
NOX (thousand tons)............................. 11 57 105 126
SO2 (thousand tons)............................. 1.2 1.1 2.7 2.8
Hg (tons)....................................... (0.0002) (0.0013) (0.0010) (0.0009)
----------------------------------------------------------------------------------------------------------------
Present Value of Monetized Benefits and Costs (3% discount rate, billion 2022$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................. 0.5 1.3 3.1 3.7
[[Page 55203]]
Climate Benefits *.............................. 0.2 1.1 2.0 2.5
Health Benefits **.............................. 0.4 1.8 3.3 4.1
Total Monetized Benefits [dagger]............... 1.1 4.3 8.5 10.3
Consumer Incremental Product Costs [Dagger]..... 0.34 0.62 0.82 5.9
Consumer Net Benefits........................... 0.16 0.73 2.3 (2.2)
Total Net Monetized Benefits.................... 0.78 3.7 7.6 4.4
----------------------------------------------------------------------------------------------------------------
Present Value of Monetized Benefits and Costs (7% discount rate, billion 2022$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................. 0.19 0.51 1.1 1.4
Climate Benefits *.............................. 0.21 1.1 2.0 2.5
Health Benefits **.............................. 0.15 0.64 1.1 1.4
Total Monetized Benefits [dagger]............... 0.55 2.3 4.3 5.3
Consumer Incremental Product Costs [Dagger]..... 0.18 0.32 0.43 2.9
Consumer Net Benefits........................... 0.01 0.19 0.72 (1.6)
Total Net Monetized Benefits.................... 0.37 2.0 3.9 2.3
----------------------------------------------------------------------------------------------------------------
Note: This table presents the present value (in 2022) of costs and benefits associated with consumer boilers
shipped in 2030-2059. These results include benefits which accrue after 2059 from the products shipped in 2030-
2059.
* Climate benefits are calculated using four different estimates of the SC-CO2, SC-CH4 and SC-N2O. Together,
these represent the global SC-GHG. For presentational purposes of this table, the climate benefits associated
with the average SC-GHG at a 3 percent discount rate are shown; however, DOE emphasizes the importance and
value of considering the benefits calculated using all four sets of SC-GHG estimates. To monetize the benefits
of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support
Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990
published in February 2021 by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for NOX and SO2) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
continue to assess the ability to monetize other effects such as health benefits from reductions in direct
PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate. DOE emphasizes
the importance and value of considering the benefits calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as installation costs.
Table V.35--Summary of Analytical Results for Consumer Boilers TSLs: Manufacturer and Consumer Impacts
----------------------------------------------------------------------------------------------------------------
Category TSL 1 * TSL 2 * TSL 3 * TSL 4 *
----------------------------------------------------------------------------------------------------------------
Manufacturer Impacts: INPV (million 2022$)
----------------------------------------------------------------------------------------------------------------
GHW (No-new-standards case INPV = 409.4)........ 399.1 to 401.5 371.9 to 389.0 364.6 to 384.4 316.7 to 428.9
GST (No-new-standards case INPV = 41.7)......... 41.7 41.7 41.7 30.8 to 32.5
OHW (No-new-standards case INPV = 73.5)......... 65.9 to 66.6 65.9 to 66.6 60.0 to 61.4 60.0 to 61.4
OST (No-new-standards case INPV = 7.5).......... 7.5 7.5 3.4 to 3.6 3.4 to 3.6
Total INPV (No-new-standards case INPV = 532.0). 514.1 to 517.1 487.0 to 504.8 469.7 to 491.2 411.9 to 527.6
----------------------------------------------------------------------------------------------------------------
Manufacturer Impacts: INPV (% change)
----------------------------------------------------------------------------------------------------------------
GHW............................................. (2.5) to (1.9) (9.2) to (5.0) (11.0) to (22.7) to 4.8
(6.1)
GST............................................. 0.0 0.0 0.0 (26.2) to
(22.2)
OHW............................................. (10.3) to (10.3) to (18.4) to (18.4) to
(9.4) (9.4) (16.4) (16.4)
OST............................................. 0.0 0.0 (54.6) to (54.6) to
(52.7) (52.7)
Total INPV...................................... (3.4) to (2.8) (8.5) to (5.1) (11.7) to (22.6) to
(7.7) (0.8)
----------------------------------------------------------------------------------------------------------------
Consumer Average LCC Savings (2022$)
----------------------------------------------------------------------------------------------------------------
GHW............................................. (193) 275 768 (526)
GST............................................. NA NA NA (53)
OHW............................................. 374 374 666 666
OST............................................. NA NA 310 310
Shipment-Weighted Average *..................... (50) 296 737 (380)
----------------------------------------------------------------------------------------------------------------
Consumer Simple PBP (years)
----------------------------------------------------------------------------------------------------------------
GHW............................................. 29.2 3.4 2.7 9.9
GSTs............................................ NA NA NA 20.4
OHW............................................. 3.3 3.3 3.3 3.3
OST............................................. NA NA 5.5 5.5
Shipment-Weighted Average *..................... 22.9 2.9 2.4 9.7
----------------------------------------------------------------------------------------------------------------
Percent of Consumers that Experience a Net Cost
----------------------------------------------------------------------------------------------------------------
GHW............................................. 11 13 11 78
[[Page 55204]]
GST............................................. NA NA NA 56
OHW............................................. 4 4 4 4
OST............................................. NA NA 14 14
Shipment-Weighted Average *..................... 9 10 9 66
----------------------------------------------------------------------------------------------------------------
Note: Parentheses indicate negative (-) values. The entry ``n.a.'' means not applicable because there is no
change in the standard at certain TSLs (i.e., standard remains at the baseline).
* Weighted by shares of each product class in total projected shipments in 2030.
DOE first considered TSL 4, which represents the max-tech
efficiency levels for all product classes. These levels include 96-
percent AFUE for consumer gas-fired hot water boilers (representing
condensing operation), 83-percent AFUE for consumer gas-fired steam
boilers, 88-percent AFUE for consumer oil-fired hot water boilers, and
86-percent AFUE for consumer oil-fired steam boilers. Gas-fired hot
water, gas-fired steam, oil-fired hot water, and oil-fired steam
boilers account for approximately 78 percent, 8 percent, 13 percent,
and 1 percent of current industry shipments, respectively. At this TSL,
the Secretary has determined that the benefits are outweighed by the
burdens, as discussed in detail in the following paragraphs.
TSL 4 would save an estimated 0.83 quads of energy, an amount DOE
considers significant, primarily driven by the savings associated with
condensing operation for gas-fired hot water boilers, the largest
product class of consumer boilers. Consumer gas-fired hot water boilers
save an estimated 0.73 quads. Consumer gas-fired steam boilers save an
estimated 0.02 quads. Consumer oil-fired hot water boilers save an
estimate 0.08 quads of energy. Consumer oil-fired steam boilers save an
estimate 0.003 quads of energy.
Under TSL 4, the NPV is negative, indicating that consumer costs
exceed consumer benefits. The NPV would be -$1.55 billion using a
discount rate of 7 percent, and -$2.15 billion using a discount rate of
3 percent. Much of the consumer costs are driven by consumer gas-fired
boilers, which have the largest share of shipments and a significant
increase in total installed costs at the max-tech efficiency level to
accommodate 96-percent AFUE compared to other product classes. The NPV
for consumer gas-fired hot water boilers would be -$1.76 billion using
a 7-percent discount rate, and -$2.80 billion using a 3-percent
discount rate. The NPV for consumer gas-fired steam boilers would be -
$0.02 billion using a 7-percent discount rate, and -$0.02 billion using
a 3-percent discount rate. For consumer oil-fired boilers, the NPV is
positive, indicating that consumer benefits exceed consumer costs. The
NPV for consumer oil-fired hot water boilers would be $0.22 billion at
a 7-percent discount rate and $0.65 billion at a 3-percent discount
rate. The NPV for consumer oil-fired boilers (hot water and steam)
would be $0.01 billion at a 7-percent discount rate and $0.02 billion
at a 3-percent discount rate.
The cumulative emissions reductions at TSL 4 are 47 million metric
tons of CO2, 532 thousand tons of CH4, 0.19
thousand tons of N2O, and 126 thousand tons of
NOX, 2.8 thousand tons of SO2, and an increase of
0.001 tons of Hg due to slightly higher electricity consumption. The
estimated monetary value of the climate benefits from reduced GHG
emissions (associated with the average SC-GHG at a 3-percent discount
rate) at TSL 4 is $2.5 billion. The estimated monetary value of the
health benefits from reduced NOX and SO2
emissions at TSL 4 is $1.4 billion using a 7-percent discount rate and
$4.1 billion using a 3-percent discount rate.
Using a 7-percent discount rate for consumer benefits and costs,
health benefits from reduced SO2 and NOX
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated total NPV at TSL 4 is $2.3
billion. Using a 3-percent discount rate for all benefits and costs,
the estimated total NPV at TSL 4 is $4.4 billion. The estimated total
NPV is provided for additional information; however, DOE primarily
relies upon the NPV of consumer benefits when determining whether a
proposed standard level is economically justified.
At TSL 4, the average LCC impact is a cost of $526 for consumer
gas-fired hot water boilers, a cost of $53 for consumer gas-fired steam
boilers, a savings of $666 for consumer oil-fired hot water boilers,
and a savings of $310 for consumer oil-fired steam boilers. The average
consumer costs exceed the benefits for gas-fired boilers and the
average consumer benefits exceed the costs for oil-fired boilers at TSL
4. For example, the average total installed costs for gas-fired hot
water boilers are $1,292 higher at max-tech compared to the baseline
efficiency level, with only a corresponding savings of $130 in first-
year operating costs. In contrast, the average total installed costs
for oil-fired hot water boilers are only $192 higher at max-tech
compared to the baseline efficiency level, with a corresponding savings
of $59 in first-year operating costs. The fraction of consumers
experiencing a net LCC cost is 78 percent for consumer gas-fired hot
water boilers, 56 percent for consumer gas-fired steam boilers, 4
percent for consumer oil-fired hot water boilers, and 14 percent for
consumer oil-fired steam boilers. For a majority of gas-fired boiler
consumers, the costs exceed the benefits.
At TSL 4, the projected change in INPV ranges from a decrease of
$120.0 million to a decrease of $4.3 million, which corresponds to
decreases of 22.6 percent and 4.3 percent, respectively. Industry
conversion costs could reach $170.1 million as gas-fired hot water
boiler manufacturers develop or expand their production capacity for
condensing models and work with suppliers to develop new condensing
heat exchangers that can meet the max-tech efficiency of 96-percent
AFUE, and as manufacturers of other product classes invest in higher-
efficiency non-condensing designs.
At TSL 4, all gas-fired hot water boilers must transition to the
max-tech condensing technology. This is a significant technological
shift and may be challenging for many manufacturers. Out of the 24 gas-
fired hot water boiler OEMs, only six OEMs offer models that meet the
efficiencies required by TSL 4. Less than 5 percent of gas-fired hot
water model listings can meet the 96-percent AFUE required. The
projected change in INPV for the gas-fired hot water industry ranges
from a decrease of $92.8 million to an increase of $19.5 million, which
correspond to -22.7 percent and 4.8 percent, respectively. The lower
bound is driven by the
[[Page 55205]]
industry conversion costs of $117.4 million.
With 95 percent of all model offerings now on the market rendered
obsolete, all 24 manufacturers would need to re-evaluate and redesign
their portfolio of product offerings. Many OEMs that have extensive
condensing gas-fired hot water product offerings do not have any models
that can meet max-tech. Even OEMs that offer some max-tech models today
would need to allocate extensive technical resources to provide max-
tech offerings across the full range of capacities to serve their
customers. Manufacturers that are heavily invested in the non-
condensing market would likely need to re-orient their role in the
market and determine how to compete in a marketplace where there is
only one efficiency level.
Traditionally, manufacturers have designed their product lines to
support a range of models with varying input capacities, and the
efficiency has varied between models within the line. In reviewing
available models, DOE found that manufacturers generally only have one
or two input capacities optimized to achieve 96-percent AFUE within
product lines, while the remaining input capacities are at a lower
AFUE. This suggests that manufacturers would have to individually
redesign each model within product lines to ensure all models can
achieve the max-tech level. Redesign by individual model would
necessitate a significant increase in design effort for manufacturers.
Additionally, for manufacturers who source condensing heat exchangers
(which is the majority of OEMs producing condensing boilers), there is
concern that the relatively lower shipment volumes of boilers in the
U.S. market (relative to international markets for boilers) will make
it difficult to find suppliers willing to produce heat exchanger
designs that would allow all models within their gas-fired hot water
product lines to meet 96-percent AFUE, as each heat exchanger design
would need to be optimized for a given input capacity. The need for
gas-fired hot water manufacturers to invest heavily in redesign drives
the industry's product conversion costs to $39.5 million.
The push toward new product designs would also require changes to
the manufacturing facilities. While most manufacturer offer some
condensing models today, a max-tech standard would accelerate the
market shift to condensing products, and all manufacturers would likely
need to make capital investments to extend or add production lines for
gas-fired hot water boilers. Industry capital conversion costs could
reach $77.9 million.
Gas-fired steam shipments account for approximately 10 percent of
current industry shipments. Oil-fired hot water shipments account for
approximately 14 percent of current industry shipments. Oil-fired steam
shipments account for approximately 1 percent of current industry
shipments. The technology options to improve efficiency are similar
across the three product classes. The max-tech efficiency level at TSL
4 for these three product classes does not require a shift to
condensing designs and does not dramatically alter the manufacturing
process.
All four gas-fired steam boiler OEMs offer at least one model that
meets max-tech. However, only 8 percent of gas-fired steam model
listings meet the efficiencies required by TSL 4. The projected change
in INPV for the gas-fired steam industry ranges from a decrease of
$10.9 million to a decrease of $9.3 million, which correspond to -22.6
percent and -22.2 percent, respectively. The potential losses in INPV
are driven by the industry conversion costs of $19.9 million.
Out of the 11 oil-fired hot water boiler OEMs, two OEMs offer
models that can meet max-tech. Approximately 3 percent of oil-fired hot
water model listings are at max-tech. The projected change in INPV for
the oil-fired hot water industry ranges from a decrease of $13.6
million to a decrease of $12.1 million, which correspond to -18.4
percent and -16.4 percent, respectively. The decrease in INPV is driven
by the industry conversion costs of $25.6 million.
Of the four oil-fired steam boiler OEMs, two OEMs offer max-tech
models. Approximately 22 percent of oil-fired steam model listings can
meet TSL 4. The projected change in INPV for the oil-fired steam
industry ranges from a decrease of $4.1 million to a decrease of $4.0
million, which correspond to -54.6 percent and -52.7 percent,
respectively. The decrease in INPV is driven by the industry conversion
costs of $7.2 million.
The design options available to increase the efficiency of gas-
fired steam, oil-fired hot water, and oil-fired steam boilers are
similar. Manufacturers may be able to meet max-tech efficiency for some
models by adding additional heat exchanger sections. However, where
additional sections are not sufficient, manufacturers may need to
invest in the more time-intensive process of redesigning of the heat
exchanger and in new castings and tooling to achieve max-tech
efficiencies.
The Secretary tentatively concludes that at TSL 4 for consumer
boilers, the benefits of energy savings, positive NPV of consumer
benefits for the oil-fired boiler product classes, emission reductions,
and the estimated monetary value of the emissions reductions would be
outweighed by the economic burden on some consumers (particularly the
majority of gas-fired boiler consumers) and the impacts on
manufacturers of gas-fired hot water boilers, including the potentials
for large conversion costs, for reduced product availability, and for
substantial reductions in INPV. In particular, DOE notes that TSL 4
could lead to substantial upfront investments for the gas-fired hot
water products, which account for the largest portion of shipments by
product class. At max-tech, 95 percent of all model offerings would be
made obsolete. All 24 manufacturers would need to re-evaluate and
redesign their portfolio of product lines. Although the max-tech
efficiency level has been demonstrated to be achievable for a wide
range of input capacities, most product lines only have one or two
models meeting the max-tech level, while the remaining input capacities
are at a lower AFUE level. This suggests that even manufacturers who
currently offer max-tech models would have to individually redesign
each model within product lines to ensure all models can achieve the
max-tech level. Additionally, manufactures would need to ramp up
production capacity of max-tech condensing units, through expansion of
existing production lines or addition of new lines. Furthermore,
manufacturer raised concerns about their ability to source the custom
heat exchangers necessary to optimize models at every input capacity to
meet a standard set at 96-percent AFUE. The average LCC impact is
negative for consumer gas-fired hot water and steam boilers, indicating
that the consumer costs exceed the benefits. Consequently, the
Secretary has tentatively concluded that the current record does not
provide a clear and convincing basis to conclude that TSL 4 is
economically justified.
DOE then considered TSL 3, which represents the max-tech efficiency
levels for consumer oil-fired boilers, 95-percent AFUE for consumer
gas-fired hot water boilers (representing condensing operation), and
baseline efficiency levels (which would result in no amendment to the
energy conservation standard) for consumer gas-fired steam boilers.
TSL 3 would save an estimated 0.69 quads of energy, an amount DOE
considers significant, primarily driven by the savings associated with
[[Page 55206]]
condensing operation for gas-fired hot water boilers, which are the
largest product class of consumer boilers. Consumer gas-fired hot water
boilers save an estimated 0.61 quads. Consumer oil-fired hot water
boilers save an estimated 0.08 quads of energy. Consumer oil-fired
steam boilers save an estimated 0.003 quads of energy. There are no
savings from consumer gas-fired steam boilers at TSL 3, as DOE is not
considering amendments to the energy conservation standard at this TSL.
Under TSL 3, the NPV is positive, indicating that consumer benefits
exceed consumer costs across all product classes. The NPV would be
$0.72 billion using a discount rate of 7 percent, and $2.27 billion
using a discount rate of 3 percent. The NPV for consumer gas-fired hot
water boilers would be $0.49 billion using a 7-percent discount rate,
and $1.60 billion using a 3-percent discount rate. The NPV for consumer
oil-fired hot water boilers would be $0.22 billion at a 7-percent
discount rate and $0.65 billion at a 3-percent discount rate. The NPV
for consumer oil-fired boilers (hot water and steam) would be $0.01
billion at a 7-percent discount rate and $0.02 billion at a 3-percent
discount rate.
The cumulative emissions reductions at TSL 3 are 39 million metric
tons of CO2, 438 thousand tons of CH4, 0.17
thousand tons of N2O, 105 thousand tons of NOX,
and 2.7 thousand tons of SO2, and an increase of 0.001 tons
of Hg due to slightly higher electricity consumption. The estimated
monetary value of the climate benefits from reduced GHG emissions
(associated with the average SC-GHG at a 3-percent discount rate) at
TSL 3 is $2.0 billion. The estimated monetary value of the health
benefits from reduced NOX and SO2 emissions at
TSL 3 is $1.1 billion using a 7-percent discount rate and $3.3 billion
using a 3-percent discount rate.
Using a 7-percent discount rate for consumer benefits and costs,
health benefits from reduced SO2 and NOX
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated total NPV at TSL 3 is $3.9
billion. Using a 3-percent discount rate for all benefits and costs,
the estimated total NPV at TSL 3 is $7.6 billion. The estimated total
NPV is provided for additional information; however, DOE primarily
relies upon the NPV of consumer benefits when determining whether a
proposed standard level is economically justified.
At TSL 3, the average LCC impact is a savings of $768 for consumer
gas-fired hot water boilers, a savings of $666 for consumer oil-fired
hot water boilers, and a savings of $310 for consumer oil-fired steam
boilers. The average consumer benefits exceed the costs for these
impacted product classes at TSL 3. There is no LCC impact for consumer
gas-fired steam boilers at TSL 3, as the energy conservation standard
is not being amended. The fraction of consumers experiencing a net LCC
cost is 11 percent for consumer gas-fired hot water boilers, 4 percent
for consumer oil-fired hot water boilers, and 14 percent for consumer
oil-fired steam boilers. For a majority of boiler consumers of these
impacted product classes, the benefits exceed the costs. There are no
consumers with a net LCC cost for consumer gas-fired steam boilers at
TSL 3, as the energy conservation standard is not being amended. Low-
income consumers are not disproportionately impacted, as many are
renters that either do not pay for equipment costs or energy costs. As
such, the proportion of low-income consumers that are not impacted or
who experience a net benefit are higher than in the main LCC analysis.
Specifically, the fraction of low-income consumers experiencing a net
LCC cost is 6 percent for consumer gas-fired hot water boilers, 1
percent for consumer oil-fired hot water boilers, and 4 percent for
consumer oil-fired steam boilers. For a majority of low-income boiler
consumers of these impacted product classes, the benefits exceed the
costs. There are no low-income consumers with a net LCC cost for
consumer gas-fired steam boilers at TSL 3, as the energy conservation
standard is not being amended.
At TSL 3, the projected change in INPV ranges from a decrease of
$62.2 million to a decrease of $40.7 million, which correspond to
decreases of 11.7 percent and 7.7 percent, respectively. Industry
conversion costs could reach $98.0 million. Gas-fired hot water boiler
manufacturers develop or expand their production capacity for
condensing models; however, DOE expects significantly lower product
conversion costs than would be required at TSL 4. Manufacturers of oil-
fired hot water and oil-fired steam boilers would need to invest in
higher-efficiency non-condensing designs.
Out of the 24 gas-fired hot water OEMs, 18 OEMs offer products that
meet the 95-percent AFUE required. Approximately 40 percent of gas-
fired hot water model listings can meet TSL 3. The projected change in
INPV for the gas-fired hot water industry ranges from a decrease of
$44.9 million to a decrease of $25.0 million, which correspond to -11.0
percent and -6.1 percent, respectively. The lower bound is driven by
the industry conversion costs of $65.2 million. The design options
analyzed at TSL 3 for gas-fired hot water boilers included implementing
a condensing stainless-steel heat exchanger with a premix modulating
burner. As with TSL 4, manufacturers heavily invested in non-condensing
gas-fired hot water boilers would need to develop or expand their
condensing production capacity, which would necessitate new production
lines and updates to the factory floor. However, unlike TSL 4, most
manufacturers currently offer products that meet the 95-percent AFUE
required. Additionally, TSL 3 reduces the need to redesign by
optimizing design at the individual model level to meet amended
standards. At TSL 3, industry product conversion costs decrease to $3.1
million.
At TSL 3, the efficiency level for gas-fired steam boilers is the
baseline efficiency (82-percent AFUE). Therefore, all gas-fired steam
shipments can meet TSL 3. When evaluating this product class in
isolation, DOE expects minimal change in INPV for the gas-fired steam
industry and zero conversion costs.
At TSL 3, the efficiency level for oil-fired hot water and oil-
fired steam boilers is identical to TSL 4. The projected change in INPV
for the oil-fired hot water industry ranges from a decrease of $13.6
million to a decrease of $12.1 million, which correspond to -18.4
percent and -16.4 percent, respectively. The decrease in INPV is driven
by the industry conversion costs of $25.6 million. At TSL 3, the
efficiency level for oil-fired steam boilers identical to TSL 4. The
projected change in INPV for the oil-fired steam industry ranges from a
decrease of $4.1 million to a decrease of $4.0 million, which
correspond to -54.6 percent and -52.7 percent, respectively. The
decrease in INPV is driven by the industry conversion costs of $7.2
million.
Oil-fired hot water and oil-fired steam manufacturers would need to
redesign a large portion of their products. However, the redesign would
rely on existing technologies. DOE expect manufactures to meet max-tech
efficiency for some models by adding additional heat exchanger sections
and vent dampers. However, where additional sections are not
sufficient, manufacturers may need to invest in the more time-intensive
process of redesigning the heat exchanger and in new castings and
tooling to achieve max-tech efficiencies.
After considering the analysis and weighing the benefits and
burdens, the Secretary tentatively concludes that a
[[Page 55207]]
standard set at TSL 3 for consumer boilers would be economically
justified. At this TSL, the average LCC savings for consumer gas-fired
hot water boilers, consumer oil-fired hot water boilers, and consumer
oil-fired steam boilers are positive. The FFC national energy savings
are significant. The NPV of consumer benefits is positive for each
impacted product classes using both a 3-percent and 7-percent discount
rate. Notably, the benefits to consumers substantially outweigh the
cost to manufacturers. At TSL 3, with regard to gas-fired hot water
boilers, which account for approximately 75 percent of current industry
shipments, most manufacturers offer a range of models that meet the
efficiency level required. Out of the 24 gas-fired hot water OEMs, 18
OEMs offer around 252 models (accounting for 40 percent of gas-fired
hot water model listings) that meet the 95-percent AFUE required. At
TSL 3, the NPV of consumer benefits, even measured at the more
conservative discount rate of 7 percent, is more than 900 percent
higher than the maximum of manufacturers' loss in INPV. The positive
average LCC savings--a different way of quantifying consumer benefits--
reinforces this conclusion. The economic justification for TSL 3 is
clear and convincing even without weighing the estimated monetary value
of emissions reductions. When those emissions reductions are included--
representing $2.0 billion in climate benefits (associated with the
average SC-GHG at a 3-percent discount rate), and $3.3 billion (using a
3-percent discount rate) or $1.1 billion (using a 7-percent discount
rate) in health benefits--the rationale becomes stronger still.
As stated, DOE conducts the walk-down analysis to determine the TSL
that represents the maximum improvement in energy efficiency that is
technologically feasible and economically justified, as required under
EPCA. Although DOE has not conducted a comparative analysis to select
the amended energy conservation standards, DOE notes that at TSL 3, the
efficiency levels result in the largest LCC savings for each product
class and the largest NPV for each product class compared to any other
efficiency level. Additionally, the conversion costs for gas-fired hot
water and gas-fired steam boiler at substantially lower at TSL 3.
Although DOE considered proposed amended standard levels for
consumer boilers by grouping the efficiency levels for each product
class into TSLs, DOE evaluates all analyzed efficiency levels for all
product classes in its analysis.
For consumer gas-fired hot water boilers, TSL 3 includes an
efficiency level (i.e., EL 3) that is one level below the max-tech
efficiency level. As discussed previously, at the max-tech efficiency
level for gas-fired hot water boilers, there is an average LCC cost of
$526 and a majority of consumers (78 percent) with a net LCC cost.
Furthermore, for low-income consumers of gas-fired hot water boilers,
there is an average LCC cost of $161 and 34 percent with a net LCC cost
at the max-tech efficiency level. Additionally, conversion costs could
reach $117.4 million for industry. At EL 4 (i.e., the max-tech
efficiency level for gas-fired hot water boilers), less than 5 percent
of industry models would meet the amended standard. However, at EL 3
(i.e., the efficiency level below max-tech), approximately 40 percent
of industry models would meet the standard. Furthermore, redesign
efforts for gas-fired hot water boilers would be significantly less at
EL 3, as manufacturer would not need to optimize performance for every
product line and input capacity individually to achieve the proposed
efficiency level. This difference in redesign effort is the primary
driver that reduces conversion costs down from $117.4 million at max-
tech to $65.2 million at EL 3. The benefits of the max-tech efficiency
level for consumer gas-fired hot water boilers do not outweigh the
negative impacts to consumers and manufacturers. Therefore, DOE
tentatively concludes that the max-tech efficiency level is not
justified for consumer gas-fired hot water boilers. In contrast, EL 3
for consumer gas-fired hot water boilers results in positive average
LCC savings of $768 and a minority of consumers (11 percent) with a net
LCC cost. Similarly, for low-income consumers, the efficiency level
below max-tech for consumer gas-fired hot water boilers results in
positive average LCC savings of $643 and 9 percent with a net LCC cost.
Additionally, greater than 50 percent of the shipments for consumer
gas-fired hot water boilers is at or above EL 3, clearly supporting the
viability of products at this efficiency level in the market. At this
level, industry conversion costs are significantly lower at 65.2
million. Therefore, DOE tentatively concludes that EL 3 is justified
for consumer gas-fired hot water boilers.
For consumer gas-fired steam boilers, TSL 3 includes the baseline
efficiency level. The only efficiency level above baseline that was
analyzed for consumer gas-fired steam boilers is the max-tech
efficiency level, which results in an average LCC cost and a majority
of consumers with a net LCC costs. The benefits of the max-tech
efficiency level for consumer gas-fired steam boilers do not outweigh
the negative impacts to consumers and manufacturers. Therefore, DOE
tentatively concludes that the max-tech efficiency level is not
justified and is not proposing to amend the energy conservation
standard for consumer gas-fired steam boilers.
For consumer oil-fired hot water boilers, TSL 3 includes the max-
tech efficiency level, which is the maximum level determined to be
technologically feasible. The max-tech efficiency level for consumer
oil-fired hot water boilers results in an average LCC savings of $666
and a minority of consumers (4 percent) with a net LCC cost. Similarly,
for low-income consumers, the efficiency level below max-tech for
consumer oil-fired hot water boilers results in positive average LCC
savings of $603 and 1 percent with a net LCC cost. The benefits of max-
tech efficiency levels for consumer oil-fired hot water boilers
outweigh the negative impacts to consumers and manufacturers.
Therefore, DOE tentatively concludes that the max-tech efficiency level
is justified for consumer oil-fired hot water boilers.
For consumer oil-fired steam boilers, TSL 3 includes the max-tech
efficiency level, which is the maximum level determined to be
technologically feasible. The max-tech efficiency level for consumer
oil-fired steam boilers results in an average LCC savings of $310 and a
minority of consumers (14 percent) with a net LCC cost. Similarly, for
low-income consumers, the efficiency level below max-tech for consumer
oil-fired steam boilers results in positive average LCC savings of $279
and 5 percent with a net LCC cost. The benefits of max-tech efficiency
levels for consumer oil-fired hot water and steam boilers outweigh the
negative impacts to consumers and manufacturers. Therefore, DOE
tentatively concludes that the max-tech efficiency level is justified
for consumer oil-fired hot water and steam boilers.
Therefore, based on the previous considerations, DOE proposes
amended energy conservation standards for consumer boilers at TSL 3.
The amended energy conservation standards for consumer boilers, which
are expressed as an annual fuel utilization efficiency, are shown in
Table V.32 of this document.
[[Page 55208]]
Table V.36--Proposed Amended Energy Conservation Standards for Consumer
Boilers
------------------------------------------------------------------------
Product class AFUE (%)
------------------------------------------------------------------------
Gas-fired Hot Water..................................... 95
Gas-fired Steam......................................... 82
Oil-fired Hot Water..................................... 88
Oil-fired Steam......................................... 86
------------------------------------------------------------------------
2. Annualized Benefits and Costs of the Proposed Standards
The benefits and costs of the proposed standards can also be
expressed in terms of annualized values. The annualized net benefit is:
(1) the annualized national economic value (expressed in 2022$) of the
benefits from operating products that meet the proposed standards
(consisting primarily of operating cost savings from using less energy,
minus increases in product purchase costs), and (2) the annualized
monetary value of the climate and health benefits from emission
reductions. Table V.37 shows the annualized values for consumer boilers
under TSL 3, expressed in 2022$. The results under the primary estimate
are as follows.
Using a 7-percent discount rate for consumer benefits and costs and
health benefits from reduced NOX and SO2
emissions, and the 3-percent discount rate case for climate benefits
from reduced GHG emissions, the estimated cost of the standards
proposed in this rule is $52 million per year in increased equipment
costs, while the estimated annual benefits are $139 million in reduced
equipment operating costs, $124 million in climate benefits, and $137
million in health benefits. In this case, the net benefit would amount
to $348 million per year.
Using a 3-percent discount rate for all benefits and costs, the
estimated cost of the proposed standards is $50 million per year in
increased equipment costs, while the estimated annual benefits are $188
million in reduced operating costs, $124 million in climate benefits,
and $204 million in health benefits. In this case, the net benefit
would amount to $466 million per year.
Table V.37--Annualized Monetized Benefits and Costs of Proposed Energy Conservation Standards for Consumer
Boilers
[TSL 3]
----------------------------------------------------------------------------------------------------------------
Million 2022$/year
-----------------------------------------------
Low-net- High-net-
Primary benefits benefits
estimate estimate estimate
----------------------------------------------------------------------------------------------------------------
3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 188 175 233
Climate Benefits *.............................................. 124 121 144
Health Benefits **.............................................. 204 200 237
Total Monetized Benefits [dagger]............................... 516 496 613
Consumer Incremental Product Costs [Dagger]..................... 50 58 38
Net Monetized Benefits.......................................... 466 438 575
Change in Producer Cashflow [Dagger][Dagger].................... (6)-(4) (6)-(4) (6)-(4)
----------------------------------------------------------------------------------------------------------------
7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings................................. 139 129 169
Climate Benefits * (3% discount rate)........................... 124 121 144
Health Benefits **.............................................. 137 135 158
Total Monetized Benefits [dagger]............................... 400 385 470
Consumer Incremental Product Costs [Dagger]..................... 52 59 41
Net Monetized Benefits.......................................... 348 326 430
Change in Producer Cashflow [Dagger][Dagger].................... (6)-(4) (6)-(4) (6)-(4)
----------------------------------------------------------------------------------------------------------------
Note: This table presents the present value (in 2022) of the costs and benefits associated with consumer boilers
shipped in 2030-2059. These results include benefits which accrue after 2059 from the products shipped in 2030-
2059. The Primary, Low-Net-Benefits, and High-Net-Benefits Estimates utilize projections of energy prices from
the AEO 2022 Reference case, Low-Economic-Growth case, and High-Economic-Growth case, respectively. In
addition, incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline
rate in the Low-Net-Benefits Estimate, and a high decline rate in the High-Net-Benefits Estimate. The methods
used to derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that
the Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this
document). For presentational purposes of this table, the climate benefits associated with the average SC-GHG
at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the
benefits calculated using all four sets of SC-GHG estimates. To monetize the benefits of reducing GHG
emissions, this analysis uses the interim estimates presented in the Technical Support Document: Social Cost
of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021
by the IWG.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
(for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
continue to assess the ability to monetize other effects such as health benefits from reductions in direct
PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
of this document for more details.
[dagger] Total benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs, as well as installation costs.
[[Page 55209]]
[Dagger][Dagger] Operating Cost Savings are calculated based on the life cycle costs analysis and national
impact analysis as discussed in detail below. See sections IV.F and IV.H of this document. DOE's NIA includes
all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the
manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE
also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of
this document. In the detailed MIA, DOE models manufacturers' pricing decisions based on assumptions regarding
investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule's
expected impact on the INPV. The change in INPV is the present value of all changes in industry cash flow,
including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized
change in INPV is calculated using the industry weighted average cost of capital value of 9.7% that is
estimated in the MIA (see chapter 12 of the NOPR TSD for a complete description of the industry weighted
average cost of capital). For consumer boilers, those values are -$6 million and -$4 million. DOE accounts for
that range of likely impacts in analyzing whether a TSL is economically justified. See section V.C of this
document. DOE is presenting the range of impacts to the INPV under two markup scenarios: the Preservation of
Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating
Cost Savings in this table, and the Preservation of Operating Profit Markup scenario, where DOE assumed
manufacturers would not be able to increase per-unit operating profit in proportion to increases in
manufacturer production costs. DOE includes the range of estimated annualized change in INPV in the above
table, drawing on the MIA explained further in section IV.J of this document, to provide additional context
for assessing the estimated impacts of this proposal to society, including potential changes in production and
consumption, which is consistent with OMB's Circular A-4 and E.O. 12866. If DOE were to include the INPV into
the annualized net benefit calculation for this proposed rule, the annualized net benefits would range from
$460 million to $462 million at 3-percent discount rate and would range from $342 million to $344 million at 7-
percent discount rate. DOE seeks comment on this approach.
D. Reporting, Certification, and Sampling Plan
Manufacturers, including importers, must use product-specific
certification templates to certify compliance to DOE. For consumer
boilers, the certification template reflects the general certification
requirements specified at 10 CFR 429.12 and the product-specific
requirements specified at 10 CFR 429.18. As discussed in the previous
paragraphs, DOE is not proposing to amend the product-specific
certification requirements for these products.
VI. Procedural Issues and Regulatory Review
A. Review Under Executive Orders 12866 and 13563
Executive Order (E.O.) 12866, ``Regulatory Planning and Review,''
58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by E.O.
13563, ``Improving Regulation and Regulatory Review,'' 76 FR 3821 (Jan.
21, 2011), requires agencies, to the extent permitted by law, 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 E.O. 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 (OIRA) in the Office of Management and Budget (OMB) 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,
this proposed regulatory action is consistent with these principles.
Section 6(a) of E.O. 12866 also requires agencies to submit
``significant regulatory actions'' to OIRA for review. OIRA has
determined that this proposed regulatory action constitutes a
``significant regulatory action'' under section 3(f)(1) of E.O. 12866,
as amended by E.O. 14094. Accordingly, pursuant to section 6(a)(3)(C)
of E.O. 12866, DOE has provided to OIRA an assessment, including the
underlying analysis, of benefits and costs anticipated from the
proposed regulatory action, together with, to the extent feasible, a
quantification of those costs; and an assessment, including the
underlying analysis, of costs and benefits of potentially effective and
reasonably feasible alternatives to the planned regulation, and an
explanation why the planned regulatory action is preferable to the
identified potential alternatives. These assessments are summarized in
this preamble and further detail can be found in the technical support
document for this proposed rulemaking.
B. Review Under the Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires
preparation of an initial regulatory flexibility analysis (IRFA) and 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 E.O. 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 website (www.energy.gov/gc/office-general-counsel). DOE reviewed this proposed rule under the provisions
of the Regulatory Flexibility Act and the policies and procedures
published on February 19. 2003.
DOE has prepared the following IRFA for the products that are the
subject of this proposed energy conservation standard rulemaking.
For manufacturers of consumer boilers, 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. (See 13 CFR part 121.) The size standards are listed by North
American Industry Classification System (NAICS) code and industry
description and are available at www.sba.gov/document/support--table-
size-standards. Manufacturing of consumer boilers is classified under
NAICS 333414, ``Heating Equipment (except Warm Air Furnaces)
Manufacturing.'' The SBA
[[Page 55210]]
sets a threshold of 500 employees or fewer for an entity to be
considered as a small business for this category. For the products
under review, the SBA bases its small business definition on the total
number of employees for a business, including the total number of
employees of its parent company and any subsidiaries. An aggregated
business entity with fewer employees than the listed limit is
considered a small business.
1. Description of Reasons Why Action Is Being Considered
DOE is proposing amended energy conservation standards for consumer
boilers. In a final rule published in the Federal Register on January
15, 2016 (January 2016 Final Rule), DOE prescribed the current energy
conservation standards for consumer boilers manufactured on and after
January 15, 2021. 81 FR 2320, 2416-2417. EPCA provides that, not later
than six years after the issuance of any final rule establishing or
amending a standard, DOE must publish either a notice of determination
that standards for the product do not need to be amended, or a NOPR
including new proposed energy conservation standards (proceeding to a
final rule, as appropriate). (42 U.S.C. 6295(m)(1))
2. Objectives of, and Legal Basis for, Rule
EPCA authorizes DOE to regulate the energy efficiency of a number
of consumer products and certain industrial equipment. Title III, Part
B of EPCA established the Energy Conservation Program for Consumer
Products Other Than Automobiles. These products include consumer
boilers, the subject of this document. (42 U.S.C. 6292(a)(5)) EPCA
prescribed energy conservation standards for these products (42 U.S.C.
6295(f)(3)), and directs DOE to conduct future rulemakings to determine
whether to amend these standards. (42 U.S.C. 6295(f)(4)(C)) EPCA
further provides that, not later than six years after the issuance of
any final rule establishing or amending a standard, DOE must publish
either a notice of determination that standards for the product do not
need to be amended, or a NOPR including new proposed energy
conservation standards (proceeding to a final rule, as appropriate).
(42 U.S.C. 6295(m)(1))
3. Description on Estimated Number of Small Entities Regulated
DOE conducted a market survey to identify potential small
manufacturers of consumer boilers. DOE began its assessment by
reviewing its Compliance Certification Database (CCD),\166\
supplemented by information in California Energy Commission's
Modernized Appliance Efficiency Database System (MAEDbS),\167\ AHRI's
Directory of Certified Product Performance,\168\ U.S. Environmental
Protection Agency's ENERGY STAR product finder dataset,\169\ individual
company websites, and prior consumer boiler rulemakings to identify
manufacturers of the covered product. DOE then consulted publicly-
available data, such as manufacturer websites, manufacturer
specifications and product literature, import/export logs (e.g., bills
of lading from Panjiva \170\), and basic model numbers, to identify
original equipment manufacturers (OEMs) of covered consumer boilers.
DOE further relied on public data and subscription-based market
research tools (e.g., Dun & Bradstreet reports \171\) to determine
company, location, headcount, and annual revenue. DOE also asked
industry representatives if they were aware of any small manufacturers
during manufacturer interviews. DOE screened out companies that do not
offer products covered by this rulemaking, do not meet the SBA's
definition of a ``small business,'' or are foreign-owned and operated.
---------------------------------------------------------------------------
\166\ U.S. Department of Energy's Compliance Certification
Database is available at: www.regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (Last accessed Jan. 3, 2023).
\167\ California Energy Commission's Modernized Appliance
Efficiency Database System is available at:
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (Last
accessed Jan. 3, 2023).
\168\ AHRI's Directory of Certified Product Performance is
available at: www.ahridirectory.org/Search/SearchHome (Last accessed
Jan. 3, 2023).
\169\ U.S. Environmental Protection Agency's ENERGY STAR product
finder dataset is available at: www.energystar.gov/products/products_list (Last accessed Dec. 27, 2022).
\170\ S&P Global. Panjiva Market Intelligence is available at:
panjiva.com/import-export/United-States (Last accessed Feb. 28,
2023).
\171\ D&B Hoovers subscription login is accessible at:
app.dnbhoovers.com/ (Last accessed August 24, 2022).
---------------------------------------------------------------------------
DOE initially identified 24 OEMs that sell consumer boilers in the
United States. Of the 24 OEMs identified, DOE tentatively determined
that three companies qualify as small businesses and are not foreign-
owned and operated.
4. Description and Estimate of Compliance Requirements Including
Differences in Cost, if Any, for Different Groups of Small Entities
AHRI stated that small OEMs will be impacted by this rulemaking,
especially with respect to cast-iron boilers. (AHRI, No. 40 at p. 6)
Of the three small domestic OEMs identified, DOE tentatively
determined that all three OEMs manufacture both gas-fired hot water and
oil-fired hot water boilers. DOE identified these manufacturers through
a review of EPA's ENERGY STAR dataset, prior DOE consumer boiler
rulemakings, and DOE's CCD.
The first small OEM (``Manufacturer A'' in Table VI.1 and Table
VI.2) offers seven gas-fired hot water basic models and five oil-fired
hot water basic models. DOE identified these models through the company
website and available product literature. Of the seven gas-fired hot
water basic models, five meet the efficiency required by TSL 3. Of the
five oil-fired hot water basic models, four meet the efficiency
required by TSL 3. Given the company's small market share in the U.S.
consumer boiler market and existing range of high-efficiency boilers,
this manufacturer may choose to discontinue the non-compliant models.
Alternatively, the manufacturer may choose to redesign models in order
to maintain a diversified portfolio with cost-competitive baseline
models. To avoid underestimating the conversion costs this manufacturer
could incur as a result of amended standards, DOE assumed this small
business would choose to redesign or replace the non-compliant models.
DOE used basic model counts (i.e., the manufacturer's proportion of
industry basic models) to scale the industry conversion costs,
described in section IV.J.2.c of the proposed rule's notice of proposed
rulemaking. Product conversion costs are investments in research,
development, testing, marketing, and other non-capitalized costs
necessary to make product designs comply with amended energy
conservation standards. Product conversion costs would be driven by the
development and testing necessary to develop compliant products.
Capital conversion costs are investments in property, plant, and
equipment necessary to adapt or change existing production facilities
such that new compliant product designs can be fabricated and
assembled. For gas-fired hot water boilers, the design options analyzed
at TSL 3 included implementing a condensing stainless-steel heat
exchanger with a premix modulating burner. This small manufacturer may
need to expand their condensing production capacity, which could
necessitate updates to production lines and the factory floor. For oil-
fired hot water boilers, DOE expects that some manufacturers would need
to invest in new casting designs and tooling to meet TSL 3
efficiencies. Based on this manufacturer's model share,
[[Page 55211]]
DOE estimates product conversion costs of $80,000 and capital
conversion costs of $370,000. For this small manufacturer, total
conversion costs are approximately 1.0 percent of company revenue over
the 5-year conversion period.\172\
---------------------------------------------------------------------------
\172\ According to D&B Hoovers, this small business has an
estimated annual revenue of $8.8 million. DOE calculated total
conversion costs as a percent of revenue over the 5-year conversion
period using the following calculation: ($370,000 + $80,000)/(5
years x $8,800,000).
---------------------------------------------------------------------------
The second small OEM (``Manufacturer B'' in Table VI.1 and Table
VI.2) offers one gas-fired hot water model and six oil-fired hot water
models based on their website information. According to the company's
website, they do not offer any condensing gas-fired hot water boilers
or max-tech (88 percent AFUE) oil-fired hot water boilers. Similarly,
the third small OEM (``Manufacturer C'' in Table VI.1 and Table VI.2)
offers three gas-fired hot water models and 18 oil-fired hot water
models, does not have any condensing gas-fired hot water boilers or
max-tech oil-fired hot water boilers. Thus, neither small business
offers any models that meet the efficiencies required by TSL 3. To
offer condensing gas-fired hot water boilers, these small OEMs would
have to decide whether to develop their own condensing heat exchanger
production, source heat exchangers from Europe or Asia and assemble
higher-efficiency products, or leave the market entirely. DOE believes
both small OEMs currently source their non-condensing heat exchangers
from third-party foundries. Given the high upfront cost of in-house
development of condensing heat exchangers, DOE expects these small
businesses will continue to source their heat exchangers. These
manufacturers would need to develop their condensing production
capacity, which would necessitate updated production lines. DOE used
basic model counts to scale the industry conversion costs. DOE
estimates that the second small OEM, with seven consumer boiler models,
would incur product conversion costs of $402,000 and capital conversion
costs of $360,000. For this small manufacturer, total conversion costs
are approximately 3.4 percent of company revenue over the 5-year
conversion period.\173\ DOE estimates that the third small OEM, with 21
consumer boiler models, would incur product conversion costs of $1.2
million and capital conversion costs of $1.1 million. For this small
manufacturer, total conversion costs are approximately 13.8 percent of
company revenue over the 5-year conversion period.\174\
---------------------------------------------------------------------------
\173\ According to D&B Hoovers, this small business has an
estimated annual revenue of $4.5 million. DOE calculated total
conversion costs as a percent of revenue over the 5-year conversion
period using the following calculation: ($402,000 + $360,000)/(5
years x $4,500,000).
\174\ According to D&B Hoovers, this small business has an
estimated annual revenue of $3.3 million. DOE calculated total
conversion costs as a percent of revenue over the 5-year conversion
period using the following calculation: ($1,200,000 + $1,100,000)/(5
years x $3,300,000).
Table VI.1--Potential Small Business Impacts
[TSL 3]
----------------------------------------------------------------------------------------------------------------
Conversion Conversion
Number of Conversion Annual period costs as a %
Company unique basic costs ($ revenue ($ revenue ($ of conversion
models millions) millions) millions) period revenue
----------------------------------------------------------------------------------------------------------------
Manufacturer A.................. 12 0.45 8.8 44.0 1.0
Manufacturer B.................. 7 0.76 4.5 22.5 3.4
Manufacturer C.................. 21 2.29 3.3 16.5 13.8
----------------------------------------------------------------------------------------------------------------
Table VI.2--Estimated Small Business Conversion Costs by Product Class
[TSL 3]
----------------------------------------------------------------------------------------------------------------
Product Capital
Number of conversion conversion
Company Product class unique basic costs ($ costs ($
models millions) millions)
----------------------------------------------------------------------------------------------------------------
Manufacturer A........................ Gas-fired Hot Water..... 7 0.02 0.34
Oil-fired Hot Water..... 5 0.07 0.03
Manufacturer B........................ Gas-fired Hot Water..... 1 0.01 0.17
Oil-fired Hot Water..... 6 0.39 0.19
Manufacturer C........................ Gas-fired Hot Water..... 3 0.02 0.50
Oil-fired Hot Water..... 18 1.18 0.58
----------------------------------------------------------------------------------------------------------------
DOE seeks comments, information, and data on the number of small
businesses in the industry, the names of those small businesses, and
their market shares by product class. DOE also requests comment on the
potential impacts of the proposed standards on small manufacturers.
5. 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 proposed rule.
6. Significant Alternatives to the Rule
The discussion in the previous section analyzes impacts on small
businesses that would result from DOE's proposed rule, represented by
TSL 3. In reviewing alternatives to the proposed rule, DOE examined
energy conservation standards set at lower efficiency levels. While TSL
1 and TSL 2 would reduce impacts on small business manufacturers, it
would come at the expense of a reduction in energy savings. TSL 1
achieves 91 percent lower energy savings compared to the energy savings
at TSL 3. TSL 2 achieves 48 percent lower energy savings compared to
energy savings at TSL 3.
Based on the presented discussion, establishing standards at TSL 3
balances the benefits of the energy savings at TSL 3 with the potential
burdens place on consumer boiler manufacturers, including small
business manufacturers. Accordingly, DOE does not propose one of the
other TSLs considered in this analysis, or the other policy
alternatives examined as part of the regulatory
[[Page 55212]]
impact analysis and included in chapter 17 of the NOPR TSD.
Additional compliance flexibilities may be available through other
means. EPCA provides that a manufacturer whose annual gross revenue
from all of its operations does not exceed $8 million may apply for an
exemption from all or part of an energy conservation standard for a
period not longer than 24 months after the effective date of a final
rule establishing the standard. (42 U.S.C. 6295(t)) Additionally,
manufacturers subject to DOE's energy efficiency standards may apply to
DOE's Office of Hearings and Appeals for exception relief under certain
circumstances. Manufacturers should refer to 10 CFR part 430, subpart
E, and 10 CFR part 1003 for additional details.
C. Review Under the Paperwork Reduction Act of 1995
Manufacturers of consumer boilers must certify to DOE that their
products comply with any applicable energy conservation standards. In
certifying compliance, manufacturers must test their products according
to the DOE test procedures for consumer boilers, including any
amendments adopted for those test procedures. DOE has established
regulations for the certification and recordkeeping requirements for
all covered consumer products and commercial equipment, including
consumer boilers. (See generally 10 CFR part 429). The collection-of-
information requirement for the certification and recordkeeping is
subject to review and approval by OMB under the Paperwork Reduction Act
(PRA). This requirement has been approved by OMB under OMB control
number 1910-1400. Public reporting burden for the certification is
estimated to average 35 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.
DOE is not proposing to amend the certification or reporting
requirements for consumer boilers in this proposed rulemaking. Instead,
DOE may consider proposals to amend the certification requirements and
reporting for consumer boilers under a separate rulemaking regarding
appliance and equipment certification. DOE will address changes to OMB
Control Number 1910-1400 at that time as necessary.
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
DOE is analyzing this proposed regulation in accordance with the
National Environmental Policy Act of 1969 (NEPA) and DOE's NEPA
implementing regulations (10 CFR part 1021). DOE's regulations include
a categorical exclusion for rulemakings that establish energy
conservation standards for consumer products or industrial equipment.
10 CFR part 1021, subpart D, appendix B5.1. DOE anticipates that this
rulemaking qualifies for categorical exclusion B5.1 because it is a
rulemaking that establishes energy conservation standards for consumer
products or industrial equipment, none of the exceptions identified in
categorical exclusion B5.1(b) apply, no extraordinary circumstances
exist that require further environmental analysis, and it otherwise
meets the requirements for application of a categorical exclusion. See
10 CFR 1021.410. Therefore, DOE has initially determined that
promulgation of this proposed rule is not a major Federal action
significantly affecting the quality of the human environment within the
meaning of NEPA, and does not require an environmental assessment or an
environmental impact statement. DOE will complete its NEPA review
before issuing the final rule.
E. Review Under Executive Order 13132
E.O. 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 proposed rule and has
tentatively determined that it would not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. EPCA governs
and prescribes Federal preemption of State regulations as to energy
conservation for the products that are the subject of this proposed
rule. States can petition DOE for exemption from such preemption to the
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297)
Therefore, 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 E.O. 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 E.O. 12988 specifically requires that Executive
agencies make every reasonable effort to ensure that the regulation:
(1) clearly specifies the preemptive effect, if any; (2) clearly
specifies any effect on existing Federal law or regulation; (3)
provides a clear legal standard for affected conduct while promoting
simplification and burden reduction; (4) specifies the retroactive
effect, if any; (5) adequately defines key terms, and (6) addresses
other important issues affecting clarity and general draftsmanship
under any guidelines issued by the Attorney General. Section 3(c) of
Executive Order 12988 requires executive agencies to review regulations
in light of applicable standards in section 3(a) and section 3(b) to
determine whether they are met or it is unreasonable to meet one or
more of them. DOE has completed the required review and determined
that, to the extent permitted by law, this proposed rule meets the
relevant standards of E.O. 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, section 201 (codified at 2 U.S.C.
1531). For a proposed regulatory action likely
[[Page 55213]]
to result in a rule that may cause the expenditure by State, local, and
Tribal governments, in the aggregate, or by the private sector of $100
million or more in any one year (adjusted annually for inflation),
section 202 of UMRA requires a Federal agency to publish a written
statement that estimates the resulting costs, benefits, and other
effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also
requires a Federal agency to develop an effective process to permit
timely input by elected officers of State, local, and Tribal
governments on a proposed ``significant intergovernmental mandate,''
and requires an agency plan for giving notice and opportunity for
timely input to potentially affected small governments before
establishing any requirements that might significantly or uniquely
affect them. On March 18, 1997, DOE published a statement of policy on
its process for intergovernmental consultation under UMRA. 62 FR 12820.
DOE's policy statement is also available at www.energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
Although this proposed rule does not contain a Federal
intergovernmental mandate, it may require expenditures of $100 million
or more in any one year by the private sector. Such expenditures may
include: (1) investment in research and development and in capital
expenditures by consumer boilers manufacturers in the years between the
final rule and the compliance date for the newly amended standards and
(2) incremental additional expenditures by consumers to purchase
higher-efficiency consumer boilers, starting at the compliance date for
the applicable standard.
Section 202 of UMRA authorizes a Federal agency to respond to the
content requirements of UMRA in any other statement or analysis that
accompanies the proposed rule. (2 U.S.C. 1532(c)) The content
requirements of section 202(b) of UMRA relevant to a private sector
mandate substantially overlap the economic analysis requirements that
apply under section 325(o) of EPCA and Executive Order 12866. The
SUPPLEMENTARY INFORMATION section of this NOPR and the TSD for this
proposed rule respond to those requirements.
Under section 205 of UMRA, the Department is obligated to identify
and consider a reasonable number of regulatory alternatives before
promulgating a rule for which a written statement under section 202 is
required. (2 U.S.C. 1535(a)) DOE is required to select from those
alternatives the most cost-effective and least burdensome alternative
that achieves the objectives of the proposed rule unless DOE publishes
an explanation for doing otherwise, or the selection of such an
alternative is inconsistent with law. As required by 42 U.S.C. 6295(m),
this proposed rule would establish amended energy conservation
standards for consumer boilers that are designed to achieve the maximum
improvement in energy efficiency that DOE has determined to be both
technologically feasible and economically justified, as required by 42
U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B). A full discussion of
the alternatives considered by DOE is presented in chapter 17 of the
TSD for this proposed rule.
H. Review Under the Treasury and General Government Appropriations Act,
1999
Section 654 of the Treasury and General Government Appropriations
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family
Policymaking Assessment for any rule that may affect family well-being.
This proposed 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 E.O. 12630, ``Governmental Actions and Interference
with Constitutionally Protected Property Rights,'' 53 FR 8859 (March
18, 1988), DOE has determined that this proposed rule would not result
in any takings that might require compensation under the Fifth
Amendment to the U.S. Constitution.
J. Review Under the Treasury and General Government Appropriations Act,
2001
Section 515 of the Treasury and General Government Appropriations
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review
most disseminations of information to the public under information
quality guidelines established by each agency pursuant to general
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452
(Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446
(Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, ``Improving
Implementation of the Information Quality Act'' (April 24, 2019), DOE
published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has
reviewed this NOPR under the OMB and DOE guidelines and has concluded
that it is consistent with applicable policies in those guidelines.
K. Review Under Executive Order 13211
E.O. 13211, ``Actions Concerning Regulations That Significantly
Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22,
2001), requires Federal agencies to prepare and submit to OIRA at OMB,
a Statement of Energy Effects for any proposed significant energy
action. A ``significant energy action'' is defined as any action by an
agency that promulgates or is expected to lead to promulgation of a
final rule, and that: (1) is a significant regulatory action under
Executive Order 12866, or any successor order; and (2) is likely to
have a significant adverse effect on the supply, distribution, or use
of energy, or (3) is designated by the Administrator of OIRA as a
significant energy action. For any proposed significant energy action,
the agency must give a detailed statement of any adverse effects on
energy supply, distribution, or use should the proposal be implemented,
and of reasonable alternatives to the action and their expected
benefits on energy supply, distribution, and use.
DOE has tentatively concluded that this regulatory action, which
proposes amended energy conservation standards for consumer boilers, is
not a significant energy action because the proposed standards are not
likely to have a significant adverse effect on the supply,
distribution, or use of energy, nor has it been designated as such by
the Administrator at OIRA. Accordingly, DOE has not prepared a
Statement of Energy Effects for this proposed rule.
L. Review Under the Information Quality Bulletin for Peer Review
On December 16, 2004, OMB, in consultation with the Office of
Science and Technology Policy (OSTP), issued its Final Information
Quality Bulletin for Peer Review (the Bulletin). 70 FR 2664 (Jan. 14,
2005). The Bulletin establishes that certain scientific information
shall be peer reviewed by qualified specialists before it is
disseminated by the Federal Government, including influential
scientific information related to agency regulatory actions. The
purpose of the bulletin is to enhance the quality and credibility of
the Government's scientific information. Under the Bulletin, the energy
conservation standards rulemaking analyses are ``influential scientific
information,'' which the Bulletin defines as ``scientific information
the agency reasonably can
[[Page 55214]]
determine will have, or does have, a clear and substantial impact on
important public policies or private sector decisions.'' Id. at 70 FR
2667.
In response to OMB's Bulletin, DOE conducted formal peer reviews of
the energy conservation standards development process and the analyses
that are typically used and has prepared a Peer Review report
pertaining to the energy conservation standards rulemaking
analyses.\175\ 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.
Because available data, models, and technological understanding have
changed since 2007, DOE has engaged with the National Academy of
Sciences to review DOE's analytical methodologies to ascertain whether
modifications are needed to improve the Department's analyses. DOE is
in the process of evaluating the resulting December 2021 NAS
report.\176\
---------------------------------------------------------------------------
\175\ The 2007 ``Energy Conservation Standards Rulemaking Peer
Review Report'' is available at the following website: energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0 (Last accessed Jan. 3, 2023).
\176\ The December 2021 NAS report is available at
www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards (Last accessed Jan. 3,
2023).
---------------------------------------------------------------------------
VII. Public Participation
A. Participation in the Public Meeting Webinar
The time and date of the webinar meeting are listed in the DATES
section at the beginning of this document. Webinar registration
information, participant instructions, and information about the
capabilities available to webinar participants will be published on
DOE's website:www.energyenergy.gov/eere/buildings/public-meetings-and-comment-deadlines. Participants are responsible for ensuring their
systems are compatible with the webinar software.
B. Procedure for Submitting Prepared General Statements for
Distribution
Any person who has plans to present a prepared general statement
may request that copies of his or her statement be made available at
the public meeting. Such persons may submit requests, along with an
advance electronic copy of their statement in PDF (preferred),
Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, to
the appropriate address shown in the ADDRESSES section at the beginning
of this document. The request and advance copy of statements must be
received at least one week before the public meeting and are to be
emailed. Please include a telephone number to enable DOE staff to make
follow-up contact, if needed.
C. Conduct of the Webinar
DOE will designate a DOE official to preside at the webinar and may
also use a professional facilitator to aid discussion. The meeting will
not be a judicial or evidentiary-type public hearing, but DOE will
conduct it in accordance with section 336 of EPCA (42 U.S.C. 6306). A
court reporter will be present to record the proceedings and prepare a
transcript. DOE reserves the right to schedule the order of
presentations and to establish the procedures governing the conduct of
the webinar/public meeting. There shall not be discussion of
proprietary information, costs or prices, market share, or other
commercial matters regulated by U.S. anti-trust laws. After the webinar
and until the end of the comment period, interested parties may submit
further comments on the proceedings and any aspect of the proposed
rulemaking.
The webinar will be conducted in an informal, conference style. DOE
will present a general overview of the topics addressed in this
proposed rulemaking, allow time for prepared general statements by
participants, and encourage all interested parties to share their views
on issues affecting this proposed rulemaking. Each participant will be
allowed to make a general statement (within time limits determined by
DOE), before the discussion of specific topics. DOE will permit, as
time permits, other participants to comment briefly on any general
statements.
At the end of all prepared statements on a topic, DOE will permit
participants to clarify their statements briefly. Participants should
be prepared to answer questions by DOE and by other participants
concerning these issues. DOE representatives may also ask questions of
participants concerning other matters relevant to this proposed
rulemaking. The official conducting the webinar will accept additional
comments or questions from those attending, as time permits. The
presiding official will announce any further procedural rules or
modification of the above procedures that may be needed for the proper
conduct of the webinar.
A transcript of the webinar will be included in the docket, which
can be viewed as described in the Docket section at the beginning of
this NOPR. In addition, any person may buy a copy of the transcript
from the transcribing reporter.
D. Submission of Comments
DOE will accept comments, data, and information regarding this
proposed rule before or after the public meeting webinar, but no later
than the date provided in the DATES section at the beginning of this
proposed rule. Interested parties may submit comments, data, and other
information using any of the methods described in the ADDRESSES section
at the beginning of this document.
Submitting comments via www.regulations.gov. The
www.regulations.gov web page will require you to provide your name and
contact information. Your contact information will be viewable to DOE
Building Technologies staff only. Your contact information will not be
publicly viewable except for your first and last names, organization
name (if any), and submitter representative name (if any). If your
comment is not processed properly because of technical difficulties,
DOE will use this information to contact you. If DOE cannot read your
comment due to technical difficulties and cannot contact you for
clarification, DOE may not be able to consider your comment.
However, your contact information will be publicly viewable if you
include it in the comment itself or in any documents attached to your
comment. Any information that you do not want to be publicly viewable
should not be included in your comment, nor in any document attached to
your comment. Otherwise, persons viewing comments will see only first
and last names, organization names, correspondence containing comments,
and any documents submitted with the comments.
Do not submit to www.regulations.gov information for which
disclosure is restricted by statute, such as trade secrets and
commercial or financial information (hereinafter referred to as
Confidential Business Information (CBI)). Comments submitted through
www.regulations.gov cannot be claimed as CBI. Comments received through
the website will waive any CBI claims for the information submitted.
For information on submitting CBI, see the Confidential Business
Information section.
DOE processes submissions made through www.regulations.gov before
[[Page 55215]]
posting. Normally, comments will be posted within a few days of being
submitted. However, if large volumes of comments are being processed
simultaneously, your comment may not be viewable for up to several
weeks. Please keep the comment tracking number that www.regulations.gov
provides after you have successfully uploaded your comment.
Submitting comments via email, hand delivery/courier, or postal
mail. Comments and documents submitted via email, hand delivery/
courier, or postal mail also will be posted to www.regulations.gov. If
you do not want your personal contact information to be publicly
viewable, do not include it in your comment or any accompanying
documents. Instead, provide your contact information in a cover letter.
Include your first and last names, email address, telephone number, and
optional mailing address. The cover letter will not be publicly
viewable as long as it does not include any comments.
Include contact information each time you submit comments, data,
documents, and other information to DOE. If you submit via postal mail
or hand delivery/courier, please provide all items on a CD, if
feasible, in which case it is not necessary to submit printed copies.
No telefacsimiles (faxes) will be accepted.
Comments, data, and other information submitted to DOE
electronically should be provided in PDF (preferred), Microsoft Word or
Excel, WordPerfect, or text (ASCII) file format. Provide documents that
are not secured, that are written in English, and that are free of any
defects or viruses. Documents should not contain special characters or
any form of encryption, and, if possible, they should carry the
electronic signature of the author.
Campaign form letters. Please submit campaign form letters by the
originating organization in batches of between 50 to 500 form letters
per PDF or as one form letter with a list of supporters' names compiled
into one or more PDFs. This reduces comment processing and posting
time.
Confidential Business Information. Pursuant to 10 CFR 1004.11, any
person submitting information that he or she believes to be
confidential and exempt by law from public disclosure should submit via
email two well-marked copies: one copy of the document marked
``confidential'' including all the information believed to be
confidential, and one copy of the document marked ``non-confidential''
with the information believed to be confidential deleted. DOE will make
its own determination about the confidential status of the information
and treat it according to its determination.
It is DOE's policy that all comments may be included in the public
docket, without change and as received, including any personal
information provided in the comments (except information deemed to be
exempt from public disclosure).
E. Issues on Which DOE Seeks Comment
Although DOE welcomes comments on any aspect of this proposal, DOE
is particularly interested in receiving comments and views of
interested parties concerning the following issues:
1. DOE requests comment on the methodology used to present the
change in producer cashflow (INPV) in the monetized benefits and
cost tables I.3, I.4, and V.37 of this document.
2. DOE requests information on the market share of weatherized
consumer boilers and the typical jacket losses of such products.
3. DOE requests further information on the potential future
adoption of hydrogen-ready consumer boilers in the United States and
any data demonstrating potential impacts of these burner systems on
AFUE.
4. DOE requests comment on the tentative determination that
condensing operation in oil-fired hot water boilers, pulse
combustion, burner derating, low-pressure air-atomized oil burners,
and control relays for models with BPM motors should be screened out
from further analysis.
5. DOE requests comment on whether an increase in MPCs for gas-
fired steam, oil-fired hot water, and oil-fired steam boilers would
result from an amended standard requiring condensing technology for
gas-fired hot water boilers and, if so, how much of an increase
would occur. DOE also requests comment on whether the potential
increase in cast-iron boiler MPCs would only be applicable to
consumer boiler manufacturers that operate their own foundries.
6. DOE requests comment on the cost-efficiency results in this
engineering analysis. DOE also seeks input on the design options
that would be implemented to achieve the selected efficiency levels.
7. DOE requests comment on DOE's space heating and water heating
energy use methodology. DOE would also appreciate feedback,
information, and data on these additional system types and processes
that use consumer boilers (such as snow melt systems, pool or spa
heating, or steam or hot water production for industrial or
commercial processes).
8. DOE requests comment on DOE's methodology for determining the
fraction of consumer boilers used in commercial buildings. DOE also
seeks input regarding the fraction of consumer boilers in commercial
buildings larger than 10,000 square feet.
9. DOE requests comments, information, and data regarding the
relationship between boiler efficiency and return water temperature.
10. DOE requests comment on DOE's updated methodology for
determining energy use for condensing boilers in different return
water temperature applications.
11. DOE requests comments, information, and data showing the
relationship between boiler efficiency and excess air during AFUE
testing and in the field.
12. DOE requests comments on the default constant price trend
for consumer boilers. DOE seeks comments on how material prices and
technological advancement would be expected to impact future prices
of consumer boilers.
13. DOE requests comments on its approach for taking into
account electrification efforts in its shipment analysis. DOE also
requests comments on other local, State, and Federal policies that
may impact the shipments projection of consumer boilers.
14. DOE requests comments on its approach for developing
efficiency trends beyond 2030.
15. DOE requests comments and any data on the potential for
direct rebound.
16. DOE requests comments on its approach to monetizing the
impact of the rebound effect.
17. DOE seeks comments, information, and data on the capital
conversion costs and product conversion costs estimated for each
TSL.
18. DOE seeks comments, information, and data on the potential
direct employment impacts estimated for each TSL.
19. DOE seeks comment on whether manufacturers expect that
manufacturing capacity or engineering resource constraints would
limit product availability to consumers in the timeframe of the
amended standards compliance date (2030).
20. DOE requests comment on the $20 per-unit reallocation cost
for gas-fired steam, oil-fired hot water, and oil-fired steam
boilers under a condensing standard for gas-fired hot water boilers,
as well as the methodology used to derive the estimate.
21. DOE requests comment on the potential impacts on consumer
boiler manufacturers that own domestic foundry assets including
impacts but not limited to those vital to national security or
critical infrastructure at the TSLs analyzed in this NOPR analysis.
22. DOE requests information regarding the impact of cumulative
regulatory burden on manufacturers of consumer boilers associated
with multiple DOE standards or product-specific regulatory actions
of other Federal agencies in addition to state or local regulations.
23. DOE seeks comments, information, and data on the number of
small businesses in the industry, the names of those small
businesses, and their market shares by product class. DOE also
requests comment on the potential impacts of the proposed standards
on small manufacturers.
Additionally, DOE welcomes comments on other issues relevant to the
conduct of this rulemaking that may not specifically be identified in
this document.
VIII. Approval of the Office of the Secretary
The Secretary of Energy has approved publication of this notice of
proposed rulemaking and request for comment.
[[Page 55216]]
List of Subjects in 10 CFR Part 430
Administrative practice and procedure, Confidential business
information, Energy conservation, Household appliances, Imports,
Intergovernmental relations, Reporting and recordkeeping requirements,
Small businesses.
Signing Authority
This document of the Department of Energy was signed on July 27,
2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for
Energy Efficiency and Renewable Energy, pursuant to delegated authority
from the Secretary of Energy. That document with the original signature
and date is maintained by DOE. For administrative purposes only, and in
compliance with requirements of the Office of the Federal Register, the
undersigned DOE Federal Register Liaison Officer has been authorized to
sign and submit the document in electronic format for publication, as
an official document of the Department of Energy. This administrative
process in no way alters the legal effect of this document upon
publication in the Federal Register.
Signed in Washington, DC, on July 28, 2023.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.
For the reasons set forth in the preamble, DOE proposes to amend
part 430 of chapter II, subchapter D, of title 10 of the Code of
Federal Regulations, as set forth below:
PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS
0
1. The authority citation for part 430 continues to read as follows:
Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.
0
2. Amend Sec. 430.32 by revising paragraph (e)(2) to read as follows:
Sec. 430.32 Energy and water conservation standards and their
compliance dates.
* * * * *
(e) * * *
(2) Boilers. (i) Except as provided in paragraph (e)(2)(iii) of
this section, residential boilers manufactured on and after January 15,
2021, and before [date 5 years after publication of the final rule in
the Federal Register], shall comply with the requirements as follows:
Table 14 to Paragraph (e)(2)(i)
----------------------------------------------------------------------------------------------------------------
Minimum Maximum Maximum
Product class AFUE\1\ PW,SB\2\ PW,OFF\3\ Design requirements\4\
(percent) (watts) (watts)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water................ 84 9 9 Constant-burning pilot not
permitted. Automatic means
for adjusting water
temperature required
(except for boilers
equipped with tankless
domestic water heating
coils).
Gas-Fired Steam.................... 82 8 8 Constant-burning pilot not
permitted.
Oil-fired Hot Water................ 86 11 11 Automatic means for
adjusting temperature
required (except for
boilers equipped with
tankless domestic water
heating coils).
Oil-fired Steam.................... 85 11 11 None.
Electric Hot Water................. None 8 8 Automatic means for
adjusting temperature
required (except for
boilers equipped with
tankless domestic water
heating coils).
Electric Steam..................... None 8 8 None.
----------------------------------------------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec. 430.23(n)(2) of this part.
\2\ Standby Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\3\ Off Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\4\ See paragraph (e)(2)(iv) of this section.
(ii) Except as provided in paragraph (e)(2)(iii) of this section,
residential boilers manufactured on and after [date five years after
publication of the final rule amending standards], shall comply with
the requirements as follows:
Table 15 to Paragraph (e)(2)(ii)
----------------------------------------------------------------------------------------------------------------
Minimum Maximum Maximum
Product class AFUE\1\ PW,SB\2\ PW,OFF\3\ Design requirements\4\
(percent) (watts) (watts)
----------------------------------------------------------------------------------------------------------------
Gas-fired Hot Water................ 95 9 9 Constant-burning pilot not
permitted. Automatic means
for adjusting water
temperature required
(except for boilers
equipped with tankless
domestic water heating
coils).
Gas-Fired Steam.................... 82 8 8 Constant-burning pilot not
permitted.
Oil-fired Hot Water................ 88 11 11 Automatic means for
adjusting temperature
required (except for
boilers equipped with
tankless domestic water
heating coils).
Oil-fired Steam.................... 86 11 11 None.
Electric Hot Water................. None 8 8 Automatic means for
adjusting temperature
required (except for
boilers equipped with
tankless domestic water
heating coils).
Electric Steam..................... None 8 8 None.
----------------------------------------------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec. 430.23(n)(2) of this part.
\2\ Standby Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\3\ Off Mode Power Consumption, as determined in appendix EE to subpart B of this part.
\4\ See paragraph (e)(2)(iv) of this section.
[[Page 55217]]
(iii) A boiler that is manufactured to operate without any need for
electricity or any electric connection, electric gauges, electric
pumps, electric wires, or electric devices is not required to meet the
AFUE or design requirements in paragraphs (e)(2)(i) or (2)(ii) of this
section, but must meet the following requirements, as applicable:
Table 16 to Paragraph (e)(2)(iii)
------------------------------------------------------------------------
Minimum
Product class AFUE\1\
(percent)
------------------------------------------------------------------------
Gas-fired Steam......................................... 75
Boilers Other Than Gas-fired Steam...................... 80
------------------------------------------------------------------------
\1\ Annual Fuel Utilization Efficiency, as determined in Sec.
430.23(n)(2) of this part.
(iv) Automatic means for adjusting water temperature. (A) The
automatic means for adjusting water temperature as required under
paragraphs (e)(2)(i) and (2)(ii) of this section must automatically
adjust the temperature of the water supplied by the boiler to ensure
that an incremental change in inferred heat load produces a
corresponding incremental change in the temperature of water supplied.
(B) For boilers that fire at a single input rate, the automatic
means for adjusting water temperature requirement may be satisfied by
providing an automatic means that allows the burner or heating element
to fire only when the means has determined that the inferred heat load
cannot be met by the residual heat of the water in the system.
(C) When there is no inferred heat load with respect to a hot water
boiler, the automatic means described in this paragraph shall limit the
temperature of the water in the boiler to not more than 140 degrees
Fahrenheit.
(D) A boiler for which an automatic means for adjusting water
temperature is required shall be operable only when the automatic means
is installed.
* * * * *
[FR Doc. 2023-16476 Filed 8-11-23; 8:45 am]
BILLING CODE 6450-01-P