CHAPTER 16. REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR ROOM AIR CONDITIONERS AND CLOTHES DRYERS

TABLE OF CONTENTS

16.1 INTRODUCTION

......................................................................................................... 16-1 16.2 METHODOLOGY

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LIST OF TABLES

Table 16.1.1 Non-Regulatory Alte rnatives to Standards

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16-iCHAPTER 16. REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR ROOM AIR CONDITIONERS AND CLOTHES DRYERS

16.1 INTRODUCTION

Under the Process Rule ( Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products , 61 FR 36974 (July 15, 1996)), the U.S. Department of Energy (DOE) is committed to con tinually explore non-regulatory alternatives to standards. DOE will prepare a draft regulatory impact analysis pursuant to E.O. 12866, “Regulatory Planning and Review,” which will be subject to review under the Executive Order by the Office of Management and Budget’s Office of Information and Regulatory Affairs. 58 FR 51735. DOE has identified seven majo r alternatives to standards as representing feasible policy options to reduce consumer product energy consum ption. It will evaluate each alternative in terms of its ability to achieve significant energy savings at a reasonable cost, and will compare the effectiveness of each one to the eff ectiveness of the proposed standards rule.

The non-regulatory means of achieving energy savings that DOE proposes to analyze are listed in Table 16.1.1. The technical support document (TSD) in support of DOE’s notice of proposed rulemaking will include a complete qu antitative analysis of each alternative, the methodology for which is di scussed briefly below.

Table 16.1.1 Non-Regulatory Alternatives to Standards No new regulatory action Consumer tax credits Manufacturer tax credits Performance Standards Rebates Voluntary energy efficiency targets Early replacement Bulk government purchases

16.2 METHODOLOGY

DOE will use the national impact analysis (NIA) spreadsheet models for each of the two products to calculate the national energy saving s and the net present value (NPV) corresponding to each alternative to the proposed standards. The NIA model for each of the two products is discussed in chapter 10 of the TSD. To compare each alternative quantitatively to the proposed energy conservation standards, DOE will need to quantify the effect of each alternative on the purchase and use of energy efficient room air conditioners and clothes dryers. Once it has quantified each alternative, DOE will make the appropriate revi sions to the inputs in the NIA models. Key inputs that DOE may revise in these models are:

• Energy prices and escalation factors;

16-1• Implicit market discount rates for tradin g off purchase price against operating expense when choosing product efficiency;

• Consumer purchase price, operating cost, and income elasticities;

• Consumer price-versus-effi ciency relationships; and

• Product stock data (purchase of new products or turnove r rates for inventories).

The key measures of the impact of each alternative will be:

• Energy use: Cumulative energy use of the product from the effective date of the new standard to the year 2044. DOE will report el ectricity consumption as primary energy.

• National energy savings: Cumulative national energy use from the base case projection minus the alternative policy case projection.

• Net present value: The value of future operating cost savings from products bought in the period from the effective date of the new standard 2014 to the year 2044. DOE will calculate the NPV as the difference between the present value of product and operating expenditures (including energy) in the base case, and the present value of expenditures in each alternative policy cas e. DOE will discount future operating and product expenditures to 2011 using a seven-pe rcent and three-percent real discount rate. It will calculate operating expenses (including energy costs) for the life of the products.

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