Vol. 80 Friday, 

No. 137 July 17, 2015 

Part II 

Department of Energy 

10 CFR Part 431 

Energy Conservation Program for Certain Industrial Equipment: Energy 

Conservation Standards and Test Procedures for Commercial Heating, AirConditioning, and Water-Heating Equipment; Final Rule 

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42614 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

DEPARTMENT OF ENERGY 

10 CFR Part 431 

[Docket No. EERE–2014–BT–STD–0015] 

RIN 1904–AD23 

Energy Conservation Program for 

Certain Industrial Equipment: Energy 

Conservation Standards and Test 

Procedures for Commercial Heating, 

Air-Conditioning, and Water-Heating 

Equipment 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Final rule. 

SUMMARY: The U.S. Department of 

Energy (DOE) is amending its energy 

conservation standards for small threephase commercial air-cooled air 

conditioners (single package only) and 

heat pumps (single package and split 

system) less than 65,000 Btu/h; watersource heat pumps; and commercial oilfired storage water heaters. Pursuant to 

the Energy Policy and Conservation Act 

of 1975 (EPCA), as amended, DOE must 

assess whether the uniform national 

standards for these covered equipment 

need to be updated each time the 

corresponding industry standard—the 

American National Standards Institute 

(ANSI)/American Society of Heating, 

Refrigerating, and Air-Conditioning 

Engineers (ASHRAE)/Illuminating 

Engineering Society of North America 

(IESNA) Standard 90.1 (ASHRAE 

Standard 90.1)—is amended, which 

most recently occurred on October 9, 

2013. Under EPCA, DOE may only 

adopt more stringent standards if there 

is clear and convincing evidence 

showing that more stringent amended 

standards would be technologically 

feasible and economically justified, and 

would save a significant additional 

amount of energy. The levels DOE is 

adopting are the same as the efficiency 

levels specified in ASHRAE Standard 

90.1–2013. DOE has determined that the 

ASHRAE Standard 90.1–2013 efficiency 

levels for the equipment types listed 

above are more stringent than existing 

Federal energy conservation standards 

and will result in economic and energy 

savings compared existing energy 

conservation standards. Furthermore, 

DOE has concluded that clear and 

convincing evidence does not exist that 

would justify more-stringent standard 

levels than the efficiency levels in 

ASHRAE Standard 90.1–2013 for any of 

the equipment classes. DOE has also 

determined that the standards for small 

three-phase commercial air-cooled air 

conditioners (split system) do not need 

to be amended. DOE is also updating the 

current Federal test procedure for 

commercial warm-air furnaces to 

incorporate by reference the most 

current version of the American 

National Standards Institute (ANSI) 

Z21.47, Gas-fired central furnaces, 

specified in ASHRAE Standard 90.1, 

and the most current version of 

ASHRAE 103, Method of Testing for 

Annual Fuel Utilization Efficiency of 

Residential Central Furnaces and 

Boilers. 

DATES: The effective date of this rule is 

September 15, 2015. Compliance with 

the amended standards established for 

water-source heat pumps and 

commercial oil-fired storage water 

heaters in this final rule is required on 

and after October 9, 2015. Compliance 

with the amended standards established 

for small three-phase commercial aircooled air conditioners (single package 

only) and heat pumps (single package 

and split system) less than 65,000 

Btu/h in this final rule is required on 

and after January 1, 2017. The 

incorporation by reference of certain 

publications listed in this rule was 

approved by the Director of the Federal 

Register as of September 15, 2015. 

ADDRESSES: The docket, which includes 

Federal Register notices, public meeting 

attendee lists and transcripts, 

comments, and other supporting 

documents/materials, is available for 

review at www.regulations.gov. All 

documents in the docket are listed in 

the www.regulations.gov index. 

However, some documents listed in the 

index may not be publicly available, 

such as those containing information 

that is exempt from public disclosure. 

A link to the docket Web page can be 

found at: www.regulations.gov/#!docket

Detail;D=EERE-2014-BT-STD-0015. The 

www.regulations.gov Web page will 

contain instructions on how to access 

all documents, including public 

comments, in the docket. 

For further information on how to 

review the docket, contact Ms. Brenda 

Edwards at (202) 586–2945 or by email: 

Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT: 

Ms. Ashley Armstrong, U.S. Department 

of Energy, Office of Energy Efficiency 

and Renewable Energy, Building 

Technologies Office, EE–5B, 1000 

Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202) 586–6590. Email: 

Ashley.Armstrong@ee.doe.gov. 

Ms. Johanna Hariharan, U.S. 

Department of Energy, Office of the 

General Counsel, GC–33, 1000 

Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202) 287–6307. Email: 

Johanna.Hariharan@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: This final 

rule incorporates by reference the 

following industry standards into part 

431: 

• ANSI Z21.47–2012, ‘‘Standard for 

Gas-Fired Central Furnaces’’, approved 

on March 27, 2012. 

Copies of ANSI Z21.47–2012 can be 

obtained from ANSI. American National 

Standards Institute. 25 W. 43rd Street, 

4th Floor, New York, NY 10036. (212) 

642–4900, or by going to http:// 

www.ansi.org. 

• ASHRAE Standard 103–2007, 

‘‘Method of Testing for Annual Fuel 

Utilization Efficiency of Residential 

Central Furnaces and Boilers,’’ sections 

7.2.2.4, 7.8, 9.2, and 11.3.7, approved on 

June 27, 2007. 

Copies of ASHRAE Standard 103– 

2007 can be obtained from ASHRAE. 

American Society of Heating, 

Refrigerating and Air-Conditioning 

Engineers Inc., 1791 Tullie Circle NE., 

Atlanta, Georgia 30329. (404) 636–8400, 

or by going to http://www.ashrae.org. 

These standards are described in 

section IX.N. 

Table of Contents 

I. Synopsis of the Final Rule 

II. Introduction 

A. Authority 

B. Background 

1. ASHRAE Standard 90.1–2013 

2. Previous Rulemaking Documents 

3. Compliance Dates for Amended Federal 

Test Procedures, Amended Federal 

Energy Conservation Standards, and 

Representations for Certain ASHRAE 

Equipment 

III. General Discussion of Comments 

Received 

A. General Discussion of the Changes in 

ASHRAE Standard 90.1–2013 and 

Determination of Scope for Further 

Rulemaking Activity 

B. The Proposed Energy Conservation 

Standards 

IV. Test Procedure Amendments and 

Discussion of Related Comments 

V. Methodology for Small Commercial AirCooled Air Conditioners and Heat 

Pumps Less Than 65,000 Btu/h 

A. Market Assessment 

1. Equipment Classes 

2. Review of Current Market 

a. Trade Association Information 

b. Manufacturer Information 

c. Market Data 

B. Engineering Analysis 

1. Approach 

2. Baseline Equipment 

3. Identification of Increased Efficiency 

Levels for Analysis 

4. Engineering Analysis Results 

a. Manufacturer Markups 

b. Shipping Costs 

C. Markups Analysis 

D. Energy Use Analysis 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42615 

1For editorial reasons, upon codification in the 

U.S. Code, Part C was redesignated Part A–1. 

2All references to EPCA in this document refer 

to the statute as amended through the Energy 

Efficiency Improvement Act of 2014, Public Law 

112–210 (Apr. 30, 2015). 

E. Life-Cycle Cost and Payback Period 

Analysis 

1. Equipment Costs 

2. Installation Costs 

3. Unit Energy Consumption 

4. Electricity Prices and Electricity Price 

Trends 

5. Maintenance Costs 

6. Repair Costs 

7. Equipment Lifetime 

8. Discount Rate 

9. Base-Case Market Efficiency Distribution 

10. Compliance Date 

11. Payback Period Inputs 

F. National Impact Analysis—National 

Energy Savings and Net Present Value 

Analysis 

1. Approach 

2. Shipments Analysis 

3. Base-Case and Standards-Case 

Forecasted Distribution of Efficiencies 

4. National Energy Savings and Net Present 

Value 

VI. Methodology for Water-Source Heat 

Pumps 

A. Market Assessment 

1. Equipment Classes 

2. Review of Current Market 

a. Trade Association Information 

b. Manufacturer Information 

c. Market Data 

B. Engineering Analysis 

1. Approach 

2. Baseline Equipment 

3. Identification of Increased Efficiency 

Levels for Analysis 

4. Engineering Analysis Results 

a. Manufacturer Markups 

b. Shipping Costs 

C. Markups Analysis 

D. Energy Use Analysis 

E. Life-Cycle Cost and Payback Period 

Analysis 

1. Equipment Costs 

2. Installation Costs 

3. Unit Energy Consumption 

4. Electricity Prices and Electricity Price 

Trends 

5. Maintenance Costs 

6. Repair Costs 

7. Equipment Lifetime 

8. Discount Rate 

9. Base-Case Market Efficiency Distribution 

10. Compliance Date 

11. Payback Period Inputs 

F. National Impact Analysis—National 

Energy Savings and Net Present Value 

Analysis 

1. Approach 

2. Shipments Analysis 

3. Base-Case and Standards-Case 

Forecasted Distribution of Efficiencies 

4. National Energy Savings and Net Present 

Value 

VII. Methodology for Emissions Analysis and 

Monetizing Carbon Dioxide and Other 

Emissions Impacts 

A. Emissions Analysis 

B. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

1. Social Cost of Carbon 

a. Monetizing Carbon Dioxide Emissions 

b. Development of Social Cost of Carbon 

Values 

c. Current Approach and Key Assumptions 

2. Valuation of Other Emissions 

Reductions 

VIII. Analytical Results and Conclusions 

A. Efficiency Levels Analyzed 

1. Small Commercial Air-Cooled Air 

Conditioners and Heat Pumps Less Than 

65,000 Btu/h 

2. Water-Source Heat Pumps 

3. Commercial Oil-Fired Storage Water 

Heaters 

B. Energy Savings and Economic 

Justification 

1. Small Commercial Air-Cooled Air 

Conditioners and Heat Pumps Less Than 

65,000 Btu/h 

a. Economic Impacts on Commercial 

Customers 

b. National Impact Analysis 

2. Water-Source Heat Pumps 

a. Economic Impacts on Commercial 

Customers 

b. National Impact Analysis 

3. Commercial Oil-Fired Storage Water 

Heaters 

C. Need of the Nation To Conserve Energy 

D. Amended Energy Conservation 

Standards 

1. Small Commercial Air-Cooled Air 

Conditioners and Heat Pumps Less Than 

65,000 Btu/h 

2. Water-Source Heat Pumps 

3. Commercial Oil-Fired Storage Water 

Heaters 

IX. Procedural Issues and Regulatory Review 

A. Review Under Executive Order 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 

M. Congressional Notification 

N. Description of Materials Incorporated by 

Reference 

X. Approval of the Office of the Secretary 

I. Synopsis of the Final Rule 

Title III, Part C1 of the Energy Policy 

and Conservation Act of 1975 (‘‘EPCA’’ 

or ‘‘the Act’’), Public Law 94–163, (42 

U.S.C. 6311–6317, as codified), added 

by Public Law 95–619, Title IV, section 

441(a), established the Energy 

Conservation Program for Certain 

Industrial Equipment, which sets forth a 

variety of provisions designed to 

improve energy efficiency.2 These 

encompass several types of commercial 

heating, air-conditioning, and waterheating equipment, including those that 

are the subject of this rulemaking. (42 

U.S.C. 6311(1)(B) and (K)) EPCA, as 

amended, also requires the U.S. 

Department of Energy (DOE) to consider 

amending the existing Federal energy 

conservation standard for certain types 

of listed commercial and industrial 

equipment (generally, commercial water 

heaters, commercial packaged boilers, 

commercial air-conditioning and 

heating equipment, and packaged 

terminal air conditioners and heat 

pumps) each time the American Society 

of Heating, Refrigerating and AirConditioning Engineers (ASHRAE) 

Standard 90.1, Energy Standard for 

Buildings Except Low-Rise Residential 

Buildings, is amended with respect to 

such equipment. (42 U.S.C. 

6313(a)(6)(A)) For each type of 

equipment, EPCA directs that if 

ASHRAE Standard 90.1 is amended, 

DOE must adopt amended energy 

conservation standards at the new 

efficiency level in ASHRAE Standard 

90.1, unless clear and convincing 

evidence supports a determination that 

adoption of a more-stringent efficiency 

level as a national standard would 

produce significant additional energy 

savings and be technologically feasible 

and economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)) If DOE decides to 

adopt as a national standard the 

efficiency levels specified in the 

amended ASHRAE Standard 90.1, DOE 

must establish such standard not later 

than 18 months after publication of the 

amended industry standard. (42 U.S.C. 

6313(a)(6)(A)(ii)(I)) If DOE determines 

that a more-stringent standard is 

appropriate under the statutory criteria, 

DOE must establish such more-stringent 

standard not later than 30 months after 

publication of the revised ASHRAE 

Standard 90.1. (42 U.S.C. 6313(a)(6)(B)) 

ASHRAE officially released ASHRAE 

Standard 90.1–2013 on October 9, 2013, 

thereby triggering DOE’s previously 

referenced obligations pursuant to EPCA 

to determine for those types of 

equipment with efficiency level or 

design requirement changes beyond the 

current Federal standard, whether: (1) 

The amended industry standard should 

be adopted; or (2) clear and convincing 

evidence exists to justify more-stringent 

standard levels. 

DOE published a notice of proposed 

rulemaking on January 8, 2015, in the 

Federal Register, describing DOE’s 

determination of scope for considering 

amended energy conservation standards 

with respect to certain heating, 

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42616 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

3ASHRAE Standard 90.1–2013 did not change 

any of the design requirements for the commercial 

(HVAC) and water-heating equipment covered by 

EPCA. 

4See Packaged Terminal Air Conditioners and 

Heat Pumps Standards Rulemaking Web page: 

www1.eere.energy.gov/buildings/appliance_

standards/rulemaking.aspx/ruleid/64 and Single 

Package Vertical Air Conditioners and Heat Pumps 

Standards Rulemaking Web page: 

www1.eere.energy.gov/buildings/appliance_

standards/rulemaking.aspx?ruleid=107. 

heating equipment addressed in 

ASHRAE Standard 90.1–2013. 80 FR 

1171, 1180–1186. ASHRAE Standard 

90.1–2013 amended its efficiency levels 

for small three-phase air-cooled air 

conditioners (single package only) and 

heat pumps (single package and split 

system) less than 65,000 Btu/h, watersource heat pumps, commercial oil-fired 

storage water heaters, single package 

vertical units, and packaged terminal air 

conditioners. ASHRAE Standard 90.1– 

2013 also updated its referenced test 

procedures for several equipment types. 

In determining the scope of the 

rulemaking, DOE is statutorily required 

to ascertain whether the revised 

ASHRAE efficiency levels have become 

more stringent, thereby ensuring that 

any new amended national standard 

would not result in prohibited 

‘‘backsliding.’’ For those equipment 

classes for which ASHRAE set morestringent efficiency levels 3 (i.e., small 

three-phase air-cooled air conditioners 

(single package only) and heat pumps 

(single package and split system) less 

than 65,000 Btu/h; water-source heat 

pumps; commercial oil-fired storage 

water heaters; single package vertical 

units; and packaged terminal air 

conditioners), DOE analyzed the energy 

savings potential of amended national 

energy conservation standards (at both 

the new ASHRAE Standard 90.1 

efficiency levels and more-stringent 

efficiency levels) in the April 11, 2014 

notice of data availability (NODA) (79 

FR 20114) and, except for single 

package vertical units and packaged 

terminal air conditioners, which are 

considered in separate rulemakings,4 in 

the January 8, 2015 NOPR (80 FR 1171). 

For equipment where more-stringent 

standard levels than the ASHRAE 

efficiency levels would result in 

significant energy savings (i.e., small 

three-phase air-cooled air conditioners 

and heat pumps less than 65,000 Btu/h 

and water-source heat pumps), DOE 

analyzed the economic justification for 

more-stringent levels in the January 

2015 NOPR. 80 FR 1171, 1213–1220 

(Jan. 15, 2015). 

This final rule applies to three classes 

of small three-phase air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h, three classes of watersource heat pumps, and one class of 

commercial oil-fired storage water 

heaters, which satisfy all applicable 

requirements of EPCA and will result in 

energy savings where models exist 

below the revised efficiency levels. DOE 

has concluded that, based on the 

information presented and its analyses, 

there is not clear and convincing 

evidence justifying adoption of morestringent efficiency levels for this 

equipment. 

It is noted that DOE’s current 

regulations for have a single equipment 

class for small, three-phase commercial 

air-cooled air conditioners less than 

65,000 Btu/h, which covers both splitsystem and single-package models. 

Although ASHRAE Standard 90.1–2013 

did not amend standard levels for the 

split-system models within that 

equipment class, it did so for the singlepackage models. Given this split, in this 

final rule, DOE is once again separating 

these two types of equipment into 

separate equipment classes. However, 

following the evaluation of amended 

standards for split-system models under 

the six-year-lookback provision at 42 

U.S.C. 6313(a)(6)(C), DOE has 

concluded that there is not clear and 

convincing evidence that would justify 

adoption of more-stringent efficiency 

levels for small three-phase split-system 

air-cooled air conditioners less than 

65,000 Btu/h, where the efficiency level 

in ASHRAE 90.1–2013 is the same as 

the current Federal energy conservation 

standards. 

Thus, in accordance with the criteria 

discussed elsewhere in this document, 

DOE is amending the energy 

conservation standards for three classes 

of small three-phase air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h, three classes of watersource heat pumps, and one class of 

commercial oil-fired storage water 

heaters by adopting the efficiency levels 

specified by ASHRAE Standard 90.1– 

2013, as shown in Table I.1. Pursuant to 

EPCA, the amended standards apply to 

all equipment listed in Table I.1 and 

manufactured in, or imported into, the 

United States on or after the date two 

years after the effective date specified in 

ASHRAE Standard 90.1–2013 (i.e., by 

January 1, 2017 for small air-cooled air 

conditioners and heat pumps and by 

October 9, 2015 for water-source heat 

pumps and oil-fired storage water 

heaters). (42 U.S.C. 6313(a)(6)(D)(i)) 

DOE is making a determination that 

standards for split-system air-cooled air 

conditioners less than 65,000 Btu/h do 

not need to be amended. 

TABLE I.1—CURRENT AND AMENDED ENERGY CONSERVATION STANDARDS FOR SPECIFIC TYPES OF COMMERCIAL

EQUIPMENT

Equipment class 

Current 

Federal Energy 

Conservation standard 

Amended 

Federal Energy 

Conservation standard 

Compliance date of 

amended 

Federal Energy 

Conservation 

standard 

Three-Phase Air-Cooled Single-Package Air Conditioners 

<65,000 Btu/h.

13.0 SEER ............................ 14.0 SEER ............................ January 1, 2017. 

Three-Phase Air-Cooled Single-Package Heat Pumps 

<65,000 Btu/h.

13.0 SEER, 7.7 HSPF .......... 14.0 SEER, 8.0 HSPF .......... January 1, 2017. 

Three-Phase Air-Cooled Split-System Heat Pumps <65,000 

Btu/h.

13.0 SEER, 7.7 HSPF .......... 14.0 SEER, 8.2 HSPF .......... January 1, 2017. 

Oil-Fired Storage Water Heaters >105,000 Btu/h and 

<4,000 Btu/h/gal.

78% Et .................................. 80% Et .................................. October 9, 2015. 

Water-Source (Water-to-Air, Water-Loop) Heat Pumps 

<17,000 Btu/h.

11.2 EER, 4.2 COP .............. 12.2 EER, 4.3 COP .............. October 9, 2015. 

Water-Source (Water-to-Air, Water-Loop) Heat Pumps 

≥17,000 and <65,000 Btu/h.

12.0 EER, 4.2 COP .............. 13.0 EER, 4.3 COP .............. October 9, 2015. 

Water-Source (Water-to-Air, Water-Loop) Heat Pumps 

≥65,000 and <135,000 Btu/h.

12.0 EER, 4.2 COP .............. 13.0 EER, 4.3 COP .............. October 9, 2015. 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42617 

5For editorial reasons, upon codification in the 

U.S. Code, Part C was redesignated Part A–1. 

6All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act 

(AEMTCA), Public Law 112–210 (Dec. 18, 2012). 

7Although EPCA does not explicitly define the 

term ‘‘amended’’ in the context of ASHRAE 

Standard 90.1, DOE provided its interpretation of 

what would constitute an ‘‘amended standard’’ in 

a final rule published in the Federal Register on 

March 7, 2007 (hereafter referred to as the ‘‘March 

2007 final rule’’). 72 FR 10038. In that rule, DOE 

stated that the statutory trigger requiring DOE to 

adopt uniform national standards based on 

ASHRAE action is for ASHRAE to change a 

standard for any of the equipment listed in EPCA 

section 342(a)(6)(A)(i) (42 U.S.C. 6313(a)(6)(A)(i)) by 

increasing the energy efficiency level for that 

equipment type. Id. at 10042. In other words, if the 

revised ASHRAE Standard 90.1 leaves the standard 

level unchanged or lowers the standard, as 

compared to the level specified by the national 

standard adopted pursuant to EPCA, DOE does not 

have the authority to conduct a rulemaking to 

consider a higher standard for that equipment 

pursuant to 42 U.S.C. 6313(a)(6)(A). DOE 

subsequently reiterated this position in a final rule 

published in the Federal Register on July 22, 2009 

(74 FR 36312, 36313) and again on May 16, 2012 

(77 FR 28928, 28937). However, in the AEMTCA 

amendments to EPCA in 2012, Congress modified 

several provisions related to ASHRAE Standard 

90.1 equipment. In relevant part, DOE now must act 

whenever ASHRAE Standard 90.1’s ‘‘standard 

levels or design requirements under that standard’’ 

are amended. (42 U.S.C. 6313(a)(6)(A)(i)) 

Furthermore, DOE is now required to conduct an 

evaluation of each class of covered equipment in 

ASHRAE Standard 90.1 ‘‘every 6 years.’’ (42 U.S.C. 

6313(a)(6)(C)(i)) For any covered equipment for 

which more than 6 years has elapsed since issuance 

of the most recent final rule establishing or 

amending a standard for such equipment, DOE 

must publish either the required notice of 

determination that standards do not need to be 

amended or a NOPR with proposed standards by 

December 31, 2013. (42 U.S.C. 6313(a)(6)(C)(vi)) 

DOE has incorporated these new statutory mandates 

into its rulemaking process for covered ASHRAE 

90.1 equipment. 

In addition, DOE is adopting 

amendments to its test procedures for 

commercial warm-air furnaces, which 

manufacturers will be required to use to 

certify compliance with energy 

conservation standards mandated under 

EPCA. See 42 U.S.C. 6314(a)(1)(A) and 

(4)(B)) and 10 CFR parts 429 and 431. 

Specifically, these amendments, which 

were proposed in the January 2015 

NOPR, update the citations and 

incorporations by reference in DOE’s 

regulations to the most recent version of 

American National Standards Institute 

(ANSI) Z21.47, Standard for Gas-Fired 

Central Furnaces (i.e., ANSI Z21.47– 

2012), and to the most recent version of 

ASHRAE 103, Method of Testing for 

Annual Fuel Utilization Efficiency of 

Residential Central Furnaces and Boiler 

(i.e., ASHRAE 103–2007). This final rule 

satisfies the requirement to review the 

test procedures for commercial warm-air 

furnaces within seven years. 42 U.S.C. 

6314(a)(1)(A). 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying today’s proposal, as well as 

some of the relevant historical 

background related to the establishment 

of standards for small three-phase aircooled air conditioners and heat pumps 

less than 65,000 Btu/h, water-source 

heat pumps, and commercial oil-fired 

storage water heaters. 

A. Authority 

Title III, Part C5 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act), Public Law 94–163 (42 U.S.C. 

6311–6317, as codified), added by 

Public Law 95–619, Title IV, section 

441(a), established the Energy 

Conservation Program for Certain 

Industrial Equipment, which includes 

the commercial heating, airconditioning, and water-heating 

equipment that is the subject of this 

rulemaking.6 In general, this program 

addresses the energy efficiency of 

certain types of commercial and 

industrial equipment. Relevant 

provisions of the Act specifically 

include definitions (42 U.S.C. 6311), 

energy conservation standards (42 

U.S.C. 6313), test procedures (42 U.S.C. 

6314), labelling provisions (42 U.S.C. 

6315), and the authority to require 

information and reports from 

manufacturers (42 U.S.C. 6316). 

EPCA contains mandatory energy 

conservation standards for commercial 

heating, air-conditioning, and waterheating equipment. (42 U.S.C. 6313(a)) 

Specifically, the statute sets standards 

for small, large, and very large 

commercial package air-conditioning 

and heating equipment, packaged 

terminal air conditioners (PTACs), 

packaged terminal heat pumps (PTHPs), 

warm-air furnaces, packaged boilers, 

storage water heaters, instantaneous 

water heaters, and unfired hot water 

storage tanks. Id. In doing so, EPCA 

established Federal energy conservation 

standards that generally correspond to 

the levels in ASHRAE Standard 90.1, as 

in effect on October 24, 1992 (i.e., 

ASHRAE Standard 90.1–1989), for each 

type of covered equipment listed in 42 

U.S.C. 6313(a). The Energy 

Independence and Security Act of 2007 

(EISA 2007) amended EPCA by adding 

definitions and setting minimum energy 

conservation standards for singlepackage vertical air conditioners 

(SPVACs) and single-package vertical 

heat pumps (SPVHPs). (42 U.S.C. 

6313(a)(10)(A)) The efficiency standards 

for SPVACs and SPVHPs established by 

EISA 2007 correspond to the levels 

contained in ASHRAE Standard 90.1– 

2004, which originated as addendum 

‘‘d’’ to ASHRAE Standard 90.1–2001. 

In acknowledgement of technological 

changes that yield energy efficiency 

benefits, the U.S. Congress further 

directed DOE through EPCA to consider 

amending the existing Federal energy 

conservation standard for each type of 

equipment listed, each time ASHRAE 

Standard 90.1 is amended with respect 

to such equipment. (42 U.S.C. 

6313(a)(6)(A)) For each type of 

equipment, EPCA directs that if 

ASHRAE Standard 90.1 is amended,7

DOE must publish in the Federal 

Register an analysis of the energy 

savings potential of amended energy 

efficiency standards within 180 days of 

the amendment of ASHRAE Standard 

90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA 

further directs that DOE must adopt 

amended standards at the new 

efficiency level in ASHRAE Standard 

90.1, unless clear and convincing 

evidence supports a determination that 

adoption of a more-stringent level 

would produce significant additional 

energy savings and be technologically 

feasible and economically justified. (42 

U.S.C. 6313(a)(6)(A)(ii)) If DOE decides 

to adopt as a national standard the 

efficiency levels specified in the 

amended ASHRAE Standard 90.1, DOE 

must establish such standard not later 

than 18 months after publication of the 

amended industry standard. (42 U.S.C. 

6313(a)(6)(A)(ii)(I)) However, if DOE 

determines that a more-stringent 

standard is justified under 42 U.S.C. 

6313(a)(6)(A)(ii)(II), then it must 

establish such more-stringent standard 

not later than 30 months after 

publication of the amended ASHRAE 

Standard 90.1. (42 U.S.C. 6313(a)(6)(B)) 

In addition, DOE notes that pursuant to 

the EISA 2007 amendments to EPCA, 

under 42 U.S.C. 6313(a)(6)(C), the 

agency must periodically review its 

already-established energy conservation 

standards for ASHRAE equipment. In 

December 2012, this provision was 

further amended by the American 

Energy Manufacturing Technical 

Corrections Act (AEMTCA) to clarify 

that DOE’s periodic review of ASHRAE 

equipment must occur ‘‘[e]very six 

years.’’ (42 U.S.C. 6313(a)(6)(C)(i)) 

AEMTCA also modified EPCA to 

specify that any amendment to the 

design requirements with respect to the 

ASHRAE equipment would trigger DOE 

review of the potential energy savings 

under U.S.C. 6313(a)(6)(A)(i). 

Additionally, AEMTCA amended EPCA 

to require that if DOE proposes an 

amended standard for ASHRAE 

equipment at levels more stringent than 

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42618 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

those in ASHRAE Standard 90.1, DOE, 

in deciding whether a standard is 

economically justified, must determine, 

after receiving comments on the 

proposed standard, whether the benefits 

of the standard exceed its burdens by 

considering, to the maximum extent 

practicable, the following seven factors: 

(1) The economic impact of the 

standard on manufacturers and 

consumers of the products subject to the 

standard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the product in the type (or class) 

compared to any increase in the price, 

initial charges, or maintenance expenses 

of the products likely to result from the 

standard; 

(3) The total projected amount of 

energy savings likely to result directly 

from the standard; 

(4) Any lessening of the utility or the 

performance of the 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 

conservation; and 

(7) Other factors the Secretary 

considers relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)) 

EPCA also requires that if a test 

procedure referenced in ASHRAE 

Standard 90.1 is updated, DOE must 

update its test procedure to be 

consistent with the amended test 

procedure in ASHRAE Standard 90.1, 

unless DOE determines that the 

amended test procedure is not 

reasonably designed to produce test 

results that reflect the energy efficiency, 

energy use, or estimated operating costs 

of the ASHRAE equipment during a 

representative average use cycle. In 

addition, DOE must determine that the 

amended test procedure is not unduly 

burdensome to conduct. (42 U.S.C. 

6314(a)(2) and(4)) 

Additionally, EISA 2007 amended 

EPCA to require that at least once every 

seven years, DOE must conduct an 

evaluation of the test procedures for all 

covered equipment and either amend 

test procedures (if the Secretary 

determines that amended test 

procedures would more accurately or 

fully comply with the requirements of 

42 U.S.C. 6314(a)(2)–(3)) or publish 

notice in the Federal Register of any 

determination not to amend a test 

procedure. (42 U.S.C. 6314(a)(1)(A)) 

This final rule resulting satisfies the 

requirement to review the test 

procedures for commercial warm-air 

furnaces within seven years. 

On October 9, 2013 ASHRAE 

officially released and made public 

ASHRAE Standard 90.1–2013. This 

action triggered DOE’s obligations under 

42 U.S.C. 6313(a)(6), as outlined 

previously. 

EPCA, as codified, 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. 

6313(a)(6)(B)(iii)(I)) Also, the Secretary 

may not prescribe an amended or new 

standard if interested persons have 

established by a preponderance of the 

evidence that such standard would 

likely result in the unavailability in the 

United States of any covered product 

type (or class) of performance 

characteristics (including reliability), 

features, sizes, capacities, and volumes 

that are substantially the same as those 

generally available in the United States 

at the time of the Secretary’s finding. (42 

U.S.C. 6313(a)(6)(B)(iii)(II)(aa)) 

Further, EPCA, as codified, 

establishes a rebuttable presumption 

that a standard is economically justified 

if the Secretary finds that the additional 

cost to the consumer of purchasing a 

product complying with an energy 

conservation standard level will be less 

than three times the value of the energy 

(and, as applicable, water) savings 

during the first year that the consumer 

will receive as a result of the standard, 

as calculated under the applicable test 

procedure. 

Additionally, when a type or class of 

covered equipment such as ASHRAE 

equipment, has two or more 

subcategories, DOE often specifies more 

than one standard level. DOE generally 

will adopt a different standard level 

than that which applies generally to 

such type or class of products for any 

group of covered products that have 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 which justifies a higher or 

lower standard. In determining whether 

a performance-related feature justifies a 

different standard for a group of 

products, DOE generally considers such 

factors as the utility to the consumer of 

the feature and other factors DOE deems 

appropriate. In a rule prescribing such 

a standard, DOE includes an 

explanation of the basis on which such 

higher or lower level was established. 

DOE plans to follow a similar process in 

the context of this rulemaking. 

B. Background 

1. ASHRAE Standard 90.1–2013 

As noted previously, ASHRAE 

released a new version of ASHRAE 

Standard 90.1 on October 9, 2013 

(ASHRAE Standard 90.1–2013). The 

ASHRAE standard addresses efficiency 

levels for many types of commercial 

heating, ventilating, air-conditioning 

(HVAC), and water-heating equipment 

covered by EPCA. ASHRAE Standard 

90.1–2013 revised its efficiency levels 

for certain commercial equipment, but 

for the remaining equipment, ASHRAE 

left in place the preexisting levels (i.e., 

the efficiency levels in ASHRAE 

Standard 90.1–2010). Specifically, 

ASHRAE updated its efficiency levels 

for small three-phase air-cooled air 

conditioners (single package only) and 

heat pumps (single package and split 

system) less than 65,000 Btu/h; watersource heat pumps; commercial oil-fired 

storage water heaters; single package 

vertical units; and packaged terminal air 

conditioners. ASHRAE Standard 90.1– 

2013 did not change any of the design 

requirements for the commercial HVAC 

and water heating equipment covered 

by EPCA. See 80 FR 1171, 1177–1178 

(Jan. 8, 2015). 

2. Previous Rulemaking Documents 

On April 11, 2014, DOE published a 

notice of data availability (April 2014 

NODA) in the Federal Register and 

requested public comment as a 

preliminary step required pursuant to 

EPCA when DOE considers amended 

energy conservation standards for 

certain types of commercial equipment 

covered by ASHRAE Standard 90.1. 79 

FR 20114. Specifically, the April 2014 

NODA presented for public comment 

DOE’s analysis of the potential energy 

savings estimates related to amended 

national energy conservation standards 

for the types of commercial equipment 

for which DOE was triggered by 

ASHRAE action, based on: (1) The 

modified efficiency levels contained 

within ASHRAE Standard 90.1–2013; 

and (2) more-stringent efficiency levels. 

Id. at 20134–20136. DOE has described 

these analyses and preliminary 

conclusions and sought input from 

interested parties, including the 

submission of data and other relevant 

information. Id. 

In addition, DOE presented a 

discussion in the April 2014 NODA of 

the changes found in ASHRAE Standard 

90.1–2013. Id. at 20119–20125. The 

April 2014 NODA includes a 

description of DOE’s evaluation of each 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42619 

ASHRAE equipment type in order for 

DOE to determine whether the 

amendments in ASHRAE Standard 

90.1–2013 have increased efficiency 

levels or changed design requirements. 

As an initial matter, DOE sought to 

determine which requirements for 

covered equipment in ASHRAE 

Standard 90.1, if any: (1) Have been 

revised solely to reflect the level of the 

current Federal energy conservation 

standard (where ASHRAE is merely 

‘‘catching up’’ to the current national 

standard); (2) have been revised but 

with a reduction in stringency; or (3) 

have had any other revisions made that 

do not change the standard’s stringency, 

in which case, DOE is not triggered to 

act under 42 U.S.C. 6313(a)(6) for that 

particular equipment type. For those 

types of equipment in ASHRAE 

Standard 90.1 for which ASHRAE 

actually increased efficiency levels 

above the current Federal standard, DOE 

subjected that equipment to the 

potential energy savings analysis 

discussed previously and presented the 

results in the April 2014 NODA for 

public comment. 79 FR 20114, 20134– 

20136 (April 11, 2014). Lastly, DOE 

presented an initial assessment of the 

test procedure changes included in 

ASHRAE Standard 90.1–2013. Id. at 

20124–20125. 

Following the NODA, DOE published 

a notice of proposed rulemaking (NOPR) 

in the Federal Register on January 8, 

2015 (the January 2015 NOPR), and 

requested public comment. 80 FR 1171. 

In the January 2015 NOPR, DOE 

proposed amended energy conservation 

standards for small three-phase aircooled air conditioners (single package 

only) and heat pumps (single package 

and split system) less than 65,000 

Btu/h; water-source heat pumps; and 

commercial oil-fired storage water 

heaters. As noted previously, packaged 

terminal air conditioners and single 

package vertical units were considered 

in separate rulemakings. 

In addition, DOE’s NOPR also 

proposed adopting amended test 

procedures for commercial warm-air 

furnaces. 

3. Compliance Dates for Amended 

Federal Test Procedures, Amended 

Federal Energy Conservation Standards, 

and Representations for Certain 

ASHRAE Equipment 

This final rule specifies the 

compliance dates for amended energy 

conservation standards as shown in 

Table I.1. In addition, compliance with 

the amended test procedure for 

commercial warm-air furnaces is 

required on or after July 11, 2016. 

III. General Discussion of Comments 

Received 

In response to its request for comment 

on the January 2015 NOPR, DOE 

received eight comments from 

manufacturers, trade associations, 

utilities, and energy efficiency 

advocates. Commenters included: 

Lennox International Inc.; Goodman 

Global, Inc.; California Investor-Owned 

Utilities (CA IOUs); a group including 

Appliance Standards Awareness Project 

(ASAP), the American Council for an 

Energy-Efficient Economy (ACEEE), 

Alliance to Save Energy (ASE), and the 

Natural Resources Defense Council 

(NRDC) (jointly referred to as the 

Advocates); the Air-conditioning, 

Heating, and Refrigeration Institute 

(AHRI); United Technologies (UTC)— 

Carrier; Northwest Energy Efficiency 

Alliance (NEEA); and a group of 12 

associations led by the U.S. Chamber of 

Commerce (jointly referred to as the 

Associations). As discussed previously, 

these comments are available in the 

docket for this rulemaking and may be 

reviewed as described in the ADDRESSES

section. The following section 

summarizes the issues raised in these 

comments, along with DOE’s responses. 

A. General Discussion of the Changes in 

ASHRAE Standard 90.1–2013 and 

Determination of Scope for Further 

Rulemaking Activity 

As discussed previously, before 

beginning an analysis of the potential 

economic impacts and energy savings 

that would result from adopting the 

efficiency levels specified by ASHRAE 

Standard 90.1–2013 or more-stringent 

efficiency levels, DOE first sought to 

determine whether or not the ASHRAE 

Standard 90.1–2013 efficiency levels 

actually represented an increase in 

efficiency above the current Federal 

standard levels. DOE discussed each 

equipment class for which the ASHRAE 

Standard 90.1–2013 efficiency level 

differs from the current Federal 

standard level, along with DOE’s 

preliminary conclusion as to the action 

DOE is taking with respect to that 

equipment in the January 2015 NOPR. 

See 80 FR 1171, 1180–1185 (Jan. 8, 

2015). (Once again, DOE notes that 

ASHRAE Standard 90.1–2013 did not 

change any of the design requirements 

for the commercial HVAC and waterheating equipment covered by EPCA, so 

DOE did not conduct further analysis in 

the NOPR on that basis.) DOE 

tentatively concluded from this analysis 

that the only efficiency levels that 

represented an increase in efficiency 

above the current Federal standards 

were those for small three-phase aircooled air conditioners (single package 

only) and heat pumps (single package 

and split system) less than 65,000 Btu/ 

h; water-source heat pumps, commercial 

oil-fired storage water heaters; single 

package vertical units, and packaged 

terminal air conditioners. For a more 

detailed discussion of this approach, 

readers should refer to the preamble to 

the January 2015 NOPR. See Id. DOE 

did not receive any comments on this 

approach. 

B. The Proposed Energy Conservation 

Standards 

In the January 2015 NOPR, DOE 

proposed to adopt the efficiency levels 

in ASHRAE Standard 90.1–2013 for 

small three-phase air-cooled air 

conditioners (single package only) and 

heat pumps (single package and split 

system) less than 65,000 Btu/h; watersource heat pumps; and commercial oilfired storage water heaters. 80 FR 1171, 

1224–1227 (Jan. 8, 2015). Several 

commenters expressed support for 

DOE’s proposal to adopt the efficiency 

levels in ASHRAE 90.1–2013 for small 

three-phase commercial air conditioners 

and heat pumps less than 65,000 Btu/h 

(e.g., AHRI, No. 38 at p. 1; Goodman 

Global, Inc., No. 42 at p. 1; Lennox 

International Inc., No. 36 at p. 2). AHRI 

and Lennox International also agreed 

that standards for split-system aircooled air conditioners less than 65,000 

Btu/h do not need to be amended 

(AHRI, No. 38 at p. 2; Lennox 

International Inc., No. 36 at p. 3), 

Finally, AHRI supported the ASHRAE 

90.1–2013 levels for water-source heat 

pumps and commercial oil-fired storage 

water heaters as well (AHRI, No. 38 at 

p. 1). 

On the other hand, the Advocates, 

NEEA, and the CA IOUs commented 

that DOE should adopt higher standards 

than those in ASHRAE 90.1–2013 for 

water-source heat pumps between 

17,000 and 65,000 Btu/h. (Advocates, 

No. 39 at p. 2; CA IOUs, No. 40 at 

p. 2; NEEA, No. 41 at p. 2) The 

Advocates and CA IOUs noted that for 

that equipment class, efficiency level 2 

is cost effective at both 3 and 7 percent 

discount rates, while efficiency level 3, 

which would save additional energy, 

would not result in a net cost to 

consumers. (Advocates, No. 39 at p. 2; 

CA IOUs, No. 40 at p. 2) NEEA noted 

that the energy savings available 

supported a more in depth analysis of 

the economic justification and energy 

analysis for this equipment class (NEEA, 

No. 41 at p. 2) 

In response to the submitted 

comments, DOE maintains its position 

of adopting the efficiency levels in 

ASHRAE 90.1–2013 for all equipment in 

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42620 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

8 (2) Test procedures prescribed in accordance 

with this section shall be reasonably designed to 

produce test results which reflect energy efficiency, 

energy use, and estimated operating costs of a type 

of industrial equipment (or class thereof) during a 

representative average use cycle (as determined by 

the Secretary), and shall not be unduly burdensome 

to conduct. (3) If the test procedure is a procedure 

for determining estimated annual operating costs, 

such procedure shall provide that such costs shall 

be calculated from measurements of energy use in 

a representative average-use cycle (as determined 

by the Secretary), and from representative average 

unit costs of the energy needed to operate such 

equipment during such cycle. The Secretary shall 

provide information to manufacturers of covered 

equipment respecting representative average unit 

costs of energy. 

this rulemaking and not amending the 

standards for split-system air-cooled air 

conditioners less than 65,000 Btu/h. 

DOE notes that despite the positive 

economic benefits for water-source heat 

pumps 17,000 to 65,000 Btu/h at 

efficiency levels higher than those in 

ASHRAE 90.1–2013, the uncertainty 

present in the energy use, shipments, 

and national impact analyses are too 

great to provide clear and convincing 

evidence to adopt more stringent energy 

conservation standards. Furthermore, 

following the NOPR, DOE did not 

receive any additional data or 

information that would allow it to 

conduct more in-depth analysis for this 

equipment. See section VIII.D.2 for 

further information. 

IV. Test Procedure Amendments and 

Discussion of Related Comments 

EPCA requires the Secretary to amend 

the DOE test procedures for covered 

ASHRAE equipment to the latest 

version of those generally accepted 

industry testing procedures or the rating 

procedures developed or recognized by 

AHRI or by ASHRAE, as referenced by 

ASHRAE/IES Standard 90.1, unless the 

Secretary determines by rule published 

in the Federal Register and supported 

by clear and convincing evidence that 

the latest version of the industry test 

procedure does not meet the 

requirements for test procedures 

described in paragraphs (2) and (3) of 42 

U.S.C. 6314(a).8 (42 U.S.C. 

6314(a)(4)(B)) 

In the January 2015 NOPR, in keeping 

with EPCA’s mandate to incorporate the 

latest version of the applicable industry 

test procedure pursuant to 42 U.S.C. 

6314(a)(4)(B), DOE proposed to update 

its commercial warm air furnace test 

procedure by incorporating by reference 

ANSI (American National Standards 

Institute) Z21.47–2012, Standard for 

Gas-Fired Central Furnaces. 80 FR 1171, 

1185–1186 (Jan. 8, 2015). DOE 

determined that the changes to the 2012 

version do not impact those provisions 

of that industry test procedure that are 

used under the DOE test procedure for 

gas-fired warm air furnaces, and, 

therefore, such changes do not affect the 

energy efficiency ratings for gas-fired 

furnaces. As such, DOE anticipated no 

substantive change or increase in test 

burden to be associated with this test 

procedure amendment for warm air 

furnaces. 

DOE is also required to review the test 

procedures for covered ASHRAE 

equipment at least once every seven 

years. (42 U.S.C. 6314(a)(1)(A)) In 

addition to the updates to the referenced 

standards discussed previously, In the 

January 2015 NOPR, DOE also proposed 

to update the citations and 

incorporations by reference in DOE’s 

regulations for commercial warm-air 

furnaces to the most recent version of 

ASHRAE 103, Method of Testing for 

Annual Fuel Utilization Efficiency of 

Residential Central Furnaces and Boiler 

(i.e., ASHRAE 103–2007). 80 FR 1171, 

1185–1186 (Jan. 8, 2015). The applicable 

sections of this standard include 

measurement of condensate and 

calculation of additional heat gain and 

heat losses for condensing furnaces. 

DOE noted that the most recent version 

does not contain any updates to the 

sections currently referenced by the 

DOE test procedure, so no additional 

burden would be expected to result 

from this test procedure update. 

In response to the NOPR, Lennox 

International agreed with DOE’s 

proposal to incorporate the latest 

versions of ANSI Z21.47 and ASHRAE 

103 by reference as the applicable test 

procedure for commercial warm-air 

furnaces. (Lennox International Inc., No. 

36 at p. 2) DOE adopts these updates in 

this final rule. 

DOE is aware that some commercial 

furnaces are designed for make-up air 

heating (i.e., heating 100 percent 

outdoor air). DOE defines ‘‘commercial 

warm air furnace’’ at 10 CFR 431.72 as 

self-contained oil-fired or gas-fired 

furnaces designed to supply heated air 

through ducts to spaces that require it, 

with a capacity (rated maximum input) 

at or above 225,000 Btu/h. Further, 

DOE’s definitions specify that this 

equipment includes combination warm 

air furnace/electric air conditioning 

units but does not include unit heaters 

and duct furnaces. Given the 

characteristics of this category of 

commercial furnaces, DOE concludes 

that gas-fired and oil-fired commercial 

furnaces that are designed for make-up 

air heating and that have input ratings 

at or above 225,000 Btu/h meet the 

definition of ‘‘commercial warm air 

furnace’’ because they are self-contained 

units that supply heated air through 

ducts. Consequently, DOE is clarifying 

that commercial warm air furnaces that 

are designed for make-up air heating are 

subject to DOE’s regulatory 

requirements, including being tested 

according to the test procedure specified 

in 10 CFR 431.76. 

V. Methodology for Small Commercial 

Air-Cooled Air Conditioners and Heat 

Pumps Less Than 65,000 Btu/h 

This section addresses the analyses 

DOE has performed for this rulemaking 

with respect to small commercial aircooled air conditioners and heat pumps 

less than 65,000 Btu/h. A separate 

subsection addresses each analysis. In 

overview, DOE used a spreadsheet to 

calculate the life-cycle cost (LCC) and 

payback periods (PBPs) of potential 

energy conservation standards. DOE 

used another spreadsheet to provide 

shipments projections and then 

calculate national energy savings and 

net present value impacts of potential 

amended energy conservation 

standards. 

A. Market Assessment 

To begin its review of the ASHRAE 

Standard 90.1–2013 efficiency levels, 

DOE developed information that 

provides an overall picture of the 

market for the equipment concerned, 

including the purpose of the equipment, 

the industry structure, and market 

characteristics. This activity included 

both quantitative and qualitative 

assessments based primarily on publicly 

available information. The subjects 

addressed in the market assessment for 

this rulemaking include equipment 

classes, manufacturers, quantities, and 

types of equipment sold and offered for 

sale. The key findings of DOE’s market 

assessment are summarized in the 

following sections. For additional detail, 

see chapter 2 of the final rule technical 

support document (TSD). 

1. Equipment Classes 

The Federal energy conservation 

standards for air-cooled air conditioners 

and heat pumps are differentiated based 

on the cooling capacity (i.e., small, 

large, or very large). For small 

equipment, there is an additional 

disaggregation into: (1) equipment less 

than 65,000 Btu/h and (2) equipment 

greater than or equal to 65,000 Btu/h 

and less than 135,000 Btu/h. ASHRAE 

Standard 90.1–2013 also differentiates 

the equipment that is less than 65,000 

Btu/h into split system and single 

package subcategories. In the past, DOE 

has followed the same disaggregation. 

However, when EISA 2007 increased 

the efficiency levels to identical levels 

across single package and split system 

equipment, effective in 2008, DOE 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42621 

9AHRI Directory of Certified Product 

Performance (2013) (Available at: 

www.ahridirectory.org) (Last accessed November 

11, 2013). 

10Air-Conditioning, Heating, and Refrigeration 

Institute Web site, About Us (2013) (Available at: 

www.ari.org/site/318/About-Us) (Last accessed 

December 18, 2014). 

11Heating, Air-conditioning & Refrigeration 

Distributors International Web site, About HARDI 

(2014) (Available at: www.hardinet.org/about-hardi0) (Last accessed February 10, 2014). 

12Air Conditioning Contractors of America Web 

site, About ACCA (2014) (Available at: 

www.acca.org/acca) (Last accessed February 10, 

2014). 

combined the equipment classes in the 

CFR, resulting in only two equipment 

classes, one for air conditioners and one 

for heat pumps. 74 FR 12058, 12074 

(March 23, 2009). Because ASHRAE 

90.1–2013 has increased the standard 

for only single package air conditioners, 

and has increased the HSPF level to a 

more stringent level for split system 

heat pumps than for single package heat 

pumps, and DOE is obligated to adopt, 

at a minimum, the increased level in 

ASHRAE 90.1–2013 for that equipment 

class, DOE proposed in the January 2015 

NOPR re-creating separate equipment 

classes for single package and split 

system equipment in the overall 

equipment classes of small commercial 

package air conditioners and heat 

pumps (three-phase air-cooled) less than 

65,000 Btu/h. 80 FR 1171, 1186–1187 

(Jan. 8, 2015). In response, AHRI 

supported DOE’s proposal to re-create 

separate equipment classes for single 

package and split system air 

conditioning and heating equipment 

(air-cooled, three-phase). (AHRI, No. 38 

at p. 1). In this final rule, DOE adopts 

these amended equipment classes, as 

shown in Table V.1. 

TABLE V.1—AMENDED EQUIPMENT CLASSES FOR SMALL COMMERCIAL PACKAGED AIR-CONDITIONING AND HEATING

EQUIPMENT <65,000 Btu/h 

Product Cooling capacity Sub-category 

Small Commercial Packaged Air Conditioning and Heating Equipment (Air-Cooled, 3-Phase, 

Split System).

<65,000 Btu/h ........................... AC. 

HP. 

Small Commercial Packaged Air Conditioning and Heating Equipment (Air-Cooled, 3-Phase, 

Single Package).

<65,000 Btu/h ........................... AC. 

HP. 

2. Review of Current Market 

In order to obtain the information 

needed for the market assessment for 

this rulemaking, DOE consulted a 

variety of sources, including 

manufacturer literature, manufacturer 

Web sites, and the AHRI-certified 

directory.9 The information DOE 

gathered serves as resource material 

throughout the rulemaking. The sections 

below provide an overview of the 

market assessment, and chapter 2 of the 

final rule TSD provides additional detail 

on the market assessment, including 

citations to relevant sources. 

a. Trade Association Information 

DOE researched various trade groups 

representing manufacturers, 

distributors, and installers of the various 

types of equipment being analyzed in 

this rulemaking. AHRI is one of the 

largest trade associations for 

manufacturers of space heating, cooling, 

and water heating equipment, 

representing more than 90 percent of the 

residential and commercial air 

conditioning, space heating, water 

heating, and commercial refrigeration 

equipment manufactured in the United 

States.10 AHRI also develops and 

publishes test procedure standards for 

measuring and certifying the 

performance of residential and 

commercial HVAC equipment and 

coordinates with the International 

Organization for Standardization (ISO) 

to help harmonize U.S. standards with 

international standards, if feasible. 

AHRI also maintains the AHRI Directory 

of Certified Product Performance, which 

is a database that lists all the products 

and equipment that have been certified 

by AHRI, thereby providing equipment 

ratings for all manufacturers who elect 

to participate in the program. DOE 

utilized this database in developing 

base-case efficiency distributions. 

The Heating, Air-conditioning and 

Refrigeration Distributors International 

(HARDI) is a trade association that 

represents over 450 wholesale heating, 

ventilating, air-conditioning, and 

refrigeration (HVACR) companies, plus 

over 300 manufacturing associates and 

nearly 140 manufacturing 

representatives. HARDI estimates that 

80 percent of the revenue of HVACR 

systems goes through its members.11

DOE did not utilize HARDI data for this 

rule. 

The Air Conditioning Contractors of 

America (ACCA) is another trade 

association whose members include 

over 4,000 contractors and 60,000 

professionals in the indoor environment 

and energy service community. 

According to their Web site, ACCA 

provides contractors with technical, 

legal, and market resources, helping to 

promote good practices and to keep 

buildings safe, clean, and affordable.12

DOE did not use ACCA data for this 

rule. 

b. Manufacturer Information 

DOE reviewed data for air-cooled 

commercial air conditioners and heat 

pumps currently on the market by 

examining the AHRI Directory of 

Certified Product Performance. DOE 

identified 23 parent companies 

(comprising 61 manufacturers) of small 

three-phase air-cooled air conditioners 

and heat pumps, which are listed in 

chapter 2 of the final rule TSD. Of these 

manufacturers, five were identified as 

small businesses based upon number of 

employees and the employee thresholds 

set by the Small Business 

Administration. More details on this 

analysis can be found below in section 

IX.B. 

c. Market Data 

DOE reviewed the AHRI database to 

characterize the efficiency and 

performance of small commercial aircooled air conditioners and heat pumps 

less than 65,000 Btu/h models currently 

on the market. The full results of this 

market characterization are found in 

chapter 2 of the final rule TSD. For 

split-system air conditioners, the 

average SEER value was 13.9, and 120 

models (0.1 percent of the total models) 

have SEER ratings below the ASHRAE 

Standard 90.1–2013 level of 13.0 SEER. 

For single-package air conditioners, the 

average SEER value was 14.3, and 1,450 

models (45 percent of the total models) 

have SEER ratings below the ASHRAE 

Standard 90.1–2013 level of 14.0 SEER. 

For single-package heat pumps, the 

average SEER value is 14.0. Of the 

models identified by DOE, 653 models 

(54 percent of the total models) have 

SEER ratings below the ASHRAE 

Standard 90.1–2013 level of 14.0 SEER. 

The average HSPF value for this 

equipment class is 7.9. Of the models 

identified by DOE, 632 models (52 

percent of the total models) have HSPF 

ratings below the ASHRAE Standard 

90.1–2013 levels of 8.0. For split-system 

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42622 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

heat pumps, the average SEER value for 

this equipment class is 13.7. Of the 

models identified by DOE, 30,009 

models (64 percent of the total models) 

have SEER ratings below the ASHRAE 

Standard 90.1–2013 level of 14.0. The 

average HSPF for this equipment class 

is 7.9. Of the models identified by DOE, 

36,902 models (79 percent of the total 

models) have HSPF ratings below the 

ASHRAE Standard 90.1–2013 level of 

8.2. For more information on market 

performance data, see chapter 2 of the 

final rule TSD. 

B. Engineering Analysis 

The engineering analysis establishes 

the relationship between an increase in 

energy efficiency and the increase in 

cost (manufacturer selling price (MSP)) 

of a piece of equipment DOE is 

evaluating for potential amended energy 

conservation standards. This 

relationship serves as the basis for costbenefit calculations for individual 

consumers, manufacturers, and the 

Nation. The engineering analysis 

identifies representative baseline 

equipment, which is the starting point 

for analyzing possible energy efficiency 

improvements. For covered ASHRAE 

equipment, DOE sets the baseline for 

analysis at the ASHRAE Standard 90.1 

efficiency level, because by statute, DOE 

cannot adopt any level below the 

revised ASHRAE level. The engineering 

analysis then identifies higher efficiency 

levels and the incremental increase in 

product cost associated with achieving 

the higher efficiency levels. After 

identifying the baseline models and cost 

of achieving increased efficiency, DOE 

estimates the additional costs to the 

commercial consumer through an 

analysis of contractor costs and markups 

and uses that information in the 

downstream analyses to examine the 

costs and benefits associated with 

increased equipment efficiency. 

DOE typically structures its 

engineering analysis around one of three 

methodologies: (1) The design-option 

approach, which calculates the 

incremental costs of adding specific 

design options to a baseline model; (2) 

the efficiency-level approach, which 

calculates the relative costs of achieving 

increases in energy efficiency levels 

without regard to the particular design 

options used to achieve such increases; 

and/or (3) the reverse-engineering or 

cost-assessment approach, which 

involves a ‘‘bottom-up’’ manufacturing 

cost assessment based on a detailed bill 

of materials derived from teardowns of 

the equipment being analyzed. A 

supplementary method called a catalog 

teardown uses published manufacturer 

catalogs and supplementary component 

data to estimate the major physical 

differences between a piece of 

equipment that has been physically 

disassembled and another piece of 

similar equipment for which catalog 

data are available to determine the cost 

of the latter equipment. Deciding which 

methodology to use for the engineering 

analysis depends on the equipment, the 

design options under study, and any 

historical data upon which DOE may 

draw. 

1. Approach 

As explained in the January 2015 

NOPR, DOE used a combination of the 

efficiency-level and the cost-assessment 

approach for this analysis. 80 FR 1171, 

1187–1188 (Jan. 8, 2015). DOE used the 

efficiency-level approach to identify 

incremental improvements in efficiency 

for each equipment class and the costassessment approach to develop a cost 

for each efficiency level. The efficiency 

levels that DOE considered in the 

engineering analysis were representative 

of three-phase central air conditioners 

and heat pumps currently produced by 

manufacturers at the time the 

engineering analysis was developed. 

DOE relied on data reported in the AHRI 

Directory of Certified Product 

Performance to select representative 

efficiency levels. 

DOE generated a bill of materials 

(BOM) for each representative product 

that it disassembled. DOE did this for 

multiple manufacturers’ products that 

span a range of efficiency levels for the 

equipment classes that are analyzed in 

this rulemaking. The BOMs describe the 

manufacture of the equipment in detail, 

listing all parts and including all 

manufacturing steps required to make 

each part and to assemble the unit. DOE 

also conducted catalog teardowns to 

supplement the information obtained 

directly from physical teardowns. 

Subsequently, DOE developed a cost 

model that calculates manufacturer 

production cost (MPC) for each unit, 

based on the detailed BOM data. 

Chapter 3 of the final rule TSD describes 

DOE’s cost model in greater detail. The 

calculated costs were plotted as a 

function of the equipment efficiency 

levels (based on rated efficiency) to 

create cost-efficiency curves. DOE notes 

that the costs at some efficiency levels 

were interpolated or extrapolated based 

on the available physical and catalog 

teardown data. 

DOE developed cost-efficiency curves 

for a representative capacity of three 

tons, which it decided well represents 

the range of capacities on the market for 

commercial three-phase products. 

Because other capacity levels had 

similar designs and efficiency levels, 

cost-efficiency curves were not 

developed for any other capacities. 

Instead, DOE was able to utilize the 

cost-efficiency curve for the 

representative capacity and apply it to 

all three-phase products. 

DOE based the cost-efficiency 

relationship for three-phase central air 

conditioners and heat pumps on reverse 

engineering conducted for the June 2011 

direct final rule (DFR) for single-phase 

central air conditioners and heat pumps. 

76 FR 37408. DOE researched 

manufacturer literature and noticed that 

most model numbers between singlephase products and three-phase 

equipment were interchangeable, with 

only a single-digit difference in the 

model number for the supply voltage. 

Although three-phase equipment 

contains three-phase compressors 

instead of single-phase compressors, 

DOE did not notice any inconsistency in 

energy efficiency ratings between singlephase products and three-phase 

equipment. To supplement the 2011 

DFR data (29 physical teardowns and 12 

catalog teardowns), DOE completed one 

physical teardown and seven catalog 

teardowns of three-phase equipment. 

This approach allowed DOE to provide 

an estimate of equipment prices at 

different efficiencies and spanned a 

range of technologies currently on the 

market that are used to achieve the 

increased efficiency levels. 

2. Baseline Equipment 

DOE selected baseline efficiency 

levels as reference points for each 

equipment class, against which it 

measured changes resulting from 

potential amended energy conservation 

standards. DOE defined the baseline 

efficiency levels as reference points to 

compare the technology, energy savings, 

and cost of equipment with higher 

energy efficiency levels. Typically, units 

at the baseline efficiency level just meet 

Federal energy conservation standards 

and provide basic consumer utility. 

However, EPCA requires that DOE must 

adopt either the ASHRAE Standard 

90.1–2013 levels or more-stringent 

levels. Therefore, because the ASHRAE 

Standard 90.1–2013 levels were the 

lowest levels that DOE could adopt, 

DOE used those levels as the reference 

points against which more-stringent 

levels were evaluated. 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42623 

13The AHRI Certified Directory is available at 

http://www.ahridirectory.org/ahridirectory/pages/ 

home.aspx. 

TABLE V.2—CURRENT BASELINE AND ASHRAE EFFICIENCY LEVELS FOR SMALL COMMERCIAL AIR-COOLED AIR

CONDITIONERS AND HEAT PUMPS WITH RATED COOLING CAPACITIES LESS THAN 65,000 Btu/h 

Split-system 

AC 

Single-package 

AC 

Split-system 

HP 

Single-package 

HP 

SEER 

Baseline—Federal Standard ............................................................ 13.0 13.0 13.0 13.0 

Baseline—ASHRAE Standard ......................................................... 13.0 14.0 14.0 14.0 

HSPF 

Baseline—Federal Standard ............................................................ ............................ ............................ 7.7 7.7 

Baseline—ASHRAE Standard ......................................................... ............................ ............................ 8.2 8.0 

Table V.3 shows the current baseline 

and ASHRAE efficiency levels for each 

equipment class of small commercial 

air-cooled air conditioners and heat 

pumps <65,000 Btu/h. 

TABLE V.3—BASELINE EFFICIENCY LEVELS FOR SMALL COMMERCIAL AIR-COOLED AIR CONDITIONERS (AC) AND HEAT

PUMPS (HP) <65,000 Btu/h 

Split-system 

AC 

Single-package 

AC 

Split-system 

HP 

Single-package 

HP 

SEER 

Baseline—Federal Standard ............................................................ 13.0 13.0 13.0 13.0 

Baseline—ASHRAE Standard ......................................................... 13.0 14.0 14.0 14.0 

HSPF 

Baseline—Federal Standard ............................................................ ............................ ............................ 7.7 7.7 

Baseline—ASHRAE Standard ......................................................... ............................ ............................ 8.2 8.0 

3. Identification of Increased Efficiency 

Levels for Analysis 

DOE analyzed several efficiency 

levels and obtained incremental cost 

data for the four equipment classes 

under consideration. Table V.44 

presents the efficiency levels examined 

for each equipment class. As part of the 

engineering analyses, DOE considered 

up to six efficiency levels beyond the 

baseline for each equipment class. DOE 

derived the maximum technologically 

feasible (‘‘max-tech’’) level from the 

market maximum in the AHRI Certified 

Directory,13 as of November 2013. The 

highest available efficiency level for 

split-system heat pumps was 16.2 SEER, 

compared to 18.05 SEER for singlepackage heat pumps. In the January 

2014 NOPR, DOE tentatively 

determined the ‘‘max-tech’’ level for 

single-package air conditioners to be 

19.15. 80 FR 1171, 1189 (Jan. 8, 2015). 

DOE also determined that split-system 

air conditioners are capable of reaching 

the same efficiency levels as singlepackage units. Id. For the engineering 

analysis, DOE rounded the ‘‘max-tech’’ 

levels to integer values of 18 and 19 for 

split-system and single-package heat 

pumps, and split-system and singlepackage air conditioners, respectively. 

The impact of this rounding, which 

results in efficiency levels that are 

whole-number values of SEER, is 

minimal. DOE did not receive any 

comments on its tentative determination 

for max-tech levels for single-package 

and split-system heat pumps and air 

conditioners and thus maintained its 

analysis in this final rule. 

The final efficiency levels for each 

equipment class are presented below in 

Table V.4. For additional details on the 

efficiency levels selected for analysis, 

see chapter 3 of the final rule TSD. 

TABLE V.4—EFFICIENCY LEVELS FOR SMALL COMMERCIAL AIR-COOLED AIR CONDITIONERS AND HEAT PUMPS <65,000 

Efficiency level 

Split-system 

AC 

Single-package 

AC 

Split-system 

HP 

Single-package 

HP 

SEER SEER SEER HSPF SEER HSPF 

Federal Baseline .................................. 13 13 13 7.7 13 7.7 

0—ASHRAE Baseline * ........................ 14 14 14 8.2 14 8.0 

1 ........................................................... 15 15 15 8.5 15 8.4 

2 ........................................................... 16 16 16 8.7 16 8.8 

3 ........................................................... 17 17 17 9.0 17 8.9 

4 ** ........................................................ 18 18 18 9.2 18 9.1 

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42624 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

TABLE V.4—EFFICIENCY LEVELS FOR SMALL COMMERCIAL AIR-COOLED AIR CONDITIONERS AND HEAT PUMPS <65,000— 

Continued 

Efficiency level 

Split-system 

AC 

Single-package 

AC 

Split-system 

HP 

Single-package 

HP 

SEER SEER SEER HSPF SEER HSPF 

5 *** ...................................................... 19 19 ........................ ........................ ........................ ........................

* For consistency across equipment classes, DOE refers to 14 SEER as EL 0, which is only the ASHRAE Baseline for three of the equipment 

classes, excluding split-system AC. 

** Efficiency Level 4 is ‘‘Max-Tech’’ for HP equipment classes. 

*** Efficiency Level 5 is ‘‘Max-Tech’’ for AC equipment classes. 

4. Engineering Analysis Results 

The results of the engineering analysis 

are cost-efficiency curves based on 

results from the cost models for 

analyzed units. DOE’s calculated MPCs 

for small commercial air conditioners 

and heat pumps less than 65,000 Btu/h 

are shown in Table V.5 through Table 

V.8, and further details on the 

calculation of these curves can be found 

in chapter 3 of the final rule TSD. DOE 

used the cost-efficiency curves from the 

engineering analysis as an input for the 

life-cycle cost and payback period 

analyses. 

TABLE V.5—MANUFACTURER PRODUCTION COSTS FOR THREE-TON SPLITSYSTEM COMMERCIAL AIR-COOLED

AIR CONDITIONERS

SEER MPC 

[2014$] 

13 .................................................. $855 

14 .................................................. 937 

15 .................................................. 1,023 

16 .................................................. 1,115 

17 .................................................. 1,212 

18 .................................................. 1,316 

19 .................................................. 1,427 

TABLE V.6—MANUFACTURER PRODUCTION COSTS FOR THREE-TON SINGLE-PACKAGE COMMERCIAL AIRCOOLED AIR CONDITIONERS

SEER MPC 

[2014$] 

13 .................................................. $1,003 

14 .................................................. 1,122 

15 .................................................. 1,241 

16 .................................................. 1,361 

17 .................................................. 1,480 

18 .................................................. 1,599 

19 .................................................. 1,719 

TABLE V.7—MANUFACTURER PRODUCTION COSTS FOR THREE-TON SPLITSYSTEM COMMERCIAL AIR-COOLED

HEAT PUMPS

SEER HSPF MPC 

[2014$] 

13 .............................. 7.7 $1,068 

14 .............................. 8.2 1,154 

15 .............................. 8.5 1,244 

16 .............................. 8.7 1,377 

17 .............................. 9.0 1,486 

18 .............................. 9.2 1,601 

TABLE V.8—MANUFACTURER PRODUCTION COSTS FOR THREE-TON SINGLE-PACKAGE COMMERCIAL AIRCOOLED HEAT PUMPS

SEER HSPF MPC 

[2014$] 

13 .............................. 7.7 $1,239 

14 .............................. 8.0 1,372 

15 .............................. 8.4 1,504 

16 .............................. 8.8 1,637 

17 .............................. 8.9 1,769 

18 .............................. 9.1 1,902 

a. Manufacturer Markups 

DOE applies a non-production cost 

multiplier (the manufacturer markup) to 

the full MPC to account for corporate 

non-production costs and profit. The 

resulting manufacturer selling price 

(MSP) is the price at which the 

manufacturer can recover all production 

and nonproduction costs and earn a 

profit. To meet new or amended energy 

conservation standards, manufacturers 

often introduce design changes to their 

equipment lines that result in increased 

manufacturer production costs. 

Depending on the competitive 

environment for these particular types 

of equipment, some or all of the 

increased production costs may be 

passed from manufacturers to retailers 

and eventually to commercial 

consumers in the form of higher 

purchase prices. As production costs 

increase, manufacturers typically incur 

additional overhead. The MSP should 

be high enough to recover the full cost 

of the equipment (i.e., full production 

and non-production costs) and yield a 

profit. The manufacturer markup has an 

important bearing on profitability. A 

high markup under a standards scenario 

suggests manufacturers can pass along 

the increased variable costs and some of 

the capital and product conversion costs 

(the one-time expenditures) to the 

consumer. A low markup suggests that 

manufacturers will not be able to 

recover as much of the necessary 

investment in plants and equipment. 

For small commercial air-cooled airconditioners and heat pumps, DOE used 

a manufacturer markup of 1.3, as 

developed for the 2011 direct final rule 

for single-phase central air conditioners 

and heat pumps. 76 FR 37408 (June 27, 

2011). This markup was calculated 

using U.S. Security and Exchange 

Commission (SEC) 10–K reports for 

publicly-owned heating and cooling 

companies, as well as feedback from 

manufacturer interviews. See chapter 3 

of the final rule TSD for more details 

about the methodology DOE used to 

determine the manufacturing markup. 

b. Shipping Costs 

Manufacturers of commercial HVAC 

products typically pay for freight 

(shipping) to the first step in the 

distribution chain. Freight is not a 

manufacturing cost, but because it is a 

substantial cost incurred by the 

manufacturer, DOE accounts for 

shipping costs separately from other 

non-production costs that comprise the 

manufacturer markup. DOE calculated 

the MSP for small commercial aircooled air-conditioners and heat pumps 

by multiplying the MPC at each 

efficiency level (determined from the 

cost model) by the manufacturer 

markup and adding shipping costs for 

equipment at the given efficiency level. 

More specifically, DOE calculated 

shipping costs at each efficiency level 

based on a typical 53-foot straight-frame 

trailer with a storage volume of 4,240 

cubic feet. DOE examined the sizes of 

small commercial air-cooled airconditioners and heat pumps and 

determined the number of units that 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42625 

14U.S. Census Bureau, 2007 Economic Census, 

Construction Industry Series and Wholesale Trade 

Subject Series (Available at: www.census.gov/econ/ 

census/data/historical_data.html). 

15See Appendix D of the 2000 Screening Analysis 

for EPACT-Covered Commercial HVAC and WaterHeating Equipment. (EERE–2006–STD–0098–0015) 

would fit in each trailer, based on 

assumptions about the arrangement of 

units in the trailer. See chapter 3 of the 

final rule TSD for more details about the 

methodology DOE used to determine the 

shipping costs. 

C. Markups Analysis 

The markups analysis develops 

appropriate markups in the distribution 

chain to convert the estimates of 

manufacturer selling price derived in 

the engineering analysis to commercial 

consumer prices. (‘‘Commercial 

consumer’’ refers to purchasers of the 

equipment being regulated.) DOE 

calculates overall baseline and 

incremental markups based on the 

equipment markups at each step in the 

distribution chain. The incremental 

markup relates the change in the 

manufacturer sales price of higherefficiency models (the incremental cost 

increase) to the change in the 

commercial consumer price. 

In the 2014 NOPR for Central Unitary 

Air Conditioners (CUAC), which 

includes equipment similar to but larger 

than that in this rulemaking, DOE 

determined that there are three types of 

distribution channels to describe how 

the equipment passes from the 

manufacturer to the commercial 

consumer. 79 FR 58948, 58975 (Sept. 

30, 2014). In the new construction 

market, the manufacturer sells the 

equipment to a wholesaler. The 

wholesaler sells the equipment to a 

mechanical contractor, who sells it to a 

general contractor, who in turn sells the 

equipment to the commercial consumer 

or end user as part of the building. In 

the replacement market, the 

manufacturer sells to a wholesaler, who 

sells to a mechanical contractor, who in 

turn sells the equipment to the 

commercial consumer or end user. In 

the third distribution channel, used in 

both the new construction and 

replacement markets, the manufacturer 

sells the equipment directly to the 

customer through a national account. 

In the analysis for this Final Rule and 

in the January 2015 NOPR, DOE used 

two of the three distribution channels 

described above to determine the 

markups. Given the small cooling 

capacities of air conditioners and heat 

pumps less than 65,000 Btu/h, DOE did 

not use the national accounts 

distribution chain in the markups 

analysis. National accounts are 

composed of large commercial 

consumers of HVAC equipment that 

negotiate equipment prices directly with 

the manufacturers, such as national 

retail chains. The end market consumers 

of three-ton central air conditioners and 

heat pumps are small offices and small 

retailers and do not fit the profile of 

large national chains. 80 FR 1171, 1191 

(Jan. 8, 2015). 

In the 2014 CUAC NOPR, based on 

information that equipment 

manufacturers provided, commercial 

consumers were estimated to purchase 

50 percent of the covered equipment 

through small mechanical contractors, 

32.5 percent through large mechanical 

contractors, and the remaining 17.5 

percent through national accounts. 79 

FR 58948, 58976 (Sept. 30, 2014). For 

this analysis, DOE removed the national 

accounts distribution channel and 

recalculated the size of the small and 

large mechanical contractor distribution 

channels assuming they make up the 

entire market. Therefore, the small 

mechanical distribution chain accounts 

for 61 percent of equipment purchases 

(i.e., 50 percent divided by the sum of 

50 percent and 32.5 percent), and the 

large mechanical contractor distribution 

chain represents 39 percent of 

purchases. 

In this Final Rule and in the January 

2015 NOPR, DOE used the markups 

from the 2014 CUAC NOPR, for which 

DOE utilized updated versions of: (1) 

The Heating, Air Conditioning & 

Refrigeration Distributors International 

2010 Profit Report to develop 

wholesaler markups; (2) the Air 

Conditioning Contractors of America’s 

(ACCA) 2005 Financial Analysis for the 

HVACR Contracting Industry to develop 

mechanical contractor markups; and (3) 

U.S. Census Bureau economic data for 

the commercial and institutional 

building construction industry to 

develop general contractor markups.14

80 FR 1171, 1191 (Jan. 8, 2015). 

Chapter 5 of the final rule TSD 

provides further detail on the estimation 

of markups. 

D. Energy Use Analysis 

The energy use analysis provides 

estimates of the annual energy 

consumption of small air-cooled air 

conditioners and heat pumps with 

cooling capacities less than 65,000 btu/ 

h at the considered efficiency levels. 

DOE uses these values in the LCC and 

PBP analyses and in the NIA. 

The cooling unit energy consumption 

(UEC) by equipment type and efficiency 

level came from the national impact 

analysis associated with the 2011 direct 

final rule (DFR) for residential central 

air conditioners and heat pumps. 

(EERE–2011–BT–STD–0011–0011). 

Specifically, DOE used the UECs for 

single-phase equipment installed in 

commercial buildings. The UECs for 

split system and single package 

equipment were similar in the 2011 

analysis for lower efficiency levels, but 

at higher efficiency levels, the only UEC 

s available were for split-system 

equipment. DOE assumed that the 

similarities at lower levels could be 

expected to hold at higher efficiency 

levels; therefore, DOE used the UECs for 

split equipment for all equipment 

classes in this final rule, including split 

system and single package. 

In order to assess variability in the 

cooling UEC by region and building 

type, DOE used a Pacific Northwest 

National Laboratory report 15 that 

estimated the annual energy usage of 

space cooling and heating products 

using a Full Load Equivalent Operating 

Hour (FLEOH) approach. DOE 

normalized the provided FLEOHs to the 

UEC data discussed above to vary the 

average UEC across region and building 

type. The building types used in this 

analysis are small retail establishments 

and small offices. 

DOE reviewed the results of the 

simulations for the 2011 DFR and 

determined that the heating loads for 

these small commercial applications are 

extremely low (less than 500 kwh/year). 

As a result, DOE did not include any 

energy savings in the analysis for this 

Final Rule due to the increase in HSPF 

for this equipment. Chapter 4 of the 

final rule TSD provides further detail on 

energy use analysis. 

E. Life-Cycle Cost and Payback Period 

Analysis 

The purpose of the LCC and PBP 

analysis is to analyze the effects of 

potential amended energy conservation 

standards on commercial consumers of 

small commercial air-cooled air 

conditioners and heat pumps less than 

65,000 btu/h by determining how a 

potential amended standard affects their 

operating expenses (usually decreased) 

and their total installed costs (usually 

increased). 

The LCC is the total consumer 

expense over the life of the equipment, 

consisting of equipment and installation 

costs plus operating costs (i.e., expenses 

for energy use, maintenance, and 

repair). DOE discounts future operating 

costs to the time of purchase using 

commercial consumer discount rates. 

The PBP is the estimated amount of 

time (in years) it takes commercial 

consumers to recover the increased total 

installed cost (including equipment and 

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42626 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

16RS Means Mechanical Cost Data 2013. Reed 

Construction Data, LLC (2012). 

17Coughlin, K., C. Bolduc, R. Van Buskirk, G. 

Rosenquist and J.E. McMahon, ‘‘Tariff-based 

Analysis of Commercial Building Electricity Prices’’ 

(2008) Lawrence Berkeley National Laboratory: 

Berkeley, CA. Report No. LBNL–55551. 

18Edison Electric Institute, EEI Typical Bills and 

Average Rates Report (bi-annual, 2007–2012). 

installation costs) of a more-efficient 

type of equipment through lower 

operating costs. DOE calculates the PBP 

by dividing the change in total installed 

cost (normally higher) due to a standard 

by the change in annual operating cost 

(normally lower) that results from the 

potential standard. However, unlike the 

LCC, DOE only considers the first year’s 

operating expenses in the PBP 

calculation. Because the PBP does not 

account for changes in operating 

expenses over time or the time value of 

money, it is also referred to as a simple 

PBP. 

For any given efficiency level, DOE 

measures the PBP and the change in 

LCC relative to an estimate of the basecase efficiency level. For split-system air 

conditioners, for which ASHRAE did 

not increase efficiency levels, the basecase estimate reflects the market in the 

absence of amended energy 

conservation standards, including the 

market for equipment that exceeds the 

current energy conservation standards. 

For single-package air conditioners, 

split-system heat pumps, and singlepackage heat pumps, the base-case 

estimate reflects the market in the case 

where the ASHRAE 90.1–2013 level 

becomes the Federal minimum, and the 

LCC calculates the LCC savings likely to 

result from higher efficiency levels 

compared with the ASHRAE base-case. 

DOE conducted an LCC and PBP 

analysis for small commercial air-cooled 

air conditioners and heat pumps less 

than 65,000 btu/h using a computer 

spreadsheet model. When combined 

with Crystal Ball (a commerciallyavailable software program), the LCC 

and PBP model generates a Monte Carlo 

simulation to perform the analyses by 

incorporating uncertainty and 

variability considerations in certain of 

the key parameters as discussed below. 

Inputs to the LCC and PBP analysis are 

categorized as: (1) Inputs for 

establishing the total installed cost and 

(2) inputs for calculating the operating 

expense. The following sections contain 

brief discussions of the inputs and key 

assumptions of DOE’s LCC and PBP 

analysis. They are also described in 

detail in chapter 6 of the final rule TSD. 

1. Equipment Costs 

In the LCC and PBP analysis, the 

equipment costs faced by purchasers of 

small air-cooled air conditioning and 

heat pump equipment are derived from 

the MSPs estimated in the engineering 

analysis, the overall markups estimated 

in the markups analysis, and sales tax. 

To develop an equipment price trend 

for the final rule, DOE derived an 

inflation-adjusted index of the producer 

price index (PPI) for ‘‘unitary airconditioners, except air source heat 

pumps’’ from 1978 to 2013, which is the 

PPI series most relevant to small aircooled air-conditioning equipment. The 

PPI index for heat pumps covered too 

short a time period to provide a useful 

picture of pricing trends, so the airconditioner time series was used for 

both air conditioners and heat pumps. 

DOE expects this to be a reasonably 

accurate assessment for heat pumps 

because heat pumps are produced by 

the same manufacturers as airconditioners and contain most of the 

same components. Although the overall 

PPI index shows a long-term declining 

trend, data for the last decade have 

shown a flat-to-slightly-rising trend. 

Given the uncertainty as to which of the 

trends will prevail in coming years, 

DOE chose to apply a constant price 

trend (at 2014 levels) for the final rule. 

See chapter 6 of the final rule TSD for 

more information on the price trends. 

2. Installation Costs 

DOE derived national average 

installation costs for small air-cooled air 

conditioning and heat pump equipment 

from data provided in RS Means 2013.16

RS Means provides estimates for 

installation costs for the subject 

equipment by equipment capacity, as 

well as cost indices that reflect the 

variation in installation costs for 656 

cities in the United States. The RS 

Means data identify several cities in all 

50 States and the District of Columbia. 

DOE incorporated location-based cost 

indices into the analysis to capture 

variation in installation costs, 

depending on the location of the 

consumer. 

Based on these data, DOE concluded 

that data for 3-ton rooftop air 

conditioners would be sufficiently 

representative of the installation costs 

for air conditioners less than 65,000 

btu/h. For heat pumps, DOE used the 

installation costs for 3-ton air-source 

heat pumps. 

DOE also varied installation cost as a 

function of equipment weight. Because 

weight tends to increase with 

equipment efficiency, installation cost 

increased with equipment efficiency. 

The weight of the equipment in each 

class and efficiency level was 

determined through the engineering 

analysis. 

3. Unit Energy Consumption 

The calculation of annual per-unit 

energy consumption by each class of the 

subject small air-cooled air conditioning 

and heating equipment at each 

considered efficiency level is based on 

the energy use analysis as described 

above in section V.D and in chapter 4 

of the final rule TSD. 

4. Electricity Prices and Electricity Price 

Trends 

DOE used average and marginal 

electricity prices by Census Division 

based on tariffs from a representative 

sample of electric utilities. This 

approach calculates energy expenses 

based on actual commercial building 

average and marginal electricity prices 

that customers are paying.17 The 

Commercial Buildings Energy 

Consumption Survey (CBECS) 1992 and 

CBECS 1995 surveys provide monthly 

electricity consumption and demand for 

a large sample of buildings. DOE used 

these values to help develop usage 

patterns associated with various 

building types. Using these monthly 

values in conjunction with the tariff 

data, DOE calculated monthly electricity 

bills for each building. The average 

price of electricity is defined as the total 

electricity bill divided by total 

electricity consumption. From this 

average price, the marginal price for 

electricity consumption was determined 

by applying a 5-percent decrement to 

the average CBECS consumption data 

and recalculating the electricity bill. 

Using building location and the prices 

derived from the above method, an 

average and marginal price was 

determined for each region of the U.S. 

The average electricity price 

multiplied by the baseline electricity 

consumption for each equipment class 

defines the baseline LCC. For each 

efficiency level, the operating cost 

savings are calculated by multiplying 

the electricity consumption savings 

(relative to the baseline) by the marginal 

consumption price. 

For this final rule, DOE updated the 

tariff-based prices to 2014 dollars and 

projected future electricity prices using 

trends in average commercial electricity 

price from Annual Energy Outlook 

(AEO) 2014. An examination of data 

published by the Edison Electric 

Institute 18 indicates that the rate of 

increase of marginal and average prices 

is not significantly different, so the same 

factor was used for both pricing 

estimates. 

For further discussion of electricity 

prices, see chapter 6 of the final rule 

TSD. 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42627 

19RS Means Facilities Maintenance & Repair Cost 

Data 2013. Reed Construction Data, LLC. (2012). 

20 Id. 

5. Maintenance Costs 

Maintenance costs are costs to the 

commercial consumer of ensuring 

continued operation of the equipment 

(e.g., checking and maintaining 

refrigerant charge levels and cleaning 

heat-exchanger coils). DOE derived 

annualized maintenance costs for small 

commercial air-cooled air conditioners 

and heat pumps from RS Means data.19

These data provided estimates of 

person-hours, labor rates, and materials 

required to maintain commercial airconditioning and heating equipment. 

The estimated annualized maintenance 

cost, in 2014 dollars, is $302 for air 

conditioners rated between 36,000 

Btu/h and 288,000 Btu/h and $334 for 

heat pumps rated between 36,000 Btu/ 

h and 288,000 Btu/h; this capacity range 

includes the equipment that is the 

subject of this final rule. DOE assumed 

that the maintenance costs do not vary 

with efficiency level. 

6. Repair Costs 

Repair costs are costs to the 

commercial consumer associated with 

repairing or replacing components that 

have failed. DOE utilized RS Means 20 to 

find the repair costs for small 

commercial air-cooled air conditioners 

and heat pumps. For air conditioners, 

DOE used the repair costs for a 3-ton, 

single-zone rooftop unit. For heat 

pumps, DOE took the repair costs for 

1.5-ton, 5-ton, and 10-ton air-to-air heat 

pumps and linearly scaled the repair 

costs to derive a 3-ton repair cost. DOE 

assumed that the repair would be a onetime event in year 10 of the equipment 

life. DOE then annualized the present 

value of the cost over the average 

equipment life of 19 or 16 years (for air 

conditioners and heat pumps, 

respectively) to obtain an annualized 

equivalent repair cost. This value, in 

2014 dollars, ranges from $143 to $157 

at the baseline level, depending on 

equipment class. The materials portion 

of the repair cost was scaled with the 

percentage increase in manufacturers’ 

production cost by efficiency level. The 

labor cost was held constant across 

efficiency levels. This annualized repair 

cost was then added to the maintenance 

cost to create an annual ‘‘maintenance 

and repair cost’’ for the lifetime of the 

equipment. For further discussion of 

how DOE derived and implemented 

repair costs, see chapter 6 of the final 

rule TSD. 

7. Equipment Lifetime 

Equipment lifetime is the age at 

which the subject small air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h are retired from service. 

DOE based equipment lifetime on a 

retirement function in the form of a 

Weibull probability distribution. DOE 

used the inputs from the 2011 DFR 

technical support document for central 

air conditioners and heat pumps, which 

represented a mean lifetime of 19.01 

years for air conditioners and 16.24 

years for heat pumps, and used the same 

values for units in both residential and 

commercial applications. (EERE–2011– 

BT–STD–0011–0012) Given the 

similarity of such equipment types, DOE 

believes the lifetime for single-phase 

equipment is a reasonable 

approximation of the lifetime for similar 

three-phase equipment. 

8. Discount Rate 

The discount rate is the rate at which 

future expenditures are discounted to 

estimate their present value. The cost of 

capital commonly is 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 the cost of capital is the 

weighted-average cost to the firm of 

equity and debt financing. DOE uses the 

capital asset pricing model (CAPM) to 

calculate the equity capital component, 

and financial data sources to calculate 

the cost of debt financing. 

DOE derived the discount rates by 

estimating the weighted-average cost of 

capital (WACC) of companies that 

purchase air-cooled air-conditioning 

equipment. More details regarding 

DOE’s estimates of commercial 

consumer discount rates are provided in 

chapter 6 of the final rule TSD. 

9. Base-Case Market Efficiency 

Distribution 

For the LCC analysis, DOE analyzes 

the considered efficiency levels relative 

to a base case (i.e., the case without 

amended energy efficiency standards, in 

this case the current Federal standards 

for split-system air conditioners, and the 

default scenario in which DOE is 

required to adopt the efficiency levels in 

ASHRAE 90.1–2013 for the three 

equipment classes triggered by 

ASHRAE). This analysis requires an 

estimate of the distribution of 

equipment efficiencies in the base case 

(i.e., what consumers would have 

purchased in the compliance year in the 

absence of amended standards for splitsystem air conditioners, or amended 

standards more stringent than those in 

ASHRAE 90.1–2013 for the three 

triggered equipment classes). DOE refers 

to this distribution of equipment energy 

efficiencies as the base-case efficiency 

distribution. For more information on 

the development of the base-case 

distribution, see section V.F.3 and 

chapter 6 of the final rule TSD. 

10. Compliance Date 

DOE calculated the LCC and PBP for 

all commercial consumers as if each 

were to purchase new equipment in the 

year that compliance with amended 

standards is required. Generally, 

covered equipment to which a new or 

amended energy conservation standard 

applies must comply with the standard 

if such equipment is manufactured or 

imported on or after a specified date. 

EPCA states that compliance with any 

such standards shall be required on or 

after a date which is two or three years 

(depending on equipment size) after the 

compliance date of the applicable 

minimum energy efficiency requirement 

in the amended ASHRAE/IES standard. 

(42 U.S.C. 6313(a)(6)(D)) Given the 

equipment size at issue here, DOE has 

applied the two-year implementation 

period to determine the compliance date 

of any energy conservation standard 

equal to the efficiency levels specified 

by ASHRAE Standard 90.1–2013 

proposed by this rulemaking. Thus, the 

compliance date of this final rule for 

small commercial air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h manufactured on or after 

January 1, 2017, which is two years after 

the date specified in ASHRAE Standard 

90.1–2013. 

Economic justification is not required 

for DOE to adopt the efficiency levels in 

ASHRAE 90.1–2013, as DOE is 

statutorily required to, at a minimum, 

adopt those levels. Therefore, DOE did 

not perform an LCC analysis on the 

ASHRAE Standard 90.1–2013 levels, 

and for purposes of the LCC analysis, 

DOE used 2020 as the first year of 

compliance with amended standards. 

11. Payback Period Inputs 

The payback period is the amount of 

time it takes the commercial consumer 

to recover the additional installed cost 

of more-efficient equipment, compared 

to baseline equipment, through energy 

cost savings. Payback periods are 

expressed in years. Payback periods that 

exceed the life of the equipment mean 

that the increased total installed cost is 

not recovered in reduced operating 

expenses. 

Similar to the LCC, the inputs to the 

PBP calculation are the total installed 

cost of the equipment to the commercial 

consumer for each efficiency level and 

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42628 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

21An overview of the NEMS model and 

documentation is found at http://www.eia.doe.gov/ 

oiaf/aeo/overview/index.html. 

the average annual operating 

expenditures for each efficiency level 

for each building type and Census 

Division, weighted by the probability of 

shipment to each market. The PBP 

calculation uses the same inputs as the 

LCC analysis, except that discount rates 

are not needed. Because the simple PBP 

does not take into account changes in 

operating expenses over time or the time 

value of money, DOE considered only 

the first year’s operating expenses to 

calculate the PBP, unlike the LCC, 

which is calculated over the lifetime of 

the equipment. Chapter 6 of the final 

rule TSD provides additional detail 

about the PBP. 

F. National Impact Analysis—National 

Energy Savings and Net Present Value 

Analysis 

The national impact analysis (NIA) 

evaluates the effects of a considered 

energy conservation standard from a 

national perspective rather than from 

the consumer perspective represented 

by the LCC. This analysis assesses the 

net present value (NPV) (future amounts 

discounted to the present) and the 

national energy savings (NES) of total 

commercial consumer costs and savings, 

which are expected to result from 

amended standards at specific efficiency 

levels. For each efficiency level 

analyzed, DOE calculated the NPV and 

NES for adopting more-stringent 

standards than the efficiency levels 

specified in ASHRAE Standard 90.1– 

2013. 

The NES refers to cumulative energy 

savings from 2017 through 2046 for the 

three equipment classes triggered by 

ASHRAE; however when evaluating 

more-stringent standards, energy 

savings do not begin accruing until the 

later compliance date of 2020. DOE 

calculated new energy savings in each 

year relative to a base case, defined as 

DOE adoption of the efficiency levels 

specified by ASHRAE Standard 90.1– 

2013. DOE also calculated energy 

savings from adopting efficiency levels 

specified by ASHRAE Standard 90.1– 

2013 compared to the EPCA base case 

(i.e., the current Federal standards). 

For split-system air conditioners, the 

NES refers to cumulative energy savings 

from 2019 through 2048 for all 

standards cases. DOE calculated new 

energy savings in each year relative to 

a base case, defined as the current 

Federal standards, which are equivalent 

to the efficiency levels specified by 

ASHRAE Standard 90.1–2013. 

The NPV refers to cumulative 

monetary savings. DOE calculated net 

monetary savings in each year relative 

to the base case (ASHRAE Standard 

90.1–2013) as the difference between 

total operating cost savings and 

increases in total installed cost. 

Cumulative savings are the sum of the 

annual NPV over the specified period. 

DOE accounted for operating cost 

savings until past 2100, when the 

equipment installed in the 30th year 

after the compliance date of the 

amended standards should be retired. 

1. Approach 

The NES and NPV are a function of 

the total number of units in use and 

their efficiencies. Both the NES and 

NPV depend on annual shipments and 

equipment lifetime. Both calculations 

start by using the shipments estimate 

and the quantity of units in service 

derived from the shipments model. 

With regard to estimating the NES, 

because more-efficient air conditioners 

and heat pumps are expected to 

gradually replace less-efficient ones, the 

energy per unit of capacity used by the 

air conditioners and heat pumps in 

service gradually decreases in the 

standards case relative to the base case. 

DOE calculated the NES by subtracting 

energy use under a standards-case 

scenario from energy use in a base-case 

scenario. 

Unit energy savings for each 

equipment class are taken from the LCC 

spreadsheet for each efficiency level and 

weighted based on market efficiency 

distributions. To estimate the total 

energy savings for each efficiency level, 

DOE first calculated the national site 

energy consumption (i.e., the energy 

directly consumed by the units of 

equipment in operation) for each class 

of air conditioner and heat pumps for 

each year of the analysis period. The 

NES and NPV analysis periods begin 

with the earliest expected compliance 

date of amended Federal energy 

conservation standards (i.e., 2017 for the 

equipment classes triggered by 

ASHRAE, since DOE is adopting the 

baseline ASHRAE Standard 90.1–2013 

efficiency levels). For the analysis of 

DOE’s potential adoption of morestringent efficiency levels for the 

equipment classes triggered by 

ASHRAE, the earliest compliance date 

would be 2020, four years after DOE 

would likely issue a final rule requiring 

such standards. Second, DOE 

determined the annual site energy 

savings, consisting of the difference in 

site energy consumption between the 

base case and the standards case for 

each class of small commercial air 

conditioner and heat pump less than 

65,000 Btu/h. Third, DOE converted the 

annual site energy savings into the 

annual primary and FFC energy savings 

using annual conversion factors derived 

from the AEO 2014 version of the 

Energy Information Administration’s 

(EIA) National Energy Modeling System 

(NEMS). Finally, DOE summed the 

annual primary and FFC energy savings 

from 2017 to 2046 to calculate the total 

NES for that period. DOE performed 

these calculations for each efficiency 

level considered for small commercial 

air conditioners and heat pumps in this 

rulemaking. 

DOE considered whether a rebound 

effect is applicable in its NES analysis. 

A rebound effect occurs when an 

increase in equipment efficiency leads 

to an increased demand for its service. 

The NEMS model assumes a certain 

elasticity factor to account for an 

increased demand for service due to the 

increase in cooling (or heating) 

efficiency.21 EIA refers to this as an 

efficiency rebound. For the small 

commercial air conditioning and 

heating equipment market, there are two 

ways that a rebound effect could occur: 

(1) Increased use of the air conditioning 

equipment within the commercial 

buildings in which they are installed; 

and (2) additional instances of air 

conditioning of building spaces that 

were not being cooled before. 

DOE does not expect either of these 

instances to occur because the annual 

energy use for this equipment is very 

low; therefore, the energy cost savings 

from more-efficient equipment would 

likely not be high enough to induce a 

commercial consumer to increase the 

use of the equipment, either in a 

previously-cooled space or another 

previously-uncooled space. Therefore, 

DOE did not assume a rebound effect in 

the January 2015 NOPR analysis. DOE 

sought input from interested parties on 

whether there will be a rebound effect 

for improvements in the efficiency of 

small commercial air conditioners and 

heat pumps, but did not receive any 

comment. As a result, DOE has 

maintained its assumption in this final 

rule. 

To estimate NPV, DOE calculated the 

net impact as the difference between net 

operating cost savings (including 

electricity cost savings and increased 

repair costs) and increases in total 

installed costs (including customer 

prices). DOE calculated the NPV of each 

considered standard level over the life 

of the equipment using the following 

three steps. First, DOE determined the 

difference between the equipment costs 

under the standard-level case and the 

base case in order to obtain the net 

equipment cost increase resulting from 

the higher standard level. As noted in 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42629 

22U.S. Census Bureau, Current Industrial Reports 

for Refrigeration, Air Conditioning, and Warm Air 

Heating Equipment, MA333M. Note that the current 

industrial reports were discontinued in 2010, so 

more recent data are not available. (Available at: 

http://www.census.gov/manufacturing/cir/

historical_data/ma333m/index.html). 

23AHRI, HVACR & Water Heating Industry 

Statistical Profile (2012) (Available at: http://

www.ari.org/site/883/Resources/Statistics/AHRIIndustry-Statistical-Profile). See also AHRI Monthly 

Shipments: http://www.ari.org/site/498/Resources/

Statistics/Monthly-Shipments; especially December 

2013 release: http://www.ari.org/App_Content/ahri/ 

files/Statistics/Monthly%20Shipments/2013/

December2013.pdf; May 2014 release: http://

www.ari.org/App_Content/ahri/files/Statistics/

Monthly%20Shipments/2014/May2014.pdf. 

section V.E.1, DOE used a constant price 

assumption as the default price forecast. 

Second, DOE determined the difference 

between the base-case operating costs 

and the standard-level operating costs in 

order to obtain the net operating cost 

savings from each higher efficiency 

level. Third, DOE determined the 

difference between the net operating 

cost savings and the net equipment cost 

increase in order to obtain the net 

savings (or expense) for each year. DOE 

then discounted the annual net savings 

(or expenses) to 2015 for air 

conditioners and heat pumps bought on 

or after 2017 (or 2019) and summed the 

discounted values to provide the NPV of 

an efficiency level. An NPV greater than 

zero shows net savings (i.e., the 

efficiency level would reduce 

commercial consumer expenditures 

relative to the base case in present value 

terms). An NPV that is less than zero 

indicates that the efficiency level would 

result in a net increase in commercial 

consumer expenditures in present value 

terms. 

To make the analysis more 

transparent to all interested parties, 

DOE used a commercially-available 

spreadsheet tool to calculate the energy 

savings and the national economic costs 

and savings from potential amended 

standards. Interested parties can review 

DOE’s analyses by changing various 

input quantities within the spreadsheet. 

Unlike the LCC analysis, the NES 

spreadsheet does not use distributions 

for inputs or outputs, but relies on 

national average first costs and energy 

costs developed from the LCC 

spreadsheet. DOE used the NES 

spreadsheet to perform calculations of 

energy savings and NPV using the 

annual energy consumption and total 

installed cost data from the LCC 

analysis. DOE projected the energy 

savings, energy cost savings, equipment 

costs, and NPV of benefits for 

equipment sold in each small 

commercial air-cooled air conditioner 

and heat pump class from 2017 through 

2046. The projections provided annual 

and cumulative values for all four 

output parameters described previously. 

2. Shipments Analysis 

Equipment shipments are an 

important element in the estimate of the 

future impact of a potential energy 

conservation standard. DOE developed 

shipment projections for small 

commercial air-cooled air conditioners 

and heat pumps less than 65,000 Btu/h 

and, in turn, calculated equipment stock 

over the course of the analysis period by 

assuming a Weibull distribution with an 

average 19-year equipment life for air 

conditioners and a 16-year life for heat 

pumps. (See section V.E.7 for more 

information on lifetime.) DOE used the 

shipments projection and the equipment 

stock to determine the NES. The 

shipments portion of the spreadsheet 

model projects small commercial aircooled air conditioner and heat pump 

shipments through 2046. 

DOE relied on 1999 shipment 

estimates along with trends from the 

U.S. Census and AEO 2014 to estimate 

shipments for this equipment. Table 

V.99 shows the 1999 shipments 

estimates from the 2000 Screening 

Analysis for EPACT-Covered 

Commercial HVAC and Water-Heating 

Equipment (EERE–2006–STD–0098– 

0015). While the U.S. Census provides 

shipments data for air-cooled equipment 

less than 65,000 Btu/h, it does not 

disaggregate the shipments into singlephase and three-phase. Therefore, DOE 

used the Census data from 1999 to 

2010 22 as a trend from which to 

extrapolate DOE’s 1999 estimated 

shipments data (which is divided by 

equipment class) for three-phase 

equipment shipments between 2000 to 

2010. 

TABLE V.9—DOE ESTIMATED SHIPMENTS OF SMALL THREE-PHASE

COMMERCIAL AIR CONDITIONERS

AND HEAT PUMPS <65,000 Btu/h 

Equipment class 1999 

Three-Phase Air-Cooled 

Split-System Air Conditioners <65,000 Btu/h ....... 91,598 

Three-Phase Air-Cooled Single-Package Air Conditioners <65,000 Btu/h ....... 213,728 

Three-Phase Air-Cooled 

Split-System Heat Pumps 

<65,000 Btu/h ................... 11,903 

Three-Phase Air-Cooled Single-Package Heat Pumps 

<65,000 Btu/h ................... 27,773 

Because the Census data end in 2010, 

DOE cannot use those data to determine 

whether shipments continue to decline 

past 2010. Therefore, DOE reviewed 

AHRI’s monthly shipments data for the 

broader category of central air 

conditioners and heat pumps to 

determine more recent trends.23 DOE 

found that the average annual growth 

rate from 2005 to 2010 was ¥12 percent 

for air conditioners and ¥4 percent for 

heat pumps. However, the average 

annual growth rate from 2010 to 2014 

was 7 percent for air conditioners and 

8 percent for heat pumps. These data 

indicate that the decline in shipments 

through 2010 has stopped and has in 

fact begun to reverse. Therefore, DOE 

used the AHRI-reported growth rates 

from 2010 to 2011 (10 percent for air 

conditioners and 1 percent for heat 

pumps) to scale its projected 2010 

shipments to 2011, at which time it 

could begin projecting shipments using 

AEO 2014 forecasts (2011 through 2040) 

for commercial floor space. DOE 

assumed that shipments of small 

commercial air-cooled air conditioners 

and heat pumps would be related to the 

growth of commercial floor space. DOE 

used this projection, with an average 

annual growth rate of 1 percent, to 

project shipments for each of the four 

equipment classes through 2040. For 

years beyond 2040, DOE also applied an 

average annual growth rate of 1 percent. 

Table V.10 shows the projected 

shipments for the different equipment 

classes of small commercial air-cooled 

air conditioners and heat pumps less 

than 65,000 Btu/h for selected years 

from 2017 to 2046, as well as the 

cumulative shipments. As equipment 

purchase price and repair costs increase 

with efficiency, DOE recognizes that 

higher first costs and repair costs can 

result in a drop in shipments. However, 

in the January 2015 NOPR, DOE had no 

basis for estimating the elasticity of 

shipments for small commercial aircooled air conditioners and heat pumps 

less than 65,000 Btu/h as a function of 

first costs, repair costs, or operating 

costs. In addition, because air-cooled air 

conditioners are likely the lowest-cost 

option for air conditioning small office 

and retail applications, DOE tentatively 

concluded in the NOPR that it is 

unlikely that shipments would change 

as a result of higher first costs and repair 

costs. Therefore, DOE presumed that the 

shipments projection would not change 

with higher standard levels. 80 FR 1171, 

1196 (Jan. 8, 2015). 

DOE sought input on this assumption. 

In response, Lennox International 

commented that more stringent 

efficiency levels increase equipment 

costs and reduce demand, citing the 

decline in residential central air 

conditioner shipments when SEER 

requirements were raised from 10 to 13. 

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42630 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

24See DOE’s technical support document 

underlying DOE’s July 29, 2004 ANOPR. 69 FR 

45460 (Available at: http://www.regulations.gov/

#!documentDetail;D=EERE-2006-STD-0103-0078). 

DOE assumed that the EER trend would reasonably 

represent a SEER trend. 

Lennox also noted that higher prices 

also lead to more repairs, which reduces 

energy savings benefits. (Lennox 

International, No. 36 at p. 2–3) 

DOE acknowledges Lennox’s 

concerns. However, DOE does not have 

data available to estimate the price 

elasticity for this equipment. 

Furthermore, DOE does not believe that 

the commercial market would 

necessarily respond in a similar manner 

to an increased standard as would the 

residential market. Given that even 

without a drop in shipments, none of 

the efficiency levels in the NOPR were 

determined to be economically justified, 

DOE has not revised its shipments 

estimates for the final rule. 

Chapter 7 of the final rule TSD 

provides additional details on the 

shipments projections. 

TABLE V.10—SHIPMENTS PROJECTION FOR SMALL COMMERCIAL AIR-COOLED AIR CONDITIONERS AND HEAT PUMPS

<65,000 Btu/h 

Equipment 

Units shipped by year and equipment class 

2017 2020 2025 2030 2035 2040 2046 

Cumulative 

shipments 

(2017–2046) * 

Three-Phase Air-Cooled Split-System Air Conditioners 

<65,000 Btu/h ........................................................................ 80,210 83,175 87,651 91,610 96,170 101,593 107,802 2,806,115 

Three-Phase Air-Cooled Single-Package Air Conditioners 

<65,000 Btu/h ........................................................................ 122,271 126,790 133,613 139,649 146,600 154,867 164,332 4,277,584 

Three-Phase Air-Cooled Split-System Heat Pumps <65,000 

Btu/h ...................................................................................... 19,634 20,360 21,455 22,424 23,541 24,868 26,388 686,883 

Three-Phase Air-Cooled Single-Package Heat Pumps 

<65,000 Btu/h ........................................................................ 25,157 26,086 27,490 28,732 30,162 31,863 33,810 880,091 

Total ................................................................................... 247,272 256,411 270,210 282,415 296,473 313,191 332,333 8,650,673 

* Note that the analysis period for split-system air conditioners is 2019–2048, but for comparison purposes, the same time period for cumulative shipments is shown 

for each equipment class. 

3. Base-Case and Standards-Case 

Forecasted Distribution of Efficiencies 

DOE developed base-case efficiency 

distributions based on model 

availability in the AHRI Certified 

Directory. DOE bundled the efficiency 

levels into ‘‘efficiency ranges’’ and 

determined the percentage of models 

within each range. DOE applied the 

percentages of models within each 

efficiency range to the total unit 

shipments for a given equipment class 

to estimate the distribution of shipments 

within the base case. 

In the January 2015 NOPR, DOE 

estimated a base-case efficiency trend of 

an increase of approximately 1 SEER 

every 35 years, based on the EER trend 

from 2012 to 2035 found in the 

Commercial Unitary Air Conditioner 

Advance Notice of Proposed 

Rulemaking (ANOPR).24 DOE used this 

same trend in the standards-case 

scenarios. 80 FR 1171, 1197 (Jan. 8, 

2015). DOE requested comment on the 

estimated efficiency trend but did not 

receive any comments. As a result, DOE 

used this same trend in its final rule 

analysis. 

In addition, DOE used a ‘‘roll-up’’ 

scenario to establish the market shares 

by efficiency level for the year that 

compliance would be required with 

amended standards (i.e., 2017 for 

adoption of efficiency levels in 

ASHRAE Standard 90.1–2013). Table 

V.8 presents the estimated base-case 

efficiency market shares for each small 

commercial air-cooled air conditioner 

and heat pump equipment class. 

TABLE V.11—BASE-CASE EFFICIENCY MARKET SHARES FOR SMALL COMMERCIAL AIR-COOLED AIR CONDITIONERS AND

HEAT PUMPS <65,000 Btu/h 

Three-phase air-cooled split-system air 

conditioners <65,000 Btu/h (2019) 

Three-phase air-cooled singlepackage air conditioners 

<65,000 Btu/h (2020) 

Three-phase air-cooled splitsystem heat pumps 

65,000 Btu/h (2020) 

Three-phase air-cooled singlepackage heat pumps 

<65,000 Btu/h (2020) 

SEER Market share 

(%) SEER Market share 

(%) SEER Market share (%) SEER Market share (%) 

13 ................................. 26 13 0 13 0 13 0 

14 ................................. 50 14 52 14 80 14 69 

15 ................................. 22 15 30 15 19 15 21 

16 ................................. 2 16 7 16 1 16 9 

17 ................................. 0 17 4 17 0 17 1 

18 ................................. 0 18 7 18 0 18 1 

19 ................................. 0 19 0 ........................ ........................ ........................ ........................

Note: The 0% market share at 13.0 SEER for three equipment classes is accounting for the default adoption of ASHRAE Standard 90.1–2013 

levels in 2017. 

4. National Energy Savings and Net 

Present Value 

The stock of small commercial aircooled air conditioner and heat pump 

equipment less than 65,000 Btu/h is the 

total number of units in each equipment 

class purchased or shipped from 

previous years that have survived until 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42631 

25The NES spreadsheet can be found in the 

docket for the ASHRAE rulemaking at: 

www.regulations.gov/#!docketDetail;D=EERE-2014- 

BT-STD-0015. 

a given point. The NES spreadsheet,25

through use of the shipments model, 

keeps track of the total number of units 

shipped each year. For purposes of the 

NES and NPV analyses, DOE assumes 

that shipments of air conditioner and 

heat pump units survive for an average 

of 19 years and 16 years, respectively, 

following a Weibull distribution, at the 

end of which time they are removed 

from service. 

The national annual energy 

consumption is the product of the 

annual unit energy consumption and 

the number of units of each vintage in 

the stock, summed over all vintages. 

This approach accounts for differences 

in unit energy consumption from year to 

year. In determining national annual 

energy consumption, DOE estimated 

energy consumption and savings based 

on site energy and converted the 

electricity consumption and savings to 

primary energy using annual conversion 

factors derived from the AEO 2014 

version of NEMS. Cumulative energy 

savings are the sum of the NES for each 

year over the timeframe of the analysis. 

In response to the recommendations 

of a committee on ‘‘Point-of-Use and 

Full-Fuel-Cycle Measurement 

Approaches to Energy Efficiency 

Standards’’ appointed by the National 

Academy of 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 

(Aug. 18, 2011). After evaluating the 

approaches discussed in the August 18, 

2011 notice, DOE published a statement 

of amended policy in the Federal 

Register in which DOE explained its 

determination that NEMS is the most 

appropriate tool for its FFC analysis and 

its intention to use NEMS for that 

purpose. 77 FR 49701 (Aug. 17, 2012). 

The approach used for this final rule is 

described in Appendix 8A of the final 

rule TSD. 

In accordance with the OMB’s 

guidelines on regulatory analysis, DOE 

calculated NPV using both a 7-percent 

and a 3-percent real discount rate. The 

7-percent rate is an estimate of the 

average before-tax rate of return on 

private capital in the U.S. economy. 

DOE used this discount rate to 

approximate the opportunity cost of 

capital in the private sector, because 

recent OMB analysis has found the 

average rate of return on capital to be 

near this rate. DOE used the 3-percent 

rate to capture the potential effects of 

standards on private consumption (e.g., 

through higher prices for products and 

reduced purchases of energy). This rate 

represents the rate at which society 

discounts future consumption flows to 

their present value. This rate can be 

approximated by the real rate of return 

on long-term government debt (i.e., 

yield on United States Treasury notes 

minus annual rate of change in the 

Consumer Price Index), which has 

averaged about 3 percent on a pre-tax 

basis for the past 30 years. 

Table V.12 summarizes the inputs to 

the NES spreadsheet model along with 

a brief description of the data sources. 

The results of DOE’s NES and NPV 

analysis are summarized in section 

VIII.B.1.b and described in detail in 

chapter 8 of the final rule TSD. 

TABLE V.12—SUMMARY OF SMALL COMMERCIAL AIR-COOLED AIR CONDITIONER AND HEAT PUMPS <65,000 Btu/h NES 

AND NPV MODEL INPUTS

Inputs Description 

Shipments ....................................... Annual shipments based on U.S. Census, AHRI monthly shipment reports, and AEO2014 forecasts of 

commercial floor space. (See chapter 7 of the final rule TSD.) 

Compliance Date of Standard ........ 2020 for adoption of a more-stringent efficiency level than those specified by ASHRAE Standard 90.1– 

2013 for the three equipment classes triggered by ASHRAE. 

2017 for adoption of the efficiency levels specified by ASHRAE Standard 90.1–2013. 

2019 for split-system air conditioners. 

Base-Case Efficiencies ................... Distribution of base-case shipments by efficiency level, with efficiency trend of an increase of 1 EER every 

35 years. 

Standards-Case Efficiencies ........... Distribution of shipments by efficiency level for each standards case. In compliance year, units below the 

standard level ‘‘roll-up’’ to meet the standard. Efficiency trend of an increase of 1 EER every 35 years. 

Annual Energy Use per Unit ........... Annual national weighted-average values are a function of efficiency level. (See chapter 4 of the final rule 

TSD.) 

Total Installed Cost per Unit ........... Annual weighted-average values are a function of efficiency level. (See chapter 5 of the final rule TSD.) 

Annualized Maintenance and Repair Costs per Unit.Annual weighted-average values are a function of efficiency level. (See chapter 5 of the final rule TSD.) 

Escalation of Fuel Prices ................ AEO2014 forecasts (to 2040) and extrapolation for beyond 2040. (See chapter 8 of the final rule TSD.) 

Site to Primary and FFC Conversion.Based on AEO2014 forecasts (to 2040) and extrapolation for beyond 2040. (See chapter 8 of the final rule 

TSD.) 

Discount Rate ................................. 3 percent and 7 percent real. 

Present Year ................................... Future costs are discounted to 2015. 

VI. Methodology for Water-Source Heat 

Pumps 

This section addresses the analyses 

DOE has performed for this rulemaking 

with respect to water-source heat 

pumps. A separate subsection addresses 

each analysis. In overview, DOE used a 

spreadsheet to calculate the LCC and 

PBPs of potential energy conservation 

standards. DOE used another 

spreadsheet to provide shipments 

projections and then calculate national 

energy savings and net present value 

impacts of potential amended energy 

conservation standards. 

A. Market Assessment 

To begin its review of the ASHRAE 

Standard 90.1–2013 efficiency levels, 

DOE developed information that 

provides an overall picture of the 

market for the equipment concerned, 

including the purpose of the equipment, 

the industry structure, and market 

characteristics. This activity included 

both quantitative and qualitative 

assessments based primarily on 

publicly-available information. The 

subjects addressed in the market 

assessment for this rulemaking include 

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42632 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

26 2012 ASHRAE Handbook, Heating, Ventilating, 

and Air-Conditioning Systems and Equipment. 

ASHRAE, Chapter 9 (Available at: https://

www.ashrae.org/resourceslpublications/

description-of-the-2012-ashrae-handbook-hvacsystems-and-equipment). 

27AHRI Directory of Certified Product 

Performance (2013) (Available at: 

www.ahridirectory.org) (Last accessed November 

11, 2013). 

equipment classes, manufacturers, 

quantities, and types of equipment sold 

and offered for sale. The key findings of 

DOE’s market assessment are 

summarized subsequently. For 

additional detail, see chapter 2 of the 

final rule TSD. 

As proposed in the January 2015 

NOPR, DOE is adopting the following 

definition for water-source heat pumps, 

adapted from the ASHRAE Handbook 26

and specifically referencing the new 

nomenclature included in ASHRAE 

90.1–2013: ‘‘Water-source heat pump 

means a single-phase or three-phase 

reverse-cycle heat pump of all capacities 

(up to 760,000 Btu/h) that uses a 

circulating water loop as the heat source 

for heating and as the heat sink for 

cooling. The main components are a 

compressor, refrigerant-to-water heat 

exchanger, refrigerant-to-air heat 

exchanger, refrigerant expansion 

devices, refrigerant reversing valve, and 

indoor fan. Such equipment includes, 

but is not limited to, water-to-air waterloop heat pumps.’’ 80 FR 1171, 1182– 

1183 (Jan. 8, 2015). 

1. Equipment Classes 

EPCA and ASHRAE Standard 90.1– 

2013 both divide water-source heat 

pumps into three categories based on 

the following cooling capacity ranges: 

(1) <17,000 Btu/h; (2) ≥17,000 and 

<65,000 Btu/h; and (3) ≥65,000 and 

<135,000 Btu/h. ASHRAE 90.1–2013 

revised the nomenclature for these 

equipment classes to refer to ‘‘water-toair, water-loop.’’ In this document, DOE 

is revising the nomenclature for these 

equipment classes (but not the broader 

category) to match that used by 

ASHRAE. Specifically, DOE revises 

Table 1 to 10 CFR 431.96 and Tables 1 

and 2 to 10 CFR 431.97 to refer to 

‘‘water-source (water-to-air, waterloop)’’ heat pumps rather than simply 

‘‘water-source’’ heat pumps. Throughout 

this final rule, any reference to watersource heat pump equipment classes 

should be considered as referring to 

water-to-air, water-loop heat pumps. 

2. Review of Current Market 

In order to obtain the information 

needed for the market assessment for 

this rulemaking, DOE consulted a 

variety of sources, including 

manufacturer literature, manufacturer 

Web sites, and the AHRI certified 

directory.27 The information DOE 

gathered serves as resource material 

throughout the rulemaking. The sections 

that follow provide an overview of the 

market assessment, and chapter 2 of the 

final rule TSD provides additional detail 

on the market assessment, including 

citations to relevant sources. 

a. Trade Association Information 

DOE identified the same trade groups 

relevant to water-source heat pumps as 

to those listed in section V.A.2.a for 

small air-cooled air conditioners and 

heat pumps, namely AHRI, HARDI, and 

ACCA. DOE used data available from 

AHRI in its analysis, as described in the 

next section. 

b. Manufacturer Information 

DOE reviewed data for water-source 

(water-to-air, water-loop) heat pumps 

currently on the market by examining 

the AHRI Directory of Certified Product 

Performance. DOE identified 18 parent 

companies (comprising 21 

manufacturers) of water-source (waterto-air, water-loop) heat pumps, which 

are listed in chapter 2 of the final rule 

TSD. Of these manufacturers, seven 

were identified as small businesses 

based upon number of employees and 

the employee thresholds set by the 

Small Business Administration. More 

details on this analysis can be found 

below in section IX.B. 

c. Market Data 

DOE reviewed the AHRI database to 

characterize the efficiency and 

performance of water-source (water-toair, water-loop) heat pump models 

currently on the market. The full results 

of this market characterization are found 

in chapter 2 of the final rule TSD. For 

water-source heat pumps less than 

17,000 Btu/h, the average EER was 13.8, 

and the average coefficient of 

performance (COP) was 4.7. Of the 

models identified by DOE, 34 (six 

percent of the total models) have EERs 

rated below the ASHRAE Standard 

90.1–2013 levels, and 30 (five percent of 

the total models) have COPs rated below 

the ASHRAE Standard 90.1–2013 levels. 

For water-source heat pumps greater 

than or equal to 17,000 Btu/h and less 

than 65,000 Btu/h, the average EER was 

15.2, and the average COP was 4.9. Of 

the models identified by DOE, 72 (two 

percent of the total models) have EERs 

rated below the ASHRAE Standard 

90.1–2013 levels, and 133 (four percent 

of the total models) have COPs rated 

below the ASHRAE Standard 90.1–2013 

levels. For water-source heat pumps 

greater than or equal to 65,000 Btu/h 

and less than 135,000 Btu/h, the average 

EER was 14.7, and the average COP was 

4.8. Of the models identified by DOE, 

five (one percent of the total models) 

have EERs rated below the ASHRAE 

Standard 90.1–2013 levels, and two (0.5 

percent of the total models) have COPs 

rated below the ASHRAE Standard 

90.1–2013 levels. 

B. Engineering Analysis 

The engineering analysis establishes 

the relationship between an increase in 

energy efficiency and the increase in 

cost (manufacturer selling price (MSP)) 

of a piece of equipment DOE is 

evaluating for potential amended energy 

conservation standards. This 

relationship serves as the basis for costbenefit calculations for individual 

consumers, manufacturers, and the 

Nation. The engineering analysis 

identifies representative baseline 

equipment, which is the starting point 

for analyzing possible energy efficiency 

improvements. For covered ASHRAE 

equipment, DOE sets the baseline for 

analysis at the ASHRAE Standard 90.1 

efficiency level, because by statute, DOE 

cannot adopt any level below the 

revised ASHRAE level. The engineering 

analysis then identifies higher efficiency 

levels and the incremental increase in 

product cost associated with achieving 

the higher efficiency levels. After 

identifying the baseline models and cost 

of achieving increased efficiency, DOE 

estimates the additional costs to the 

commercial consumer through an 

analysis of contractor costs and 

markups, and uses that information in 

the downstream analyses to examine the 

costs and benefits associated with 

increased equipment efficiency. 

DOE typically structures its 

engineering analysis around one of three 

methodologies: (1) The design-option 

approach, which calculates the 

incremental costs of adding specific 

design options to a baseline model; (2) 

the efficiency-level approach, which 

calculates the relative costs of achieving 

increases in energy efficiency levels 

without regard to the particular design 

options used to achieve such increases; 

and/or (3) the reverse-engineering or 

cost-assessment approach, which 

involves a ‘‘bottom-up’’ manufacturing 

cost assessment based on a detailed bill 

of materials derived from teardowns of 

the equipment being analyzed. A 

supplementary method called a catalog 

teardown uses published manufacturer 

catalogs and supplementary component 

data to estimate the major physical 

differences between a piece of 

equipment that has been physically 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42633 

disassembled and another piece of 

similar equipment for which catalog 

data are available to determine the cost 

of the latter equipment. Deciding which 

methodology to use for the engineering 

analysis depends on the equipment, the 

design options under study, and any 

historical data upon which DOE may 

draw. 

1. Approach 

As discussed in the January 2015 

NOPR, DOE used a combination of the 

efficiency-level approach and the costassessment approach. 80 FR 1171, 1200 

(Jan. 8, 2015). DOE used the efficiencylevel approach to identify incremental 

improvements in efficiency for each 

equipment class and the costassessment approach to develop a cost 

for each efficiency level. The efficiency 

levels that DOE considered in the 

engineering analysis were representative 

of commercial water-source heat pumps 

currently produced by manufacturers at 

the time the engineering analysis was 

developed. DOE relied on data reported 

in the AHRI Directory of Certified 

Product Performance to select 

representative efficiency levels. This 

directory reported EER, COP, heating 

and cooling capacities, and other data 

for all three application types (waterloop, ground-water, ground-loop) for all 

AHRI-certified units. After identifying 

representative efficiency levels, DOE 

used a catalog teardown or ‘‘virtual 

teardown’’ approach to estimate 

equipment costs at each level. DOE 

obtained general descriptions of key 

water-source heat pump components in 

product literature and used data 

collected for dozens of HVAC products 

to characterize the components’ design 

details. This approach was used instead 

of the physical teardown approach due 

to time constraints. 

In the January 2015 NOPR, DOE noted 

the drawbacks to using a catalog 

teardown approach. 80 FR 1171, 1200 

(Jan. 8, 2015). However, DOE tentatively 

concluded the approach provided a 

reasonable approximation of all cost 

increases associated with efficiency 

increases. DOE did not receive any 

comments that rejected this conclusion, 

and therefore, adopts it in this Final 

Rule. 

After selecting efficiency levels for 

each capacity class, as described in the 

sections that follow, DOE selected 

products for the catalog teardown 

analysis that corresponded to the 

representative efficiencies and cooling 

capacities. The engineering analysis 

included data for over 60 water-source 

heat pumps. DOE calculated the MPC 

for products spanning the full range of 

efficiencies from the baseline to the 

max-tech level for each analyzed 

equipment class. In some cases, catalog 

data providing sufficient information for 

cost analysis were not available at each 

efficiency level under consideration. 

Hence, DOE calculated the costs for 

some of the efficiency levels based on 

the cost/efficiency trends observed for 

other efficiency levels for which such 

catalog data were available. The 

engineering analysis is described in 

more detail in chapter 3 of the final rule 

TSD. 

2. Baseline Equipment 

DOE selected baseline efficiency 

levels as reference points for each 

equipment class, against which it 

measured changes resulting from 

potential amended energy conservation 

standards. DOE defined the baseline 

efficiency levels as reference points to 

compare the technology, energy savings, 

and cost of equipment with higher 

energy efficiency levels. Typically, units 

at the baseline efficiency level just meet 

Federal energy conservation standards 

and provide basic consumer utility. 

However, EPCA requires that DOE must 

adopt either the ASHRAE Standard 

90.1–2013 levels or more-stringent 

levels. Therefore, because the ASHRAE 

Standard 90.1–2013 levels were the 

lowest levels that DOE could adopt, 

DOE used those levels as the reference 

points against which more-stringent 

levels could be evaluated. Table VI.1 

shows the current baseline and 

ASHRAE efficiency levels for each 

water-source heat pump equipment 

class. In Table VI.2 below, the ASHRAE 

levels are designated ‘‘0’’ and morestringent levels are designated 1, 2, and 

so on. 

TABLE VI.1—BASELINE EFFICIENCY LEVELS FOR WATER-SOURCE HEAT PUMPS

Water-source 

(water-to-air, 

water-loop) heat 

pumps <17,000 

Btu/h 

Water-source 

(water-to-air, 

water-loop) heat 

pumps ≥17,000 

and <65,000 Btu/h 

Water-source 

(water-to-air, waterloop) heat pumps 

≥65,000 and 

<135,000 Btu/h 

Efficiency Level (EER) 

Baseline—Federal Standard .................................................................................... 11.2 12.0 12.0 

Baseline—ASHRAE Standard ................................................................................. 12.2 13.0 13.0 

3. Identification of Increased Efficiency 

Levels for Analysis 

DOE developed and considered 

potential increased energy efficiency 

levels for each equipment class. These 

more-stringent efficiency levels are 

representative of efficiency levels along 

the technology paths that manufacturers 

of residential heating products 

commonly use to maintain cost-effective 

designs while increasing energy 

efficiency. DOE developed morestringent energy efficiency levels for 

each of the equipment classes, based on 

a review of AHRI’s Directory of Certified 

Product Performance, manufacturer 

catalogs, and other publicly-available 

literature. The efficiency levels selected 

for analysis for each water-source heat 

pump equipment class are shown in 

Table VI.2. Chapter 3 of the final rule 

TSD shows additional details on the 

efficiency levels selected for analysis. 

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42634 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

28 ‘‘Commercial consumer’’ refers to purchasers of 

the equipment being regulated. 

TABLE VI.2—EFFICIENCY LEVELS FOR ANALYSIS OF WATER-SOURCE HEAT PUMPS

Water-source 

(water-to-air, 

water-loop) heat 

pumps <17,000 

Btu/h 

Water-source 

(water-to-air, 

water-loop) heat 

pumps ≥17,000 

and <65,000 Btu/h 

Water-source 

(water-to-air, waterloop) heat pumps 

≥65,000 and 

<135,000 Btu/h 

Efficiency Level (EER, Btu/W-h) 

Baseline—Federal Standard .................................................................................... 11.2 12.0 12.0 

Baseline—ASHRAE Level (0) ................................................................................. 12.2 13.0 13.0 

Efficiency Level 1 ..................................................................................................... 13.0 14.6 14.0 

Efficiency Level 2 ..................................................................................................... 14.0 16.6 15.0 

Efficiency Level 3 ..................................................................................................... 15.7 18.0 16.0 

Efficiency Level 4* ................................................................................................... 16.5 19.2 17.2 

Efficiency Level 5** .................................................................................................. 18.1 21.6 - 

* Efficiency Level 4 is ‘‘Max-Tech’’ for the largest equipment classes. 

** Efficiency Level 5 is ‘‘Max-Tech’’ for the two smaller equipment classes. 

4. Engineering Analysis Results 

The results of the engineering analysis 

are cost-efficiency curves based on 

results from the cost models for 

analyzed units. DOE’s calculated MPCs 

for the three analyzed classes of watersource heat pumps are shown in Table 

VI.3. DOE used the cost-efficiency 

curves from the engineering analysis as 

an input for the life-cycle cost and PBP 

analysis. Further details regarding MPCs 

for water-source heat pumps may be 

found in chapter 3 of the final rule TSD. 

TABLE VI.3—MANUFACTURER PRODUCTION COSTS FOR WATER-SOURCE HEAT PUMPS

Water-source (water-to-air, waterloop) heat pumps <17,000 Btu/h Water-source (water-to-air, waterloop) heat pumps ≥17,000 and 

<65,000 Btu/h 

Water-source (water-to-air, waterloop) heat pumps ≥65,000 and 

<135,000 Btu/h 

EER MPC (2014$) EER MPC (2014$) EER MPC (2014$) 

ASHRAE—Level 0 ........... 12.2 860 13.0 1,346 13.0 3,274 

Efficiency Level 1 ............. 13.0 904 14.6 1,463 14.0 3,660 

Efficiency Level 2 ............. 14.0 960 16.6 1,609 15.0 4,045 

Efficiency Level 3 ............. 15.7 1,053 18.0 1,711 16.0 4,431 

Efficiency Level 4 ............. 16.5 1,097 19.2 1,798 17.2 4,893 

Efficiency Level 5 ............. 18.1 1,185 21.6 1,974 ............................ ............................

a. Manufacturer Markups 

As discussed in detail in section 

V.B.4.a, DOE applies a non-production 

cost multiplier (the manufacturer 

markup) to the full MPC to account for 

corporate non-production costs and 

profit. The resulting manufacturer 

selling price (MSP) is the price at which 

the manufacturer can recover all 

production and nonproduction costs 

and earn a profit. Because water-source 

heat pumps and commercial air-cooled 

equipment are sold by similar heating 

and cooling product manufacturers, 

DOE used the same manufacturer 

markup of 1.3 that was developed for 

small commercial air-cooled airconditioners and heat pumps, as 

described in chapter 3 of the final rule 

TSD. 

b. Shipping Costs 

Manufacturers of commercial HVAC 

equipment typically pay for freight 

(shipping) to the first step in the 

distribution chain. Freight is not a 

manufacturing cost, but because it is a 

substantial cost incurred by the 

manufacturer, DOE accounts for 

shipping costs separately from other 

non-production costs that comprise the 

manufacturer markup. DOE calculated 

the MSP for water-source heat pumps by 

multiplying the MPC at each efficiency 

level (determined from the cost model) 

by the manufacturer markup and adding 

shipping costs. Shipping costs for watersource heat pumps were calculated 

similarly to those for small commercial 

air-cooled air-conditioners and heat 

pumps described in section V.B.4.b. See 

chapter 3 of the final rule TSD for more 

details about DOE’s shipping cost 

assumptions and the shipping costs per 

unit for each water-source heat pump 

product class. 

C. Markups Analysis 

The markups analysis develops 

appropriate markups in the distribution 

chain to convert the estimates of 

manufacturer selling price derived in 

the engineering analysis to commercial 

consumer prices.28 DOE calculates 

overall baseline and incremental 

markups based on the equipment 

markups at each step in the distribution 

chain. The incremental markup relates 

the change in the manufacturer sales 

price of higher-efficiency models (the 

incremental cost increase) to the change 

in the commercial consumer price. 

For water-source heat pumps, DOE 

used the same markups that DOE 

developed for small commercial aircooled air-conditioners and heat pumps, 

as discussed in section V.C. DOE 

understands that all the types of 

equipment move through the same 

distribution channels and that, 

therefore, using the same markups is 

reasonable. In addition, DOE’s 

development of markups within those 

channels is at the broader equipment 

category level, in this case heating, 

ventilation, and air-conditioning 

equipment. As with small commercial 

air-cooled equipment, in the January 

2015 NOPR, DOE did not use national 

accounts in its markups analysis for 

water-source heat pumps, because DOE 

does not believe that the commercial 

consumers of water-source heat pump 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42635 

29A heating efficiency of 2.9 COP corresponds to 

the existing minimum heating efficiency standard 

for commercial unitary heat pumps, a value which 

DOE believes is representative of the heat pump 

stock characterized by CBECS. 

30See: http://www.ahridirectory.org/

ahridirectory/pages/homeM.aspx. 

31See Appendix D of the 2000 Screening Analysis 

for EPACT-Covered Commercial HVAC and WaterHeating Equipment. (EERE–2006–STD–0098–0015) 

equipment less than 135,000 Btu/h 

would typically be national retail chains 

that negotiate directly with 

manufacturers. 80 FR 1171, 1202. DOE 

sought comment on whether the use of 

national accounts would be appropriate 

in this analysis. DOE did not receive 

any comments, and as such has retained 

its approach in this final rule. 

Chapter 6 of the final rule TSD 

provides further detail on the estimation 

of markups. 

D. Energy Use Analysis 

The energy use analysis provides 

estimates of the annual energy 

consumption of water-source heat 

pumps at the considered efficiency 

levels. DOE uses these values in the LCC 

and PBP analyses and in the NIA. 

The cooling unit energy consumption 

(UEC) by equipment type and efficiency 

level used in the January 2015 NOPR 

came from Appendix D of the 2000 

Screening Analysis for EPACT-Covered 

Commercial HVAC and Water-Heating 

Equipment. (EERE–2006–STD–0098– 

0015). 80 FR 1171, 1202. Where 

identical efficiency levels were 

available, DOE used the UEC directly 

from the screening analysis. For 

additional efficiency levels, DOE scaled 

the UECs based on the ratio of EER, as 

was done in the original analysis. DOE 

also adjusted the cooling energy use 

from the 2000 Screening Analysis using 

factors from the NEMS commercial 

demand module that account for 

improvements in building shell 

characteristics and changes in internal 

load as a function of region and building 

activity. 

In response to the January 2015 

NOPR, NEEA commented that DOE 

should revise its energy analysis for 

water-source heat pumps by factoring in 

the oversizing of equipment, which 

leads to additional energy use. In 

addition, NEEA also noted that in the 

field, FLEOH does not scale 

proportionally with EER at higher EER 

levels, instead decreasing at a higher 

rate as a result of better part load 

performance. (NEEA, No. 41 at p. 2) 

DOE acknowledges that the original 

2000 Screening Analysis sized 

equipment based on design-day peak 

load and did not explicitly account for 

oversizing, and as such may be a 

conservative estimate of energy usage. 

However, the uncertainty in the energy 

use analysis that was cited in the 

January 2015 NOPR extends well 

beyond the sizing factors. 80 FR 1171, 

1225¥1226 (Jan. 8, 2015). For example, 

DOE has no data on distribution by 

building type or field data to corroborate 

UEC estimates or simulations results. 

Furthermore, DOE has no data with 

which to modify the scaling of UEC 

with EER. While altering its 

assumptions on sizing and UEC scaling 

could impact the analytical results, it 

would not change DOE’s fundamental 

determination that there is too much 

uncertainty in the energy use and other 

analyses to justify a standard level more 

stringent than those in ASHRAE 90.1– 

2013. Therefore, given the lack of 

available data and lack of potential 

impact on the policy decision, DOE has 

not modified the cooling side energy use 

for the final rule. 

In the January 2015 NOPR, to 

characterize the heating-side 

performance, DOE analyzed CBECS 

2003 data to develop a national-average 

annual energy use per square foot for 

buildings that use heat pumps. 80 FR 

1171, 1202 (Jan. 8, 2015). DOE assumed 

that the average COP of the commercial 

unitary heat pump (CUHP) was 2.9.29

DOE converted the energy use per 

square foot value to annual energy use 

per ton using a ton-per-square-foot 

relationship derived from the energy use 

analysis in the 2014 CUAC NOPR. 

(EERE–2013–BT–STD–0007–0027) 

Although this analysis in the NOPR 

related to equipment larger than some of 

the equipment that is the subject of this 

final rule and is directly applicable only 

to air-source heat pumps rather than 

water-source heat pumps, DOE assumed 

that this estimate was sufficiently 

representative of the heating energy use 

for all three classes of water-source heat 

pumps. DOE sought comment on this 

issue but did not receive any. As a 

result, DOE has retained this approach 

for the final rule. 

Because equipment energy use is a 

function of efficiency, DOE assumed 

that the annual heating energy 

consumption of a unit scales 

proportionally with its heating COP 

efficiency level. Finally, to determine 

the COPs of units with given EERs, DOE 

correlated COP to EER based on the 

AHRI Certified Equipment Database.30

Thus, for any given cooling efficiency of 

a water-source heat pump, DOE was 

able to use this method to establish the 

corresponding heating efficiency, and, 

in turn, the associated annual heating 

energy consumption. 

In order to create variability in the 

cooling and heating UECs by region and 

building type, in the January 2015 

NOPR, DOE used a Pacific Northwest 

National Laboratory report 31 that 

estimated the annual energy usage of 

space cooling and heating products 

using a Full Load Equivalent Operating 

Hour (FLEOH) approach. 80 FR 1171, 

1202–1203 (Jan. 8, 2015). DOE 

normalized the provided FLEOHs to the 

UECs taken from the 2011 DFR for 

central air conditioners and heat pumps 

to vary the average UEC across region 

and building type. DOE used the 

following building types: office, 

education, lodging, multi-family 

apartments, and healthcare. 80 FR at 

1203. DOE sought comment on whether 

these building types are appropriate or 

whether there are other building types 

that should be considered for the watersource heat pump analysis. DOE did not 

receive any comments on this issue and 

retained the same building types for this 

final rule analysis. 

E. Life-Cycle Cost and Payback Period 

Analysis 

The purpose of the LCC and PBP 

analysis is to analyze the effects of 

potential amended energy conservation 

standards on commercial consumers of 

water-source heat pumps by 

determining how a potential amended 

standard affects their operating 

expenses (usually decreased) and their 

total installed costs (usually increased). 

The LCC is the total consumer 

expense over the life of the equipment, 

consisting of equipment and installation 

costs plus operating costs (i.e., expenses 

for energy use, maintenance, and 

repair). DOE discounts future operating 

costs to the time of purchase using 

commercial consumer discount rates. 

The PBP is the estimated amount of 

time (in years) it takes commercial 

consumers to recover the increased total 

installed cost (including equipment and 

installation costs) of a more-efficient 

type of equipment through lower 

operating costs. DOE calculates the PBP 

by dividing the change in total installed 

cost (normally higher) due to a standard 

by the change in annual operating cost 

(normally lower) that results from the 

potential standard. However, unlike the 

LCC, DOE only considers the first year’s 

operating expenses in the PBP 

calculation. Because the PBP does not 

account for changes in operating 

expense over time or the time value of 

money, it is also referred to as a simple 

PBP. 

For any given efficiency level, DOE 

measures the PBP and the change in 

LCC relative to an estimate of the basecase efficiency level. For water-source 

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42636 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

32RS Means Mechanical Cost Data 2013. Reed 

Construction Data, LLC. (2012). 

33RS Means Facilities Maintenance & Repair Cost 

Data 2013. Reed Construction Data, LLC. (2012). 34 Id. 

heat pumps, the base-case estimate 

reflects the market in the case where the 

ASHRAE level becomes the Federal 

minimum, and the LCC calculates the 

LCC savings likely to result from higher 

efficiency levels compared with the 

ASHRAE base case. 

DOE conducted an LCC and PBP 

analysis for water-source heat pumps 

using a computer spreadsheet model. 

When combined with Crystal Ball (a 

commercially-available software 

program), the LCC and PBP model 

generates a Monte Carlo simulation to 

perform the analyses by incorporating 

uncertainty and variability 

considerations in certain of the key 

parameters as discussed below. Inputs 

to the LCC and PBP analysis are 

categorized as: (1) Inputs for 

establishing the total installed cost and 

(2) inputs for calculating the operating 

expense. The following sections contain 

brief discussions of comments on the 

inputs and key assumptions of DOE’s 

LCC and PBP analysis and explain how 

DOE took these comments into 

consideration. They are also described 

in detail in chapter 6 of the final rule 

TSD. 

1. Equipment Costs 

In the LCC and PBP analysis, the 

equipment costs faced by purchasers of 

water-source heat pumps are derived 

from the MSPs estimated in the 

engineering analysis, the overall 

markups estimated in the markups 

analysis, and sales tax. 

To develop an equipment price trend, 

DOE derived an inflation-adjusted index 

of the PPI for ‘‘all other miscellaneous 

refrigeration and air-conditioning 

equipment’’ from 1990–2013, which is 

the PPI series most relevant to watersource heat pumps. Although the 

inflation-adjusted index shows a 

declining trend from 1990 to 2004, data 

since 2008 have shown a flat-to-slightly 

rising trend. Given the uncertainty as to 

which of the trends will prevail in 

coming years, DOE chose to apply a 

constant price trend (at 2013 levels) for 

each efficiency level in each equipment 

class for the final rule. See chapter 6 of 

the final rule TSD for more information 

on the price trends. 

2. Installation Costs 

DOE derived installation costs for 

water-source heat pump equipment 

from current RS Means data (2013).32 RS 

Means provides estimates for 

installation costs for the subject 

equipment by equipment capacity, as 

well as cost indices that reflect the 

variation in installation costs for 656 

cities in the United States. The RS 

Means data identify several cities in all 

50 States and the District of Columbia. 

DOE incorporated location-based cost 

indices into the analysis to capture 

variation in installation costs, 

depending on the location of the 

consumer. 

Based on these data, DOE concluded 

that data for 1-ton, 3-ton, and 7.5-ton 

water-source heat pumps would be 

sufficiently representative of the 

installation costs for of water-source 

heat pumps with capacities of less than 

17,000 btu/h, greater than or equal to 

17,000 and less than 65,000 btu/h, and 

greater than or equal to 65,000 and less 

than 135,000 btu/h, respectively. 

DOE also varied installation cost as a 

function of equipment weight. Because 

weight tends to increase with 

equipment efficiency, installation cost 

increased with equipment efficiency. 

The weight of the equipment in each 

class and efficiency level was 

determined through the engineering 

analysis. 

3. Unit Energy Consumption 

The calculation of annual per-unit 

energy consumption by each class of the 

subject water-source heat pumps at each 

considered efficiency level based on the 

energy use analysis is described above 

in section VI.D and in chapter 4 of the 

final rule TSD. 

4. Electricity Prices and Electricity Price 

Trends 

DOE used the same average and 

marginal electricity prices and 

electricity price trends as discussed in 

the methodology for small commercial 

air-cooled air conditioners and heat 

pumps (see section V.E.4). These data 

were developed for the broader 

commercial air-conditioning category 

and, thus, are also relevant to watersource heat pumps. 

5. Maintenance Costs 

Maintenance costs are costs to the 

commercial consumer of ensuring 

continued operation of the equipment 

(e.g., checking and maintaining 

refrigerant charge levels and cleaning 

heat-exchanger coils). Because RS 

Means does not provide maintenance 

costs for water-source heat pumps, DOE 

used annualized maintenance costs for 

air-source heat pumps, the closest 

related equipment category, derived 

from RS Means data.33 80 FR 1171, 

1203–1204 (Jan. 8, 2015). DOE does not 

expect the maintenance costs for watersource heat pumps to differ significantly 

from those for air-source heat pumps. 

These data provided estimates of 

person-hours, labor rates, and materials 

required to maintain commercial airsource heat pumps. The estimated 

annualized maintenance cost, in 2014 

dollars, is $334 for a heat pump rated up 

to 60,000 btu/h and $404 for a heat 

pump rated greater than 60,000 btu/h. 

DOE applied the former cost to watersource heat pumps less than 17,000 Btu/ 

h and heat pumps greater than or equal 

to 17,000 and less than 65,000 Btu/h. 

DOE applied the latter cost to watersource heat pumps greater than or equal 

to 65,000 Btu/h and less than 135,000 

Btu/h. DOE requested comment on how 

maintenance costs for water-source heat 

pumps might be expected to differ from 

that for air-source heat pumps. DOE did 

not receive any comments, and as such 

has retained the same approach in the 

final rule. 

6. Repair Costs 

Repair costs are costs to the 

commercial consumer associated with 

repairing or replacing components that 

have failed. As with maintenance costs, 

RS Means does not provide repair costs 

for water-source heat pumps. Therefore, 

DOE assumed the repair costs for watersource heat pumps would be similar to 

air-source units and utilized RS Means34

to find the repair costs for air-source 

heat pumps. 80 FR 1171, 1204 (Jan. 8, 

2015). DOE does not expect the repair 

costs for water-source heat pumps to 

differ significantly from those for airsource heat pumps. DOE took the repair 

costs for 1.5-ton, 5-ton, and 10-ton air to 

air heat pumps and linearly scaled the 

repair costs to derive repair costs for 1- 

ton, 3-ton, and 7.5-ton equipment. DOE 

assumed that the repair would be a onetime event in year 10 of the equipment 

life. DOE then annualized the present 

value of the cost over the average 

equipment life (see next section) to 

obtain an annualized equivalent repair 

cost. This value, in 2014 dollars, ranged 

from $93 to $240 for the ASHRAE 

baseline, depending on equipment class. 

The materials portion of the repair cost 

was scaled with the percentage increase 

in manufacturers’ production cost by 

efficiency level. The labor cost was held 

constant across efficiency levels. This 

annualized repair cost was then added 

to the maintenance cost to create an 

annual ‘‘maintenance and repair cost’’ 

for the lifetime of the equipment. In the 

January 2015 NOPR, DOE requested 

comment on how repair costs for watersource heat pumps might be expected to 

differ from that for air-source heat 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42637 

35Although the expected compliance date for 

adoption of the efficiency levels in ASHRAE 

Standard 90.1–2013 is October 9, 2015, DOE began 

its analysis period in 2016 to avoid ascribing 

savings to the three-quarters of 2015 prior to the 

compliance date. 

pumps. 80 FR 1171, 1204 (Jan. 8, 2015). 

DOE did not receive comment and as 

such, retained the same approach for the 

final rule. For further discussion of how 

DOE derived and implemented repair 

costs, see chapter 8 of the final rule 

TSD. 

7. Equipment Lifetime 

Equipment lifetime is the age at 

which the subject water-source heat 

pumps are retired from service. In the 

January 2015 NOPR, DOE based 

equipment lifetime on a retirement 

function in the form of a Weibull 

probability distribution, with a mean of 

19 years. 80 FR 1171, 1204 (Jan. 8, 

2015). Because a function specific to 

water-source heat pumps was not 

available, DOE used the function for aircooled air conditioners presented in the 

2011 DFR (EERE–2011–BT–STD–0011– 

0012), as it is for similar equipment and 

represented the desired mean lifetime of 

19 years. In the NOPR, DOE requested 

data and information that would help it 

develop a retirement function specific to 

water-source heat pumps. DOE did not 

receive any comments, and as such 

retained the same Weibull distribution 

in the final rule. 

8. Discount Rate 

The discount rate is the rate at which 

future expenditures are discounted to 

estimate their present value. The cost of 

capital commonly is 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 the cost of capital is the 

weighted-average cost of capital 

(WACC) to the firm of equity and debt 

financing. DOE uses the capital asset 

pricing model (CAPM) to calculate the 

equity capital component, and financial 

data sources to calculate the cost of debt 

financing. 

DOE derived the discount rates by 

estimating the cost of capital of 

companies that purchase water-source 

heat pump equipment. More details 

regarding DOE’s estimates of 

commercial consumer discount rates are 

provided in chapter 6 of the final rule 

TSD. 

9. Base-Case Market Efficiency 

Distribution 

For the LCC analysis, DOE analyzes 

the considered efficiency levels relative 

to a base case (i.e., the case without 

amended energy efficiency standards, in 

this case the default scenario in which 

DOE is statutorily required to adopt the 

efficiency levels in ASHRAE 90.1– 

2013). This analysis requires an estimate 

of the distribution of equipment 

efficiencies in the base case (i.e., what 

consumers would have purchased in the 

compliance year in the absence of 

amended standards more stringent than 

those in ASHRAE 90.1–2013). DOE 

refers to this distribution of equipment 

energy efficiencies as the base-case 

efficiency distribution. For more 

information on the development of the 

base-case distribution, see section VI.F.3 

and chapter 6 of the final rule TSD. 

10. Compliance Date 

DOE calculated the LCC and PBP for 

all commercial consumers as if each 

were to purchase new equipment in the 

year that compliance with amended 

standards is required. Generally, 

covered equipment to which a new or 

amended energy conservation standard 

applies must comply with the standard 

if such equipment is manufactured or 

imported on or after a specified date. In 

this final rule, DOE has evaluated 

whether more-stringent efficiency levels 

than those in ASHRAE Standard 90.1– 

2013 would be technologically feasible, 

economically justified, and result in a 

significant additional amount of energy 

savings and has declined to implement 

more stringent efficiency levels. EPCA 

states that compliance with any such 

standards shall be required on or after 

a date which is two or three years 

(depending on equipment size) after the 

compliance date of the applicable 

minimum energy efficiency requirement 

in the amended ASHRAE/IES standard. 

(42 U.S.C. 6313(a)(6)(D)) Given the 

equipment size at issue here, DOE has 

applied the two-year implementation 

period to water-source heat pumps 

manufactured on or after October 9, 

2015, which is two years after the 

publication date of ASHRAE Standard 

90.1–2013. 

Economic justification is not required 

for DOE to adopt the efficiency levels in 

ASHRAE 90.1–2013, as DOE is 

statutorily required to, at a minimum, 

adopt those levels. Therefore, DOE did 

not perform an LCC analysis on the 

ASHRAE Standard 90.1–2013 levels, 

and, for purposes of the LCC analysis, 

DOE used 2020 as the first year of 

compliance with amended standards. 

11. Payback Period Inputs 

The payback period is the amount of 

time it takes the commercial consumer 

to recover the additional installed cost 

of more-efficient equipment, compared 

to baseline equipment, through energy 

cost savings. Payback periods are 

expressed in years. Payback periods that 

exceed the life of the equipment mean 

that the increased total installed cost is 

not recovered in reduced operating 

expenses. 

Similar to the LCC, the inputs to the 

PBP calculation are the total installed 

cost of the equipment to the commercial 

consumer for each efficiency level and 

the average annual operating 

expenditures for each efficiency level 

for each building type and Census 

Division, weighted by the probability of 

shipment to each market. The PBP 

calculation uses the same inputs as the 

LCC analysis, except that discount rates 

are not needed. Because the simple PBP 

does not take into account changes in 

operating expenses over time or the time 

value of money, DOE considered only 

the first year’s operating expenses to 

calculate the PBP, unlike the LCC, 

which is calculated over the lifetime of 

the equipment. Chapter 6 of the final 

rule TSD provides additional detail 

about the PBP. 

F. National Impact Analysis—National 

Energy Savings and Net Present Value 

Analysis 

The NIA evaluates the effects of a 

considered energy conservation 

standard from a national perspective 

rather than from the consumer 

perspective represented by the LCC. 

This analysis assesses the NPV (future 

amounts discounted to the present) and 

the NES of total commercial consumer 

costs and savings, which are expected to 

result from amended standards at 

specific efficiency levels. For each 

efficiency level analyzed, DOE 

calculated the NPV and NES for 

adopting more-stringent standards than 

the efficiency levels specified in 

ASHRAE Standard 90.1–2013. 

The NES refers to cumulative energy 

savings from 2016 through 2045; 35

however, when evaluating morestringent standards, energy savings do 

not begin accruing until the later 

compliance date of 2020. DOE 

calculated new energy savings in each 

year relative to a base case, defined as 

DOE adoption of the efficiency levels 

specified by ASHRAE Standard 90.1– 

2013. DOE also calculated energy 

savings from adopting efficiency levels 

specified by ASHRAE Standard 90.1– 

2013 compared to the EPCA base case 

(i.e., the current Federal standards). 

The NPV refers to cumulative 

monetary savings. DOE calculated net 

monetary savings in each year relative 

to the base case (ASHRAE Standard 

90.1–2013) as the difference between 

total operating cost savings and 

increases in total installed cost. 

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42638 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

36U.S. Census Bureau, Current Industrial Reports 

for Refrigeration, Air Conditioning, and Warm Air 

Heating Equipment, MA333M. Note that the current 

industrial reports were discontinued in 2010, so 

more recent data are not available (Available at: 

http://www.census.gov/manufacturing/cir/

historical_data/ma333m/index.html). 

Cumulative savings are the sum of the 

annual NPV over the specified period. 

DOE accounted for operating cost 

savings until past 2100, when the 

equipment installed in the thirtieth year 

after the compliance date of the 

amended standards should be retired. 

1. Approach 

The NES and NPV are a function of 

the total number of units and their 

efficiencies. Both the NES and NPV 

depend on annual shipments and 

equipment lifetime. Both calculations 

start by using the shipments estimate 

and the quantity of units in service 

derived from the shipments model. DOE 

used the same approach to determine 

NES and NPV for water-source heat 

pumps which was used for small 

commercial air-cooled air-conditioning 

and heating equipment, as described in 

section V.F.1. In this case, the analysis 

period runs from 2016 through 2045. 

In the January 2015 NOPR, DOE 

considered whether a rebound effect is 

applicable in its NES analysis, a concept 

explained in detail in section V.F. 1. 80 

FR 1171, 1205 (Jan. 8, 2015). DOE did 

not expect commercial consumers with 

water-source heat pump equipment to 

increase their use of the equipment, 

either in a previously cooled space or 

another previously uncooled space. 

Water-source heat pumps are part of 

engineered water-loop systems designed 

for specific applications. It is highly 

unlikely that the operation or 

installation of these systems would be 

changed simply as a result of energy 

cost savings. Therefore, DOE did not 

assume a rebound effect in the NOPR 

analysis. DOE sought input from 

interested parties on whether there will 

be a rebound effect for improvements in 

the efficiency of water-source heat 

pumps, but did not receive any 

comment. As a result, DOE retained its 

assumptions in this final rule. 

2. Shipments Analysis 

Equipment shipments are an 

important element in the estimate of the 

future impact of a potential energy 

conservation standard. DOE developed 

shipment projections for water-source 

heat pumps and, in turn, calculated 

equipment stock over the course of the 

analysis period by assuming a Weibull 

distribution with an average 19-year 

equipment life. (See section V.E.7 for 

more information on equipment 

lifetime.) DOE used the shipments 

projection and the equipment stock to 

determine the NES. The shipments 

portion of the spreadsheet model 

projects water-source heat pump 

shipments through 2045. 

DOE based its shipments analysis for 

water-source heat pumps on data from 

the U.S. Census. The U.S. Census 

published historical (1980, 1983–1994, 

1997–2006, and 2008–2010) watersource heat pump shipment data.36

Table VI.4 exhibits the shipment data 

provided for a selection of years. DOE 

analyzed data from the years 1990–2010 

to establish a trend from which to 

project shipments beyond 2010. DOE 

used a linear trend. Because the Census 

data do not distinguish between 

equipment capacities, DOE used the 

shipments data by equipment class 

provided by AHRI in 1999, and 

published in the 2000 Screening 

Analysis for EPACT-Covered 

Commercial HVAC and Water-Heating 

Equipment (EERE–2006–STD–0098– 

0015), to distribute the total watersource heat pump shipments to 

individual equipment classes. Table 

VI.5 exhibits the shipment data 

provided for 1999. DOE assumed that 

this distribution of shipments across the 

various equipment classes remained 

constant and has used this same 

distribution in its projection of future 

shipments of water-source heat pumps. 

The complete historical data set and the 

projected shipments for each equipment 

class can be found in the chapter 7 of 

the final rule TSD. 

TABLE VI.4—TOTAL SHIPMENTS OF

WATER-SOURCE HEAT PUMPS

[Census product code: 333415E181] 

1989 1999 2009 

Total ............ 157,080 120,545 180,101 

TABLE VI.5—TOTAL SHIPMENTS OF

WATER-SOURCE HEAT PUMPS (AHRI) 

Equipment class 1999 Percent 

WSHP <17000 Btu/h .... 41,000 31 

WSHP 17000–65000 

Btu/h .......................... 86,000 65 

WSHP 65000–135000 

Btu/h .......................... 5,000 4 

Table VI.6 shows the projected 

shipments for the different equipment 

classes of water-source heat pumps for 

selected years from 2016 to 2045, as 

well as the cumulative shipments. 

TABLE VI.6—SHIPMENTS PROJECTION FOR WATER-SOURCE HEAT PUMPS

Equipment 

Units shipped by year and equipment class 

2016 2020 2025 2030 2035 2040 2045 

Cumulative 

shipments 

(2016–2045) 

WSHP <17000 Btu/h ................................................................... 62,934 68,072 74,495 80,918 87,341 93,764 100,187 2,446,810 

WSHP 17000–65000 Btu/h ......................................................... 132,007 142,785 156,258 169,731 183,203 196,676 210,148 5,132,334 

WSHP 65000–135000 Btu/h ....................................................... 7,675 8,301 9,085 9,868 10,651 11,435 12,218 7,579,144 

Total ..................................................................................... 202,616 219,159 239,838 260,517 281,195 301,874 322,553 7,877,536 

As equipment purchase price and 

repair costs increase with efficiency, 

DOE recognizes that higher first costs 

and repair costs can result in a drop in 

shipments. However, in the January 

2015 NOPR, DOE had no basis for 

estimating the elasticity of shipments 

for water-source heat pumps as a 

function of first costs, repair costs, or 

operating costs. 80 FR 1171, 1206 (Jan. 

8, 2015). In addition, because watersource heat pumps are often installed 

for their higher efficiency as compared 

to air-cooled equipment, DOE had 

tentatively concluded in the January 

2015 NOPR that it was unlikely that 

shipments would change as a result of 

higher first costs and repair costs. 

Therefore, DOE presumed that the 

shipments projection would not change 

with higher standard levels. DOE sought 

input on this assumption in the January 

2015 NOPR. Id. As noted in section 

V.F.2, in response, Lennox International 

commented that they with increased 

costs they expected a drop in shipments 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42639 

37See DOE’s technical support document 

underlying DOE’s July 29, 2004 ANOPR. 69 FR 

45460 (Available at: www.regulations.gov/

#!documentDetail;D=EERE-2006-STD-0103-0078). 

38The NES spreadsheet can be found in the 

docket for the ASHRAE rulemaking at: 

www.regulations.gov/#!docketDetail;D=EERE-2014- 

BT-STD-0015. 

and an increase in repairs. (Lennox 

International, No. 36 at p. 2–3) 

DOE acknowledges Lennox’s 

concerns. However, DOE does not have 

data available to estimate the price 

elasticity for this equipment. Given that 

even without a drop in shipments, none 

of the efficiency levels in the January 

2015 NOPR were determined to be 

economically justified, DOE has not 

revised its shipments estimates for this 

final rule. Chapter 7 of the final rule 

TSD provides additional details on the 

shipments forecasts. 

3. Base-Case and Standards-Case 

Forecasted Distribution of Efficiencies 

DOE estimated base-case efficiency 

distributions based on model 

availability in the AHRI certified 

directory. In the January 2015 NOPR, 

DOE also estimated a base-case 

efficiency trend of an increase of 

approximately 1 EER every 35 years, 

based on the trend from 2012 to 2035 

found in the Commercial Unitary Air 

Conditioner Advance Notice of 

Proposed Rulemaking (ANOPR).37 80 

FR 1171, 1207 (Jan. 8, 2015). DOE used 

this same trend in the standards-case 

scenarios. DOE requested comment on 

its estimated efficiency trends, but did 

not receive any. As a result, DOE used 

the same trend for this final rule. 

For each efficiency level analyzed, 

DOE used a ‘‘roll-up’’ scenario to 

establish the market shares by efficiency 

level for the first full year that 

compliance would be required with 

amended standards (i.e., 2016 for 

adoption of efficiency levels in 

ASHRAE Standard 90.1–2013 or 2020 if 

DOE adopts more-stringent efficiency 

levels than those in ASHRAE Standard 

90.1–2013). Table VI.7 presents the 

estimated base-case efficiency market 

shares for each water-source heat pump 

equipment class. 

TABLE VI.7—BASE-CASE EFFICIENCY MARKET SHARES IN 2020 FOR WATER-SOURCE HEAT PUMPS

Water-source (water-to-air, water-loop) 

heat pumps 

<17,000 Btu/h 

Water-source (water-to-air, water-loop) heat 

pumps 

≥17,000 and <65,000 Btu/h 

Water-source (water-to-air, water-loop) heat 

pumps 

≥65,000 and <135,000 Btu/h 

EER Market share 

(percent) EER Market share (percent) EER Market share (percent) 

11.2 ............. 0.0 12.0 0.0 12.0 0.0 

12.2 ............. 0.7 13.0 7.6 13.0 0.0 

13.0 ............. 49.7 14.6 55.1 14.0 29.8 

14.0 ............. 22.0 16.6 25.0 15.0 48.5 

15.7 ............. 20.5 18.0 8.9 16.0 20.1 

16.5 ............. 4.9 19.2 2.5 17.0 1.7 

18.1 ............. 2.3 21.6 1.0 ...................................... ......................................

Note: The 0% market share at the first listed EER level is accounting for the default adoption of ASHRAE Standard 90.1–2013 levels in 2016. 

4. National Energy Savings and Net 

Present Value 

The stock of water-source heat pump 

equipment is the total number of units 

in each equipment class purchased or 

shipped from previous years that have 

survived until a given point in time. The 

NES spreadsheet,38 through use of the 

shipments model, keeps track of the 

total number of units shipped each year. 

For purposes of the NES and NPV 

analyses, DOE assumes that shipments 

of water-source heat pump units survive 

for an average of 19 years, following a 

Weibull distribution, at the end of 

which time they are removed from 

service. 

The national annual energy 

consumption is the product of the 

annual unit energy consumption and 

the number of units of each vintage in 

the stock, summed over all vintages. 

This approach accounts for differences 

in unit energy consumption from year to 

year. In determining national annual 

energy consumption, DOE estimated 

energy consumption and savings based 

on site energy and converted the 

electricity consumption and savings to 

primary energy using annual conversion 

factors derived from the AEO 2014 

version of NEMS. Cumulative energy 

savings are the sum of the NES for each 

year over the timeframe of the analysis. 

In response to the recommendations 

of a committee on ‘‘Point-of-Use and 

Full-Fuel-Cycle Measurement 

Approaches to Energy Efficiency 

Standards’’ appointed by the National 

Academy of 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 

(Aug. 18, 2011). After evaluating the 

approaches discussed in the August 18, 

2011 notice, DOE published a statement 

of amended policy in the Federal 

Register in which DOE explained its 

determination that NEMS is the most 

appropriate tool for its FFC analysis and 

its intention to use NEMS for that 

purpose. 77 FR 49701 (Aug. 17, 2012). 

The approach used for this final rule is 

described in Appendix 8A of the final 

rule TSD. 

Table VI.8 summarizes the inputs to 

the NES spreadsheet model along with 

a brief description of the data sources. 

The results of DOE’s NES and NPV 

analysis are summarized in section 

VIII.B.2.b and described in detail in 

chapter 7 of the final rule TSD. 

TABLE VI.8—SUMMARY OF WATER-SOURCE HEAT PUMP NES AND NPV MODEL INPUTS

Inputs Description 

Shipments ....................................... Annual shipments based on U.S. Census data. (See chapter 7 of the final rule TSD.) 

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42640 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

39See http://www.epa.gov/climateleadership/

inventory/ghg-emissions.html. 40See North Carolina v. EPA, 550 F.3d 1176 (D.C. 

Cir. 2008); North Carolina v. EPA, 531 F.3d 896 

(D.C. Cir. 2008). 41See EME Homer City Generation, LP v. EPA, 

696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted, 81 

U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 

(U.S. June 24, 2013) (No. 12–1182). 

42On April 29, 2014, the U.S. Supreme Court 

reversed the judgment of the D.C. Circuit and 

remanded the case for further proceedings 

consistent with the Supreme Court’s opinion. The 

Supreme Court held in part that EPA’s methodology 

for quantifying emissions that must be eliminated 

in certain states due to their impacts in other 

downwind states was based on a permissible, 

workable, and equitable interpretation of the Clean 

Air Act provision that provides statutory authority 

for CSAPR. See EPA v. EME Homer City Generation, 

No 12–1182, slip op. at 32 (U.S. April 29, 2014). On 

October 23, 2014, the D.C. Circuit lifted the stay of 

CSAPR. Pursuant to this action, CSAPR will go into 

effect (and the Clean Air Interstate Rule will sunset) 

as of January 1, 2015. However, because DOE used 

emissions factors based on AEO 2014 for this final 

rule, the analysis assumes that CAIR, not CSAPR, 

is the regulation in force. The difference between 

CAIR and CSAPR is not relevant for the purpose of 

DOE’s analysis of SO2 emissions. 

TABLE VI.8—SUMMARY OF WATER-SOURCE HEAT PUMP NES AND NPV MODEL INPUTS—Continued 

Inputs Description 

Compliance Date of Standard ........ 2020 for adoption of a more-stringent efficiency level than those specified by ASHRAE Standard 90.1– 

2013. 

2016 for adoption of the efficiency levels specified by ASHRAE Standard 90.1–2013. 

Base-Case Efficiencies ................... Distribution of base-case shipments by efficiency level, with efficiency trend of an increase of 1 EER every 

35 years. 

Standards-Case Efficiencies ........... Distribution of shipments by efficiency level for each standards case. In compliance year, units below the 

standard level ‘‘roll-up’’ to meet the standard. Efficiency trend of an increase of 1 EER every 35 years. 

Annual Energy Use per Unit ........... Annual national weighted-average values are a function of efficiency level. (See chapter 4 of the final rule 

TSD.) 

Total Installed Cost per Unit ........... Annual weighted-average values are a function of efficiency level. (See chapter 5 of the final rule TSD.) 

Annualized Maintenance and Repair Costs per Unit.Annual weighted-average values are a function of efficiency level. (See chapter 5 of the final rule TSD.) 

Escalation of Fuel Prices ................ AEO2014 forecasts (to 2040) and extrapolation for beyond 2040. (See chapter 8 of the final rule TSD.) 

Site to Primary and FFC Conversion.Based on AEO2014 forecasts (to 2040) and extrapolation for beyond 2040. (See chapter 8 of the final rule 

TSD.) 

Discount Rate ................................. 3 percent and 7 percent real. 

Present Year ................................... Future costs are discounted to 2015. 

VII. Methodology for Emissions 

Analysis and Monetizing Carbon 

Dioxide and Other Emissions Impacts 

A. Emissions Analysis 

In the emissions analysis, DOE 

estimates the reduction in power sector 

emissions of carbon dioxide (CO2), 

nitrogen oxides (NOX), sulfur dioxide 

(SO2), and mercury (Hg) from potential 

amended energy conservation standards 

for the ASHRAE equipment that is the 

subject of this document. In addition, 

DOE estimates emissions impacts in 

production activities (extracting, 

processing, and transporting fuels) that 

provide the energy inputs to power 

plants. These are referred to as 

‘‘upstream’’ emissions. Together, these 

emissions account for the full-fuel cycle 

(FFC). In accordance with DOE’s FFC 

Statement of Policy (76 FR 51281 (Aug. 

18, 2011) as amended at 77 FR 49701 

(August 17, 2012)), the FFC analysis 

also includes impacts on emissions of 

methane (CH4) and nitrous oxide (N2O), 

both of which are recognized as 

greenhouse gases. The combustion 

emissions factors and the method DOE 

used to derive upstream emissions 

factors are described in chapter 9 of the 

final rule TSD. The cumulative 

emissions reduction estimated for the 

subject ASHRAE equipment is 

presented in section VIII.C. 

DOE primarily conducted the 

emissions analysis using emissions 

factors for CO2 and most of the other 

gases derived from data in AEO 2014. 

Combustion emissions of CH4 and N2O 

were estimated using emissions 

intensity factors published by the U.S. 

Environmental Protection Agency (EPA) 

in its Greenhouse Gas (GHG) Emissions 

Factors Hub.39 DOE developed separate 

emissions factors for power sector 

emissions and upstream emissions. The 

method that DOE used to derive 

emissions factors is described in chapter 

9 of the final rule TSD. 

EIA prepares the AEO using NEMS. 

Each annual version of NEMS 

incorporates the projected impacts of 

existing air quality regulations on 

emissions. AEO 2014 generally 

represents current legislation and 

environmental regulations, including 

recent government actions, for which 

implementing regulations were 

available as of October 31, 2013. 

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 28 eastern States 

and DC were also limited under the 

Clean Air Interstate Rule (CAIR). 70 FR 

25162 (May 12, 2005). CAIR, which 

created an allowance-based trading 

program that operates along with the 

Title IV program, was remanded to the 

EPA by the U.S. Court of Appeals for the 

District of Columbia Circuit, but it 

remained in effect.40 In 2011, EPA 

issued a replacement for CAIR, the 

Cross-State Air Pollution Rule (CSAPR). 

76 FR 48208 (Aug. 8, 2011). On August 

21, 2012, the D.C. Circuit issued a 

decision to vacate CSAPR.41 The court 

ordered EPA to continue administering 

CAIR. The emissions factors used for 

this final rule, which are based on AEO 

2014, assume that CAIR remains a 

binding regulation through 2040.42

The attainment of emissions caps is 

typically flexible among EGUs and is 

enforced through the use of emissions 

allowances and tradable permits. 

Beginning in 2016, however, SO2

emissions will decline significantly as a 

result of the Mercury and Air Toxics 

Standards (MATS) for power plants. 

77 FR 9304 (Feb. 16, 2012). In the final 

MATS rule, EPA established a standard 

for hydrogen chloride as a surrogate for 

acid gas hazardous air pollutants (HAP), 

and also established a standard for SO2

(a non-HAP acid gas) as an alternative 

equivalent surrogate standard for acid 

gas HAP. The same controls are used to 

reduce HAP and non-HAP acid gas; 

thus, SO2 emissions will be reduced as 

a result of the control technologies 

installed on coal-fired power plants to 

comply with the MATS requirements 

for acid gas. AEO 2014 assumes that, in 

order to continue operating, coal plants 

must have either flue gas 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42641 

43CSAPR also applies to NOX, and it would 

supersede the regulation of NOX under CAIR. As 

stated previously, the current analysis assumes that 

CAIR, not CSAPR, is the regulation in force. The 

difference between CAIR and CSAPR with regard to 

DOE’s analysis of NOX is slight. 

44National Research Council, Hidden Costs of 

Energy: Unpriced Consequences of Energy 

Production and Use, National Academies Press: 

Washington, DC (2009). 

desulfurization or dry sorbent injection 

systems installed by 2016. Both 

technologies are used to reduce acid gas 

emissions, and also reduce SO2

emissions. Under the MATS, emissions 

will be far below the cap established by 

CAIR, so it is unlikely that excess SO2

emissions allowances resulting from the 

lower electricity demand would be 

needed or used to permit offsetting 

increases in SO2 emissions by any 

regulated EGU. Therefore, DOE believes 

that energy efficiency standards will 

reduce SO2 emissions in 2016 and 

beyond. 

CAIR established a cap on NOX

emissions in 28 eastern States and the 

District of Columbia.43 Energy 

conservation standards are expected to 

have little effect on NOX emissions in 

those States covered by CAIR, because 

excess NOX emissions allowances 

resulting from the lower electricity 

demand could be used to permit 

offsetting increases in NOX emissions. 

However, standards would be expected 

to reduce NOX emissions in the States 

not affected by the caps, so DOE 

estimated NOX emissions reductions 

from the standards considered in this 

final rule for these States. 

The MATS limit mercury emissions 

from power plants, but they do not 

include emissions caps. DOE estimated 

mercury emissions using emissions 

factors based on AEO 2014, which 

incorporates the MATS. 

B. Monetizing Carbon Dioxide and 

Other Emissions Impacts 

As part of the development of this 

final rule, DOE considered the estimated 

monetary benefits from the reduced 

emissions of CO2 and NOX that are 

expected to result from each of the 

efficiency levels considered. In order to 

make this calculation analogous to the 

calculation of the NPV of consumer 

benefit, DOE considered the reduced 

emissions expected to result over the 

lifetime of equipment shipped in the 

forecast period for each efficiency level. 

This section summarizes the basis for 

the monetary values used for each of 

these emissions and presents the values 

considered in this final rule. 

For this final rule, DOE relied on a set 

of values for the social cost of carbon 

(SCC) that was developed by a Federal 

interagency process. The basis for these 

values is summarized in the next 

section, and a more detailed description 

of the methodologies used is provided 

as an appendix to chapter 10 of the final 

rule TSD. 

1. Social Cost of Carbon 

The SCC is an estimate of the 

monetized damages associated with an 

incremental increase in carbon 

emissions in a given year. It is intended 

to include (but is not limited to) changes 

in net agricultural productivity, human 

health, property damages from 

increased flood risk, and the value of 

ecosystem services. Estimates of the 

SCC are provided in dollars per metric 

ton of CO2. A domestic SCC value is 

meant to reflect the value of damages in 

the United States resulting from a unit 

change in CO2 emissions, while a global 

SCC value is meant to reflect the value 

of damages worldwide. 

Under section 1(b) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

agencies must, to the extent permitted 

by law, ‘‘assess both the costs and the 

benefits of the intended regulation and, 

recognizing that some costs and benefits 

are difficult to quantify, propose or 

adopt a regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs.’’ 

The purpose of the SCC estimates 

presented here is to allow agencies to 

incorporate the monetized social 

benefits of reducing CO2 emissions into 

cost-benefit analyses of regulatory 

actions. The estimates are presented 

with an acknowledgement of the many 

uncertainties involved and with a clear 

understanding that they should be 

updated over time to reflect increasing 

knowledge of the science and 

economics of climate impacts. 

As part of the interagency process that 

developed these SCC estimates, 

technical experts from numerous 

agencies met on a regular basis to 

consider public comments, explore the 

technical literature in relevant fields, 

and discuss key model inputs and 

assumptions. The main objective of this 

process was to develop a range of SCC 

values using a defensible set of input 

assumptions grounded in the existing 

scientific and economic literatures. In 

this way, key uncertainties and model 

differences transparently and 

consistently inform the range of SCC 

estimates used in the rulemaking 

process. 

a. Monetizing Carbon Dioxide Emissions 

When attempting to assess the 

incremental economic impacts of CO2

emissions, the analyst faces a number of 

challenges. A report from the National 

Research Council 44 points out that any 

assessment will suffer from uncertainty, 

speculation, and lack of information 

about: (1) future emissions of GHGs; (2) 

the effects of past and future emissions 

on the climate system; (3) the impact of 

changes in climate on the physical and 

biological environment; and (4) the 

translation of these environmental 

impacts into economic damages. As a 

result, any effort to quantify and 

monetize the harms associated with 

climate change will raise questions of 

science, economics, and ethics and 

should be viewed as provisional. 

Despite the limits of both 

quantification and monetization, SCC 

estimates can be useful in estimating the 

social benefits of reducing CO2

emissions. The agency can estimate the 

benefits from reduced (or costs from 

increased) emissions in any future year 

by multiplying the change in emissions 

in that year by the SCC values 

appropriate for that year. The NPV of 

the benefits can then be calculated by 

multiplying each of these future benefits 

by an appropriate discount factor and 

summing across all affected years. 

It is important to emphasize that the 

interagency process is committed to 

updating these estimates as the science 

and economic understanding of climate 

change and its impacts on society 

improves over time. In the meantime, 

the interagency group will continue to 

explore the issues raised by this analysis 

and consider public comments as part of 

the ongoing interagency process. 

b. Development of Social Cost of Carbon 

Values 

In 2009, an interagency process was 

initiated to offer a preliminary 

assessment of how best to quantify the 

benefits from reducing carbon dioxide 

emissions. To ensure consistency in 

how benefits are evaluated across 

Federal agencies, the Administration 

sought to develop a transparent and 

defensible method, specifically 

designed for the rulemaking process, to 

quantify avoided climate change 

damages from reduced CO2 emissions. 

The interagency group did not 

undertake any original analysis. Instead, 

it combined SCC estimates from the 

existing literature to use as interim 

values until a more comprehensive 

analysis could be conducted. The 

outcome of the preliminary assessment 

by the interagency group was a set of 

five interim values: Global SCC 

estimates for 2007 (in 2006$) of $55, 

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42642 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

45 It is recognized that this calculation for 

domestic values is approximate, provisional, and 

highly speculative. There is no a priori reason why 

domestic benefits should be a constant fraction of 

net global damages over time. 

46Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866, Interagency 

Working Group on Social Cost of Carbon, United 

States Government (February 2010) (Available at: 

www.whitehouse.gov/sites/default/files/omb/

inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf). 

47Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866, Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

$33, $19, $10, and $5 per metric ton of 

CO2. These interim values represented 

the first sustained interagency effort 

within the U.S. government to develop 

an SCC for use in regulatory analysis. 

The results of this preliminary effort 

were presented in several proposed and 

final rules. 

c. Current Approach and Key 

Assumptions 

After the release of the interim values, 

the interagency group reconvened on a 

regular basis to generate improved SCC 

estimates. Specifically, the group 

considered public comments and 

further explored the technical literature 

in relevant fields. The interagency group 

relied on three integrated assessment 

models commonly used to estimate the 

SCC: The FUND, DICE, and PAGE 

models. These models are frequently 

cited in the peer-reviewed literature and 

were used in the last assessment of the 

Intergovernmental Panel on Climate 

Change (IPCC). Each model was given 

equal weight in the SCC values that 

were developed. 

Each model takes a slightly different 

approach to model how changes in 

emissions result in changes in economic 

damages. A key objective of the 

interagency process was to enable a 

consistent exploration of the three 

models, while respecting the different 

approaches to quantifying damages 

taken by the key modelers in the field. 

An extensive review of the literature 

was conducted to select three sets of 

input parameters for these models: 

Climate sensitivity, socio-economic and 

emissions trajectories, and discount 

rates. A probability distribution for 

climate sensitivity was specified as an 

input into all three models. In addition, 

the interagency group used a range of 

scenarios for the socio-economic 

parameters and a range of values for the 

discount rate. All other model features 

were left unchanged, relying on the 

model developers’ best estimates and 

judgments. 

In 2010, the interagency group 

selected four sets of SCC values for use 

in regulatory analyses. Three sets of 

values are based on the average SCC 

from the three integrated assessment 

models, at discount rates of 2.5, 3, and 

5 percent. The fourth set, which 

represents the 95th percentile SCC 

estimate across all three models at a 3- 

percent discount rate, was included to 

represent higher-than-expected impacts 

from climate change further out in the 

tails of the SCC distribution. The values 

grow in real terms over time. 

Additionally, the interagency group 

determined that a range of values from 

7 percent to 23 percent should be used 

to adjust the global SCC to calculate 

domestic effects,45 although preference 

is given to consideration of the global 

benefits of reducing CO2 emissions. 

Table VII.1 presents the values in the 

2010 interagency group report,46 which 

is reproduced in appendix 10A of the 

final rule TSD. 

TABLE VII.1—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 

[2007$ per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th percentile 

2010 ................................................................................................................. 4.7 21.4 35.1 64.9 

2015 ................................................................................................................. 5.7 23.8 38.4 72.8 

2020 ................................................................................................................. 6.8 26.3 41.7 80.7 

2025 ................................................................................................................. 8.2 29.6 45.9 90.4 

2030 ................................................................................................................. 9.7 32.8 50.0 100.0 

2035 ................................................................................................................. 11.2 36.0 54.2 109.7 

2040 ................................................................................................................. 12.7 39.2 58.4 119.3 

2045 ................................................................................................................. 14.2 42.1 61.7 127.8 

2050 ................................................................................................................. 15.7 44.9 65.0 136.2 

The SCC values used for this 

document were generated using the 

most recent versions of the three 

integrated assessment models that have 

been published in the peer-reviewed 

literature.47

Table VII.2 shows the updated sets of 

SCC estimates from the 2013 

interagency update in 5-year increments 

from 2010 to 2050. The full set of 

annual SCC estimates between 2010 and 

2050 is reported in appendix 10B of the 

final rule TSD. The central value that 

emerges is the average SCC across 

models at the 3-percent discount rate. 

However, for purposes of capturing the 

uncertainties involved in regulatory 

impact analysis, the interagency group 

emphasizes the importance of including 

all four sets of SCC values. 

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48U.S. Office of Management and Budget, Office 

of Information and Regulatory Affairs, 2006 Report 

to Congress on the Costs and Benefits of Federal 

Regulations and Unfunded Mandates on State, 

Local, and Tribal Entities (2006) (Available at: 

www.whitehouse.gov/sites/default/files/omb/assets/

omb/inforeg/2006_cb/2006_cb_final_report.pdf). 

TABLE VII.2—ANNUAL SCC VALUES FROM 2013 INTERAGENCY REPORT, 2010–2050 

[2007$ per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th percentile 

2010 ................................................................................................................. 11 32 51 89 

2015 ................................................................................................................. 11 37 57 109 

2020 ................................................................................................................. 12 43 64 128 

2025 ................................................................................................................. 14 47 69 143 

2030 ................................................................................................................. 16 52 75 159 

2035 ................................................................................................................. 19 56 80 175 

2040 ................................................................................................................. 21 61 86 191 

2045 ................................................................................................................. 24 66 92 206 

2050 ................................................................................................................. 26 71 97 220 

It is important to recognize that a 

number of key uncertainties remain, and 

that current SCC estimates should be 

treated as provisional and revisable 

because they will evolve with improved 

scientific and economic understanding. 

The interagency group also recognizes 

that the existing models are imperfect 

and incomplete. The 2009 National 

Research Council report mentioned 

previously points out that there is 

tension between the goal of producing 

quantified estimates of the economic 

damages from an incremental ton of 

carbon and the limits of existing efforts 

to model these effects. There are a 

number of analytical challenges that are 

being addressed by the research 

community, including research 

programs housed in many of the Federal 

agencies participating in the interagency 

process to estimate the SCC. The 

interagency group intends to 

periodically review and reconsider 

those estimates to reflect increasing 

knowledge of the science and 

economics of climate impacts, as well as 

improvements in modeling. 

In summary, in considering the 

potential global benefits resulting from 

reduced CO2 emissions, DOE used the 

values from the 2013 interagency report 

adjusted to 2014$ using the implicit 

price deflator for gross domestic product 

(GDP) from the Bureau of Economic 

Analysis. For each of the four sets of 

SCC cases specified, the values for 

emissions in 2015 were $12.2, $41.2, 

$63.4, and $121 per metric ton avoided 

(values expressed in 2014$). DOE 

derived values after 2050 using the 

relevant growth rates for the 2040–2050 

period in the interagency update. 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SCC value for that year in each of the 

four cases. To calculate a present value 

of the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that was used to obtain the SCC 

values in each case. 

In response to the NOPR, the 

Associations stated that DOE should not 

use SCC values to establish monetary 

figures for emissions reductions until 

the SCC undergoes a more rigorous 

notice, review, and comment process. 

(The Associations, No. 37 at p. 4) In 

conducting the interagency process that 

developed the SCC values, technical 

experts from numerous agencies met on 

a regular basis to consider public 

comments, explore the technical 

literature in relevant fields, and discuss 

key model inputs and assumptions. Key 

uncertainties and model differences 

transparently and consistently inform 

the range of SCC estimates. These 

uncertainties and model differences are 

discussed in the interagency working 

group’s reports, which are reproduced 

in appendix 10A and 10B of the final 

rule TSD, as are the major assumptions. 

The 2010 SCC values have been used in 

a number of Federal rulemakings in 

which the public had opportunity to 

comment. In November 2013, the OMB 

announced a new opportunity for public 

comment on the TSD underlying the 

revised SCC estimates. See 78 FR 70586 

(Nov. 26, 2013). OMB is currently 

reviewing comments and considering 

whether further revisions to the 2013 

SCC estimates are warranted. DOE 

stands ready to work with OMB and the 

other members of the interagency 

working group on further review and 

revision of the SCC estimates as 

appropriate. 

2. Valuation of Other Emissions 

Reductions 

As noted previously, DOE has taken 

into account how considered energy 

conservation standards would reduce 

site NOX emissions nationwide and 

increase power sector NOX emissions in 

those 22 States not affected by the CAIR. 

DOE estimated the monetized value of 

net NOX emissions reductions resulting 

from each of the efficiency levels 

considered for this final rule based on 

estimates found in the relevant 

scientific literature. Estimates of 

monetary value for reducing NOX from 

stationary sources range from $484 to 

$4,971 per ton in 2014$.48 DOE 

calculated monetary benefits using a 

medium value for NOX emissions of 

$2,727 per short ton (in 2014$) and real 

discount rates of 3 percent and 7 

percent. 

DOE is evaluating appropriate 

monetization of avoided SO2 and Hg 

emissions in energy conservation 

standards rulemakings. DOE has not 

included monetization of those 

emissions in the current analysis. 

VIII. Analytical Results and 

Conclusions 

A. Efficiency Levels Analyzed 

1. Small Commercial Air-Cooled Air 

Conditioners and Heat Pumps Less 

Than 65,000 Btu/h 

The methodology for small 

commercial air-cooled air conditioners 

and heat pumps less than 65,000 Btu/h 

was presented in section V of this this 

final rule. Table VIII.1 presents the 

market baseline efficiency level and the 

higher efficiency levels analyzed for 

each equipment class of small 

commercial air-cooled air conditioners 

and heat pumps less than 65,000 Btu/h 

subject to this rule. The EPCA baseline 

efficiency levels correspond to the 

lowest efficiency levels currently 

available on the market. The efficiency 

levels above the baseline represent 

efficiency levels specified by ASHRAE 

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Standard 90.1–2013 and efficiency 

levels more stringent than those 

specified in ASHRAE Standard 90.1– 

2013 where equipment is currently 

available on the market. Note that for 

the energy savings and economic 

analysis, efficiency levels above those 

specified in ASHRAE Standard 90.1– 

2013 are compared to ASHRAE 

Standard 90.1–2013 as the baseline 

rather than the EPCA baseline (i.e., the 

current Federal standards). For splitsystem air conditioners, for which 

ASHRAE 90.1–2013 did not change the 

efficiency level, all efficiency levels are 

compared to the Federal or EPCA 

baseline. 

TABLE VIII.1—EFFICIENCY LEVELS ANALYZED FOR SMALL COMMERCIAL AIR-COOLED AIR CONDITIONERS AND HEAT

PUMPS <65,000 BTU/H

Small three-phase 

air-cooled splitsystem air conditioners <65,000 

Btu/h 

Small three-phase 

air-cooled singlepackage air conditioners <65,000 

Btu/h 

Small three-phase 

air-cooled splitsystem heat 

pumps <65,000 

Btu/h 

Small three-phase 

air-cooled singlepackage heat 

pumps <65,000 

Btu/h 

Efficiency Level (SEER/HSPF) 

Baseline—Federal Standard .................................................... 13 13 13/7.7 13/7.7 

ASHRAE Level (0) ................................................................... * 14 14 14/8.2 14/8.0 

Efficiency Level 1 ..................................................................... 15 15 15/8.5 15/8.4 

Efficiency Level 2 ..................................................................... 16 16 16/8.7 16/8.8 

Efficiency Level 3 ..................................................................... 17 17 17/9.0 17/8.9 

Efficiency Level 4 ** ................................................................. 18 18 18.0/9.2 18.0/9.1 

Efficiency Level 5 *** ................................................................ 19 19 .............................. ..............................

* For split system air conditioners, the ASHRAE level is 13.0 SEER. DOE analyzed the 14.0 SEER level as a level more stringent than 

ASHRAE, but designated it as efficiency level 0 for consistency in SEER level across equipment classes. 

** Efficiency Level 4 is ‘‘Max-Tech’’ for HP equipment classes. 

*** Efficiency Level 5 is ‘‘Max-Tech’’ for AC equipment classes. 

2. Water-Source Heat Pumps 

The methodology for water-source 

heat pumps was presented in section VI 

of this final rule. Table VIII.2 presents 

the baseline efficiency level and the 

more-stringent efficiency levels 

analyzed for each equipment class of 

water-source heat pumps subject to this 

rule. The baseline efficiency levels 

correspond to the lowest efficiency 

levels currently available on the market. 

The efficiency levels above the baseline 

represent efficiency levels specified in 

ASHRAE Standard 90.1–2013 and morestringent efficiency levels where 

equipment is currently available on the 

market. 

TABLE VIII.2—EFFICIENCY LEVELS ANALYZED FOR WATER-SOURCE HEAT PUMPS

Water-source 

(water-to-air, 

water-loop) heat 

pumps <17,000 

Btu/h 

Water-source 

(water-to-air, 

water-loop) heat 

pumps ≥17,000 

and <65,000 Btu/h 

Water-source 

(water-to-air, 

water-loop) heat 

pumps ≥65,000 

and <135,000 Btu/

h 

Efficiency Level (EER/COP) 

Baseline—Federal Standard ...................................................................................... 11.2/4.2 12.0/4.2 12.0/4.2 

ASHRAE Level (0) ..................................................................................................... 12.2/4.3 13.0/4.3 13.0/4.3 

Efficiency Level 1 ....................................................................................................... 13.0/4.6 14.6/4.8 14.0/4.7 

Efficiency Level 2 ....................................................................................................... 14.0/4.8 16.6/5.3 15.0/4.8 

Efficiency Level 3 ....................................................................................................... 15.7/5.1 18.0/5.6 16.0/5.0 

Efficiency Level 4 * ..................................................................................................... 16.5/5.3 19.2/5.9 17.2/5.1 

Efficiency Level 5 ** ................................................................................................... 18.1/5.6 21.6/6.5 ..............................

* Efficiency Level 4 is ‘‘Max-Tech’’ for the largest equipment class. 

** Efficiency Level 5 is ‘‘Max-Tech’’ for the two smaller equipment classes. 

3. Commercial Oil-Fired Storage Water 

Heaters 

Table VIII.3 presents the baseline 

efficiency level and the more-stringent 

efficiency levels analyzed for the class 

of oil-fired storage water heaters subject 

to this rule. The baseline efficiency 

levels correspond to the lowest 

efficiency levels currently available on 

the market. The efficiency levels above 

the baseline represent efficiency levels 

specified in ASHRAE Standard 90.1– 

2013 and more-stringent efficiency 

levels where equipment is currently 

available on the market. 

TABLE VIII.3—EFFICIENCY LEVELS

ANALYZED FOR COMMERCIAL OILFIRED STORAGE WATER-HEATING

EQUIPMENT

Oil-fired storage 

water-heating 

equipment 

(>105,000 Btu/h 

and <4,000 Btu/

h/gal) (%) 

Efficiency Level (Et) 

Baseline—Federal Standard ................................. 78 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42645 

49An LCC cost is shown as a negative savings in 

the results presented. 

TABLE VIII.3—EFFICIENCY LEVELS

ANALYZED FOR COMMERCIAL OILFIRED STORAGE WATER-HEATING

EQUIPMENT—Continued 

Oil-fired storage 

water-heating 

equipment 

(>105,000 Btu/h 

and <4,000 Btu/

h/gal) (%) 

ASHRAE Level (0) ............ 80 

Efficiency Level 1 ............. 81 

Efficiency Level 2—‘‘MaxTech’’ – ......................... 82 

B. Energy Savings and Economic 

Justification 

1. Small Commercial Air-Cooled Air 

Conditioners and Heat Pumps Less 

Than 65,000 Btu/h 

a. Economic Impacts on Commercial 

Customers 

1. Life-Cycle Cost and Payback Period 

To evaluate the net economic impact 

of potential amended energy 

conservation standards on commercial 

consumers of small commercial aircooled air conditioners and heat pumps, 

DOE conducted LCC and PBP analyses 

for each efficiency level. In general, 

higher-efficiency equipment would 

affect commercial consumers in two 

ways: (1) Purchase price would 

increase, and (2) annual operating costs 

would decrease. Inputs used for 

calculating the LCC and PBP include 

total installed costs (i.e., equipment 

price plus installation costs), and 

operating costs (i.e., annual energy 

usage, energy prices, energy price 

trends, repair costs, and maintenance 

costs). The LCC calculation also uses 

equipment lifetime and a discount rate. 

The output of the LCC model is a 

mean LCC savings (or cost 49) for each 

equipment class, relative to the baseline 

small commercial air-cooled air 

conditioner and heat pump efficiency 

level. The LCC analysis also provides 

information on the percentage of 

commercial consumers that are 

negatively affected by an increase in the 

minimum efficiency standard. 

DOE also performed a PBP analysis as 

part of the LCC analysis. The PBP is the 

number of years it would take for the 

commercial consumer to recover the 

increased costs of higher-efficiency 

equipment as a result of energy savings 

based on the operating cost savings. The 

PBP is an economic benefit-cost 

measure that uses benefits and costs 

without discounting. Chapter 6 of the 

final rule TSD provides detailed 

information on the LCC and PBP 

analyses. 

DOE’s LCC and PBP analyses 

provided five key outputs for each 

efficiency level above the baseline (i.e., 

efficiency levels above the current 

Federal standard for split-system air 

conditioners or efficiency levels more 

stringent than those in ASHRAE 

Standard 90.1–2013 for the three 

triggered equipment classes), as 

reported in Table VIII.4 through Table 

VIII.11 below. These outputs include 

the proportion of small commercial aircooled air conditioner and heat pump 

purchases in which the purchase of 

such a unit that is compliant with the 

amended energy conservation standard 

creates a net LCC increase, no impact, 

or a net LCC savings for the commercial 

consumer. Another output is the average 

net LCC savings from standardcompliant equipment, as well as the 

average PBP for the consumer 

investment in standard-compliant 

equipment. 

Chapter 6 of the final rule TSD 

provides detailed information on the 

LCC and PBP analyses. 

Table VIII.4 through Table VIII.11 

show the LCC and PBP results for all 

efficiency levels considered for each 

class of small commercial air-cooled air 

conditioner and heat pump in this final 

rule. In the first of each pair of tables, 

the simple payback is measured relative 

to the baseline equipment (i.e., 

equipment at the current Federal 

standards for split-system air 

conditioners or equipment with the 

efficiency levels required in ASHRAE 

Standard 90.1–2013 for the three 

triggered equipment classes). In the 

second tables, the LCC savings are 

measured relative to the base-case 

efficiency distribution in the 

compliance year (i.e., the range of 

equipment expected to be on the market 

in the absence of amended standards for 

split-system air conditioners or the 

default case where DOE adopts the 

efficiency levels in ASHRAE Standard 

90.1–2013 for the three triggered 

equipment classes). 

TABLE VIII.4—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL THREE-PHASE AIR-COOLED SPLITSYSTEM AIR CONDITIONERS <65,000 Btu/h 

Efficiency level 

Average costs 2014$ Simple 

payback 

years 

Average 

lifetime 

Installed cost years First year’s operating cost 

Lifetime operating cost LCC 

Baseline ................................................... $3,901 $776 $7,532 $11,433 N/A 19 

0 ............................................................... 4,150 773 7,497 11,647 68 19 

1 ............................................................... 4,401 766 7,433 11,834 49 19 

2 ............................................................... 4,670 760 7,373 12,043 47 19 

3 ............................................................... 4,927 763 7,409 12,335 80 19 

4 ............................................................... 5,194 768 7,449 12,643 148 19 

5 ............................................................... 5,474 774 7,507 12,981 560 19 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The 

PBP is measured relative to the baseline equipment. 

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TABLE VIII.5—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SPLIT-SYSTEM AIR

CONDITIONERS <65,000 BTU/H

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

0 ........................ 26 ($56) 

1 ........................ 75 (198) 

2 ........................ 97 (402) 

3 ........................ 100 (695) 

TABLE VIII.5—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SPLIT-SYSTEM AIR

CONDITIONERS <65,000 BTU/H— 

Continued 

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

4 ........................ 100 (1,002) 

TABLE VIII.5—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SPLIT-SYSTEM AIR

CONDITIONERS <65,000 BTU/H— 

Continued 

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

5 ........................ 100 (1,341) 

* The calculation includes households with 

zero LCC savings (no impact). 

TABLE VIII.6—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL THREE-PHASE AIR-COOLED SINGLEPACKAGE AIR CONDITIONERS <65,000 BTU/H

Efficiency level 

Average costs 2014$ Simple 

payback 

years 

Average 

lifetime 

Installed cost years First year’s operating cost 

Lifetime operating cost LCC 

ASHRAE Baseline ................................... $4,781 $772 $7,516 $12,297 N/A 19 

1 ............................................................... 5,090 758 7,381 12,471 22 19 

2 ............................................................... 5,400 753 7,329 12,729 32 19 

3 ............................................................... 5,702 757 7,368 13,070 61 19 

4 ............................................................... 6,007 761 7,407 13,414 110 19 

5 ............................................................... 6,375 766 7,457 13,833 270 19 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The 

PBP is measured relative to the baseline equipment. 

TABLE VIII.7—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SINGLE-PACKAGE AIR

CONDITIONERS <65,000 BTU/H

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

1 ........................ 49 ($89) 

2 ........................ 81 (299) 

3 ........................ 89 (602) 

4 ........................ 93 (922) 

TABLE VIII.7—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SINGLE-PACKAGE AIR

CONDITIONERS <65,000 BTU/H— 

Continued 

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

5 ........................ 100 (1,340) 

* The calculation includes households with 

zero LCC savings (no impact). 

TABLE VIII.8—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL THREE-PHASE AIR-COOLED SPLITSYSTEM HEAT PUMPS <65,000 BTU/H

Efficiency level 

Average costs 2014$ Simple 

payback 

years 

Average 

lifetime 

Installed cost years First year’s operating cost 

Lifetime operating cost LCC 

ASHRAE Baseline ................................... $4,513 $796 $7,070 $11,584 N/A 16 

1 ............................................................... 4,774 783 6,957 11,731 20 16 

2 ............................................................... 5,118 777 6,906 12,024 33 16 

3 ............................................................... 5,401 778 6,911 12,312 49 16 

4 ............................................................... 5,694 778 6,918 12,612 69 16 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The 

PBP is measured relative to the baseline equipment. 

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TABLE VIII.9—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SPLIT-SYSTEM HEAT

PUMPS <65,000 BTU/H

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

1 ........................ 75 ($118) 

2 ........................ 99 (410) 

3 ........................ 100 (697) 

TABLE VIII.9—LCC SAVINGS RELATIVE

TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL THREE-PHASE

AIR-COOLED SPLIT-SYSTEM HEAT

PUMPS <65,000 BTU/H—Continued 

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

4 ........................ 100 (997) 

* The calculation includes households with 

zero LCC savings (no impact). 

TABLE VIII.10—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR SMALL THREE-PHASE AIR-COOLED SINGLEPACKAGE HEAT PUMPS <65,000 BTU/H

Efficiency level 

Average costs 2014$ Simple 

payback 

years 

Average 

lifetime 

Installed cost years First year’s operating cost 

Lifetime operating cost LCC 

ASHRAE Baseline ................................... $5,155 $797 $7,084 $12,239 N/A 16 

1 ............................................................... 5,499 784 6,969 12,468 27 16 

2 ............................................................... 5,830 777 6,909 12,739 34 16 

3 ............................................................... 6,161 778 6,916 13,077 53 16 

4 ............................................................... 6,550 779 6,923 13,473 77 16 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. The 

PBP is measured relative to the baseline equipment. 

TABLE VIII.11—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR SMALL

THREE-PHASE AIR-COOLED SINGLEPACKAGE HEAT PUMPS <65,000 

BTU/H

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

1 ........................ 68 ($158) 

2 ........................ 90 (402) 

3 ........................ 99 (735) 

4 ........................ 99 (1,128) 

* The calculation includes households with 

zero LCC savings (no impact). 

b. National Impact Analysis 

1. Amount and Significance of Energy 

Savings 

To estimate the lifetime energy 

savings for equipment shipped through 

2046 (or 2048) due to amended energy 

conservation standards, DOE compared 

the energy consumption of small 

commercial air-cooled air conditioners 

and heat pumps less than 65,000 Btu/h 

under the ASHRAE Standard 90.1–2013 

efficiency levels (or current Federal 

levels for split-system air conditioners) 

to energy consumption of the same 

small commercial air-cooled air 

conditioners and heat pumps under 

more-stringent efficiency standards. For 

the three equipment classes triggered by 

ASHRAE, DOE also compared the 

energy consumption of those small 

commercial air-cooled air conditioners 

and heat pumps under the ASHRAE 

Standard 90.1–2013 efficiency levels to 

energy consumption of small 

commercial air-cooled air conditioners 

and heat pumps under the current EPCA 

base case (i.e., under current Federal 

standards). DOE examined up to five 

efficiency levels higher than those of 

ASHRAE Standard 90.1–2013. Table 

VIII.12 through Table VIII.15 show the 

projected national energy savings at 

each of the considered standard levels. 

(See chapter 8 of the final rule TSD.) 

TABLE VIII.12—POTENTIAL ENERGY SAVINGS FOR SMALL THREE-PHASE AIR-COOLED SPLIT-SYSTEM AIR CONDITIONERS

<65,000 BTU/H

Efficiency level 

Primary energy savings 

estimate 

(quads) 

FFC Energy 

savings 

estimate 

(quads) 

Level 0–14 SEER .................................................................................................................................................... 0.02 0.02 

Level 1–15 SEER .................................................................................................................................................... 0.08 0.08 

Level 2–16 SEER .................................................................................................................................................... 0.13 0.14 

Level 3–17 SEER .................................................................................................................................................... 0.16 0.17 

Level 4–18 SEER .................................................................................................................................................... 0.18 0.19 

Level 5–‘‘Max-Tech’’–19 SEER ............................................................................................................................... 0.19 0.20 

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TABLE VIII.13—POTENTIAL ENERGY SAVINGS FOR SMALL THREE-PHASE AIR-COOLED SINGLE-PACKAGE AIR

CONDITIONERS <65,000 BTU/H

Efficiency level 

Primary energy savings 

estimate*

(quads) 

FFC Energy 

savings 

estimate*

(quads) 

Level 0–ASHRAE–14 SEER ................................................................................................................................... 0.04 0.04 

Level 1–15 SEER .................................................................................................................................................... 0.05 0.06 

Level 2–16 SEER .................................................................................................................................................... 0.11 0.12 

Level 3–17 SEER .................................................................................................................................................... 0.15 0.15 

Level 4–18 SEER .................................................................................................................................................... 0.18 0.18 

Level 5–‘‘Max-Tech’’–19 SEER ............................................................................................................................... 0.19 0.20 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

TABLE VIII.14—POTENTIAL ENERGY SAVINGS FOR SMALL THREE-PHASE AIR-COOLED SPLIT-SYSTEM HEAT PUMPS

<65,000 BTU/H

Efficiency level 

Primary energy savings 

estimate*

(quads) 

FFC Energy 

savings 

estimate*

(quads) 

Level 0–ASHRAE–14 SEER ................................................................................................................................... 0.01 0.01 

Level 1–15 SEER .................................................................................................................................................... 0.01 0.01 

Level 2–16 SEER .................................................................................................................................................... 0.02 0.02 

Level 3–17 SEER .................................................................................................................................................... 0.03 0.03 

Level 4–‘‘Max-Tech’’–18 SEER ............................................................................................................................... 0.03 0.03 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

TABLE VIII.15—POTENTIAL ENERGY SAVINGS FOR SMALL THREE-PHASE AIR-COOLED SINGLE-PACKAGE HEAT PUMPS

<65,000 BTU/H

Efficiency level 

Primary energy savings 

estimate*

(quads) 

FFC Energy 

savings 

estimate*

(quads) 

Level 0–ASHRAE–14 SEER ................................................................................................................................... 0.01 0.01 

Level 1–15 SEER .................................................................................................................................................... 0.01 0.01 

Level 2–16 SEER .................................................................................................................................................... 0.02 0.02 

Level 3–17 SEER .................................................................................................................................................... 0.03 0.03 

Level 4–‘‘Max-Tech’’–18 SEER ............................................................................................................................... 0.04 0.04 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

2. Net Present Value of Customer Costs 

and Benefits 

The NPV analysis is a measure of the 

cumulative commercial consumer 

benefit or cost of standards to the 

Nation. In accordance with OMB’s 

guidelines on regulatory analysis (OMB 

Circular A–4, section E (Sept. 17, 2003)), 

DOE calculated NPV using both a 7- 

percent and a 3-percent real discount 

rate. Table VIII.16 and Table VIII.17 

provide an overview of the NPV results. 

(See chapter 8 of the final rule TSD for 

further detail.) 

TABLE VIII.16—SUMMARY OF CUMULATIVE NET PRESENT VALUE FOR SMALL THREE-PHASE AIR-COOLED AIR

CONDITIONERS AND HEAT PUMPS <65,000 BTU/H

(Discounted at Seven Percent) 

Equipment class Efficiency level 

0 

Efficiency level 

1 

Efficiency level 

2 

Efficiency level 

3 

Efficiency level 

4 

Efficiency level 

5 

Net Present Value (Billion 2014$) 

Three-Phase Air-Cooled Split-System Air 

Conditioners <65,000 Btu/h ................. (0.05) (0.18) (0.38) (0.66) (0.95) (1.17) 

Three-Phase Air-Cooled Single-Package 

Air Conditioners <65,000 Btu/h ............ N/A* (0.14) (0.43) (0.82) (1.25) (1.63) 

Three-Phase Air-Cooled Split-System 

Heat Pumps <65,000 Btu/h .................. N/A* (0.03) (0.09) (0.15) (0.19) N/A**

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TABLE VIII.16—SUMMARY OF CUMULATIVE NET PRESENT VALUE FOR SMALL THREE-PHASE AIR-COOLED AIR

CONDITIONERS AND HEAT PUMPS <65,000 BTU/H—Continued 

(Discounted at Seven Percent) 

Equipment class Efficiency level 

0 

Efficiency level 

1 

Efficiency level 

2 

Efficiency level 

3 

Efficiency level 

4 

Efficiency level 

5 

Three-Phase Air-Cooled Single-Package 

Heat Pumps <65,000 Btu/h .................. N/A*

 (0.04) (0.11) (0.20) (0.28) N/A**

Notes: Numbers in parentheses indicate negative NPV. 

The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the 

efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

* Economic analysis was not conducted for the ASHRAE levels (EL 0). 

** The max-tech level for this equipment class is EL 4. 

TABLE VIII.17—SUMMARY OF CUMULATIVE NET PRESENT VALUE FOR SMALL THREE-PHASE AIR-COOLED AIR

CONDITIONERS AND HEAT PUMPS <65,000 BTU/H (DISCOUNTED AT THREE PERCENT) 

Equipment class Efficiency level 

0 

Efficiency level 

1 

Efficiency level 

2 

Efficiency level 

3 

Efficiency level 

4 

Efficiency level 

5 

Net Present Value (Billion 2014$) 

Three-Phase Air-Cooled Split-System Air 

Conditioners <65,000 Btu/h ................. (0.07) (0.27) (0.64) (1.15) (1.71) (2.09) 

Three-Phase Air-Cooled Single-Package 

Air Conditioners <65,000 Btu/h ............ N/A* (0.21) (0.74) (1.47) (2.30) (2.96) 

Three-Phase Air-Cooled Split-System 

Heat Pumps <65,000 Btu/h .................. N/A* (0.05) (0.15) (0.26) (0.33) N/A**

Three-Phase Air-Cooled Single-Package 

Heat Pumps <65,000 Btu/h .................. N/A* (0.07) (0.19) (0.35) (0.48) N/A**

Notes: Numbers in parentheses indicate negative NPV. The net present value for efficiency levels more stringent than those specified by 

ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were 

adopted. 

* Economic analysis was not conducted for the ASHRAE levels (EL 0). 

** The max-tech level for this equipment class is EL 4. 

2. Water-Source Heat Pumps 

a. Economic Impacts on Commercial 

Customers 

1. Life-Cycle Cost and Payback Period 

Table VIII.18 through Table VIII.23 

show the LCC and PBP results for all 

efficiency levels considered for each 

class of water-source heat pump in this 

final rule. In the first of each pair of 

tables, the simple payback is measured 

relative to the baseline equipment (i.e., 

equipment with the efficiency level 

specified in ASHRAE Standard 90.1– 

2013). In the second tables, the LCC 

savings are measured relative to the 

base-case efficiency distribution in the 

compliance year (i.e., the range of 

equipment expected to be on the market 

in the default case where DOE adopts 

the efficiency levels in ASHRAE 

Standard 90.1–2013). 

TABLE VIII.18—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR WATER-SOURCE HEAT PUMPS (WATER-TOAIR, WATER-LOOP) <17,000 BTU/H

Efficiency level 

Average costs 2014$ Simple 

payback 

years 

Average 

lifetime 

Installed cost years First year’s operating cost 

Lifetime operating cost LCC 

ASHRAE Baseline ................................... $3,216 $654 $7,692 $10,908 — 19 

1 ............................................................... 3,354 645 7,578 10,932 14 19 

2 ............................................................... 3,530 638 7,492 11,022 19 19 

3 ............................................................... 3,822 628 7,377 11,199 23 19 

4 ............................................................... 3,958 624 7,334 11,292 25 19 

5 ............................................................... 4,233 618 7,263 11,496 28 19 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. 

The PBP is measured relative to the baseline equipment. 

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TABLE VIII.19—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR WATERSOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS <17,000 BTU//H

Efficiency level 

Life-cycle cost savings 

% of customers 

that experience 

Average 

savings* 

Net cost 2014$ 

1 ........................ 0 ($0) 

2 ........................ 46 (46) 

3 ........................ 68 (175) 

4 ........................ 89 (262) 

TABLE VIII.19—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR WATERSOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS <17,000 BTU//

H—Continued 

Efficiency level 

Life-cycle cost savings 

% of customers 

that experience 

Average 

savings* 

Net cost 2014$ 

5 ........................ 95 (462) 

* The calculation includes households with 

zero LCC savings (no impact). 

TABLE VIII.20—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR WATER-SOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥17,000 BTU/H AND <65,000 BTU/H

Efficiency level 

Average costs 

2014$ Simple 

payback 

years 

Average 

lifetime 

years Installed cost First year’s operating cost Lifetime operating cost LCC 

ASHRAE Baseline ................................... $4,882 $1,118 $13,169 $18,052 — 19 

1 ............................................................... 5,162 1,075 12,655 17,817 6.4 19 

2 ............................................................... 5,513 1,039 12,232 17,745 8.0 19 

3 ............................................................... 5,758 1,023 12,041 17,799 9.2 19 

4 ............................................................... 5,968 1,013 11,930 17,898 10 19 

5 ............................................................... 6,392 997 11,732 18,124 12 19 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. 

The PBP is measured relative to the baseline equipment. 

TABLE VIII.21—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR WATERSOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥17,000 BTU/H

AND <65,000 BTU/H

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

1 ........................ 2 19 

2 ........................ 29 64 

3 ........................ 52 17 

TABLE VIII.21—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR WATERSOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥17,000 BTU/H

AND <65,000 BTU/H—Continued 

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

4 ........................ 66 (78) 

TABLE VIII.21—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR WATERSOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥17,000 BTU/H

AND <65,000 BTU/H—Continued 

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings* 

Net cost 2014$ 

5 ........................ 76 (303) 

* The calculation includes households with 

zero LCC savings (no impact). 

TABLE VIII.22—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR WATER-SOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥65,000 BTU/H AND <135,000 BTU/H

Efficiency level 

Average costs 

2014$ Simple 

payback 

years 

Average 

lifetime 

years Installed cost First year’s operating cost Lifetime operating cost LCC 

ASHRAE Baseline ................................... $12,005 $2,202 $25,958 $37,963 — 19 

1 ............................................................... 12,961 2,126 25,065 38,026 13 19 

2 ............................................................... 13,919 2,087 24,599 38,518 17 19 

3 ............................................................... 14,830 2,054 24,213 39,042 19 19 

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TABLE VIII.22—AVERAGE LCC AND PBP RESULTS BY EFFICIENCY LEVEL FOR WATER-SOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥65,000 BTU/H AND <135,000 BTU/H—Continued 

Efficiency level 

Average costs 

2014$ Simple 

payback 

years 

Average 

lifetime 

years Installed cost First year’s operating cost Lifetime operating cost LCC 

4 ............................................................... 15,977 2,022 23,834 39,811 22 19 

Note: The results for each efficiency level are calculated assuming that all commercial consumers use equipment with that efficiency level. 

The PBP is measured relative to the baseline equipment. 

TABLE VIII.23—LCC SAVINGS RELATIVE TO THE BASE-CASE EFFICIENCY DISTRIBUTION FOR WATERSOURCE (WATER-TO-AIR, WATERLOOP) HEAT PUMPS ≥65,000 BTU/H

AND <135,000 BTU/H

Efficiency level 

Life-cycle cost savings 

% of customers that 

experience 

Average 

savings * 

Net cost 2014$ 

1 ........................ ** 0 ** $0 

2 ........................ 27 (148) 

3 ........................ 72 (560) 

4 ........................ 93 (1,315) 

* The calculation includes households with 

zero LCC savings (no impact). 

** The base-case efficiency distribution has 

0-percent market share at the ASHRAE baseline; therefore, there are no savings for EL1. 

b. National Impact Analysis 

1. Amount and Significance of Energy 

Savings 

To estimate the lifetime energy 

savings for equipment shipped through 

2045 due to amended energy 

conservation standards, DOE compared 

the energy consumption of commercial 

water-source heat pumps under the 

ASHRAE Standard 90.1–2013 efficiency 

levels to energy consumption of the 

same water-source heat pumps under 

more-stringent efficiency standards. 

DOE also compared the energy 

consumption of those commercial 

water-source heat pumps under the 

ASHRAE Standard 90.1–2013 efficiency 

levels to energy consumption of 

commercial water-source heat pumps 

under the current EPCA base case (i.e., 

under current Federal standards). DOE 

examined up to five efficiency levels 

higher than those of ASHRAE Standard 

90.1–2013. Table VIII.24 through Table 

VIII.26 show the projected national 

energy savings at each of the considered 

standard levels. (See chapter 8 of the 

final rule TSD.) 

TABLE VIII.24—POTENTIAL ENERGY SAVINGS FOR WATER-SOURCE (WATER-TO-AIR, WATER-LOOP) HEAT PUMPS

<17,000 BTU/H

Efficiency level 

Primary energy 

savings estimate * 

(quads) 

FFC Energy savings estimate * 

(quads) 

Level 0—ASHRAE—12.2 EER ** ............................................................................................................ ................................ ................................

Level 1—13.0 EER .................................................................................................................................. 0.0002 0.0002 

Level 2—14.0 EER .................................................................................................................................. 0.02 0.02 

Level 3—15.7 EER .................................................................................................................................. 0.06 0.06 

Level 4—16.5 EER .................................................................................................................................. 0.08 0.08 

Level 5—‘‘Max-Tech’’—18.1 EER ........................................................................................................... 0.11 0.11 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

** The base-case efficiency distribution has 0-percent market share at the Federal baseline; therefore, there are no savings for the ASHRAE 

level. 

TABLE VIII.25—POTENTIAL ENERGY SAVINGS FOR WATER-SOURCE (WATER-TO-AIR, WATER-LOOP) HEAT PUMPS ≥17,000 

AND <65,000 BTU/H

Efficiency level 

Primary energy 

savings estimate * 

(quads) 

FFC Energy savings estimate * 

(quads) 

Level 0—ASHRAE—13.0 EER ** ............................................................................................................ ................................ ................................

Level 1—14.6 EER .................................................................................................................................. 0.02 0.03 

Level 2—16.6 EER .................................................................................................................................. 0.26 0.27 

Level 3—18.0 EER .................................................................................................................................. 0.45 0.47 

Level 4—19.2 EER .................................................................................................................................. 0.60 0.63 

Level 5—‘‘Max-Tech’’—21.6 EER ........................................................................................................... 0.83 0.87 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

** The base-case efficiency distribution has 0-percent market share at the Federal baseline; therefore, there are no savings for the ASHRAE 

level. 

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42652 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

TABLE VIII.26—POTENTIAL ENERGY SAVINGS FOR WATER-SOURCE (WATER-TO-AIR, WATER-LOOP) HEAT PUMPS ≥65,000 

AND <135,000 BTU/H

Efficiency level 

Primary energy 

savings estimate * 

(quads) 

FFC Energy savings estimate * 

(quads) 

Level 0—ASHRAE—13.0 EER ** ............................................................................................................ ................................ ................................

Level 1—14.0 EER ** ............................................................................................................................... ................................ ................................

Level 2—15.0 EER .................................................................................................................................. 0.01 0.01 

Level 3—16.0 EER .................................................................................................................................. 0.03 0.03 

Level 4—‘‘Max-Tech’’—17.2 EER ........................................................................................................... 0.05 0.05 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

** The base-case efficiency distribution has 0-percent market share at the Federal baseline and the ASHRAE baseline; therefore, there are no 

savings for the ASHRAE level or EL1. 

2. Net Present Value of Customer Costs 

and Benefits 

Table VIII.27 and Table VIII.28 

provide an overview of the NPV results. 

(See chapter 8 of the final rule TSD for 

further detail.) 

TABLE VIII.27—SUMMARY OF CUMULATIVE NET PRESENT VALUE FOR WATER-SOURCE (WATER-TO-AIR, WATER-LOOP) 

HEAT PUMPS (DISCOUNTED AT SEVEN PERCENT) 

Equipment class 

Net present value (billion 2014$) 

Efficiency level 

1 

Efficiency level 

2 

Efficiency level 

3 

Efficiency level 

4 

Efficiency level 

5 

Water-Source (Water-to-Air, Water-Loop) HP <17,000 Btu/

h ........................................................................................ (0.00) (0.04) (0.14) (0.21) (0.33) 

Water-Source (Water-to-Air, Water-Loop) HP ≥17,000 to 

<65,000 Btu/h ................................................................... 0.01 0.00 (0.11) (0.27) (0.59) 

Water-Source (Water-to-Air, Water-Loop) HP ≥65,000 to 

135,000 Btu/h ................................................................... (*) (0.01) (0.06) (0.11) N/A ** 

Notes: Numbers in parentheses indicate negative NPV. 

The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the 

efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. Economic analysis was not conducted for the 

ASHRAE levels (EL 0). 

* The base-case efficiency distribution has 0-percent market share at the ASHRAE baseline; therefore, there are no savings for EL1. 

** The max-tech level for this equipment class is EL 4. 

TABLE VIII.28—SUMMARY OF CUMULATIVE NET PRESENT VALUE FOR WATER-SOURCE (WATER-TO-AIR, WATER-LOOP) 

HEAT PUMPS (DISCOUNTED AT THREE PERCENT) 

Equipment class 

Net present value (billion 2014$) 

Efficiency level 

1 

Efficiency level 

2 

Efficiency level 

3 

Efficiency level 

4 

Efficiency level 

5 

Water-Source (Water-to-Air, Water-Loop) HP <17,000 Btu/

h ........................................................................................ (0.00) (0.05) (0.20) (0.30) (0.49) 

Water-Source (Water-to-Air, Water-Loop) HP ≥17,000 to 

<65,000 Btu/h ................................................................... 0.03 0.26 0.21 0.03 (0.37) 

Water-Source (Water-to-Air, Water-Loop) HP ≥65,000 to 

135,000 Btu/h ................................................................... (*) (0.02) (0.08) (0.15) ** N/A 

Notes: Numbers in parentheses indicate negative NPV. 

The net present value for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the 

efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. Economic analysis was not conducted for the 

ASHRAE levels (EL 0). 

* The base-case efficiency distribution has 0-percent market share at the ASHRAE baseline; therefore, there are no savings for EL1. 

** The max-tech level for this equipment class is EL 4. 

3. Commercial Oil-Fired Storage Water 

Heaters 

DOE estimated the potential primary 

energy savings in quads (i.e., 1015 Btu) 

for each efficiency level considered 

within each equipment class analyzed. 

Table VIII.29 shows the potential energy 

savings resulting from the analyses 

conducted as part of the April 2014 

NODA. 79 FR 20114, 20136 (April 11, 

2014). 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42653 

50Because DOE did not conduct additional 

analysis for oil-fired storage water heaters, estimates 

of environmental benefits for amended standards 

for that equipment type are not shown here. 

TABLE VIII.29—POTENTIAL ENERGY SAVINGS ESTIMATES FOR COMMERCIAL OIL-FIRED STORAGE WATER HEATERS

>105,000 BTU/H AND <4,000 BTU/H/GAL

Efficiency level 

Primary energy 

savings estimate * 

(Quads) 

FFC Energy 

savings estimate * 

(Quads) 

Level 0—ASHRAE—80% Et .................................................................................................................... 0.002 0.002

Level 1—81% Et ...................................................................................................................................... 0.001 0.001 

Level 2—‘‘Max-Tech’’—82% Et ............................................................................................................... 0.002 0.002 

* The potential energy savings for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

DOE did not conduct an economic 

analysis for this oil-fired storage water 

heater equipment category because of 

the minimal energy savings. 

C. Need of the Nation To Conserve 

Energy 

An improvement in the energy 

efficiency of the equipment subject to 

this rule, where economically justified, 

is likely to improve the security of the 

nation’s energy system by reducing 

overall demand for energy, to strengthen 

the economy, and to reduce the 

environmental impacts or costs of 

energy production. Reduced electricity 

demand may also improve the reliability 

of the electricity system, particularly 

during peak-load periods. Reductions in 

national electric generating capacity 

estimated for each efficiency level 

considered in this rulemaking, 

throughout the same analysis period as 

the NIA, are reported in chapter 11 of 

the final rule TSD. 

Energy savings from amended 

standards for the small air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h, water-source heat pumps, 

and oil-fired storage water heaters 

covered in this final rule could also 

produce environmental benefits in the 

form of reduced emissions of air 

pollutants and greenhouse gases. 

Table VIII.30 and Table VIII.31 

provide DOE’s estimate of cumulative 

emissions reductions projected to result 

from the efficiency levels analyzed in 

this rulemaking.50 The tables include 

both power sector emissions and 

upstream emissions. The upstream 

emissions were calculated using the 

multipliers discussed in section VII.A. 

DOE reports annual CO2, NOX, and Hg 

emissions reductions for each efficiency 

level in chapter 9 of the final rule TSD. 

As discussed in section VII.A, DOE did 

not include NOX emissions reduction 

from power plants in States subject to 

CAIR, because an energy conservation 

standard would not affect the overall 

level of NOX emissions in those States 

due to the emissions caps mandated by 

CAIR. 

TABLE VIII.30—CUMULATIVE EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SMALL THREE-PHASE AIR-COOLED

AIR CONDITIONERS AND HEAT PUMPS <65,000 BTU/H (2017–2046 FOR ASHRAE LEVEL; 2020–2046 FOR MORESTRINGENT LEVELS; 2019–2048 FOR SPLIT-SYSTEM AIR CONDITIONERS) 

Efficiency level 

ASHRAE/0 1 2 3 4 5 

Power Sector Emissions 

CO2 (million metric tons) .......................... 3.7 8.9 16.8 20.8 24.3 25.9 

SO2 (thousand tons) ................................ 2.9 6.9 13.0 16.1 18.8 20.1 

NOX (thousand tons) ............................... 2.8 6.7 12.6 15.6 18.2 19.4 

Hg (tons) .................................................. 0.01 0.02 0.04 0.05 0.06 0.06 

N2O (thousand tons) ................................ 0.05 0.13 0.24 0.30 0.35 0.37 

CH4 (thousand tons) ................................ 0.38 0.90 1.69 2.10 2.45 2.61 

Upstream Emissions 

CO2 (million metric tons) .......................... 0.22 0.54 1.00 1.24 1.45 1.54 

SO2 (thousand tons) ................................ 0.04 0.09 0.17 0.22 0.25 0.27 

NOX (thousand tons) ............................... 3.2 7.6 14.3 17.7 20.7 22.0 

Hg (tons) .................................................. 0.0001 0.0002 0.0004 0.0005 0.0006 0.0006 

N2O (thousand tons) ................................ 0.002 0.005 0.009 0.011 0.012 0.013 

CH4 (thousand tons) ................................ 19 45 83 103 121 128 

Total FFC Emissions 

CO2 (million metric tons) .......................... 4.0 9.5 17.8 22.1 25.8 27.4 

SO2 (thousand tons) ................................ 2.9 7.0 13.2 16.4 19.1 20.3 

NOX (thousand tons) ............................... 6.0 14.3 26.8 33.4 38.9 41.4 

Hg (tons) .................................................. 0.01 0.02 0.04 0.05 0.06 0.06 

N2O (thousand tons) ................................ 0.06 0.13 0.25 0.31 0.36 0.39 

CH4 (thousand tons) ................................ 19 45 85 105 123 131 

Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

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42654 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

TABLE VIII.31—CUMULATIVE EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR WATER-SOURCE HEAT PUMPS

(2016–2045 FOR ASHRAE LEVEL; 2020–2045 FOR MORE-STRINGENT LEVELS) 

Efficiency level 

ASHRAE/0 * 1 2 3 4 5 

Power Sector Emissions 

CO2 (million metric tons) .......................... — 1.4 16.3 30.5 41.5 56.7 

SO2 (thousand tons) ................................ — 1.1 12.9 24.1 32.9 44.9 

NOX (thousand tons) ............................... — 1.1 12.3 23.1 31.4 42.9 

Hg (tons) .................................................. — 0.003 0.040 0.074 0.101 0.139 

N2O (thousand tons) ................................ — 0.02 0.23 0.44 0.60 0.81 

CH4 (thousand tons) ................................ — 0.14 1.63 3.06 4.16 5.68 

Upstream Emissions 

CO2 (million metric tons) .......................... — 0.08 0.97 1.81 2.47 3.36 

SO2 (thousand tons) ................................ — 0.01 0.17 0.32 0.43 0.59 

NOX (thousand tons) ............................... — 1.2 13.8 25.9 35.2 48.0 

Hg (tons) .................................................. — 0.00003 0.00037 0.00070 0.00095 0.00129 

N2O (thousand tons) ................................ — 0.001 0.008 0.016 0.021 0.029 

CH4 (thousand tons) ................................ — 7.0 80.4 150.7 205.0 279.6 

Total FFC Emissions 

CO2 (million metric tons) .......................... — 1.5 17.3 32.3 44.0 60.1 

SO2 (thousand tons) ................................ — 1.1 13.1 24.5 33.3 45.5 

NOX (thousand tons) ............................... — 2.3 26.1 48.9 66.6 90.9 

Hg (tons) .................................................. — 0.004 0.040 0.075 0.102 0.140 

N2O (thousand tons) ................................ — 0.02 0.24 0.45 0.62 0.84 

CH4 (thousand tons) ................................ — 7.2 82.0 153.8 209.1 285.3 

Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

* There are no reductions for the ASHRAE level because there is no market share projected at the Federal baseline in the base case. 

As part of the analysis for this final 

rule, DOE estimated monetary benefits 

likely to result from the reduced 

emissions of CO2 and NOX estimated for 

each of the efficiency levels analyzed for 

small air-cooled air conditioners and 

heat pumps less than 65,000 Btu/h, 

water-source heat pumps, and oil-fired 

storage water heaters. As discussed in 

section VII.B.1, for CO2, DOE used 

values for the SCC developed by an 

interagency process. The interagency 

group selected four sets of SCC values 

for use in regulatory analyses. Three sets 

are based on the average SCC from three 

integrated assessment models, at 

discount rates of 2.5 percent, 3 percent, 

and 5 percent. The fourth set, which 

represents the 95th-percentile SCC 

estimate across all three models at a 3- 

percent discount rate, is included to 

represent higher-than-expected impacts 

from temperature change further out in 

the tails of the SCC distribution. The 

four SCC values for CO2 emissions 

reductions in 2015, expressed in 2014$, 

are $12.2/ton, $41.2/ton, $63.4/ton, and 

$121/ton. The values for later years are 

higher due to increasing emissionsrelated costs as the magnitude of 

projected climate change increases. 

Table VIII.32 and Table VIII.33 

present the global value of CO2

emissions reductions at each efficiency 

level. For each of the four cases, DOE 

calculated a present value of the stream 

of annual values using the same 

discount rate as was used in the studies 

upon which the dollar-per-ton values 

are based. DOE calculated domestic 

values as a range from 7 percent to 23 

percent of the global values, and these 

results are presented in chapter 10 of 

the final rule TSD. 

TABLE VIII.32—GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SMALL

THREE-PHASE AIR-COOLED AIR CONDITIONERS AND HEAT PUMPS <65,000 BTU/H

Efficiency level 

SCC Scenario* 

5% Discount 

rate, average 

3% Discount 

rate, average 

2.5% Discount 

rate, average 

3% Discount 

rate, 95th percentile 

million 2014$ 

Power Sector Emissions 

ASHRAE/0 ....................................................................................................... 24 115 184 356 

1 ....................................................................................................................... 57 273 437 846 

2 ....................................................................................................................... 110 521 832 1,613 

3 ....................................................................................................................... 136 646 1,031 1,999 

4 ....................................................................................................................... 159 754 1,204 2,334 

5 ....................................................................................................................... 170 804 1,283 2,489 

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TABLE VIII.32—GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SMALL

THREE-PHASE AIR-COOLED AIR CONDITIONERS AND HEAT PUMPS <65,000 BTU/H—Continued 

Efficiency level 

SCC Scenario* 

5% Discount 

rate, average 

3% Discount 

rate, average 

2.5% Discount 

rate, average 

3% Discount 

rate, 95th percentile 

Upstream Emissions 

ASHRAE/0 ....................................................................................................... 1.4 6.8 11 21 

1 ....................................................................................................................... 3.3 16 26 50 

2 ....................................................................................................................... 6.4 31 49 95 

3 ....................................................................................................................... 7.9 38 61 118 

4 ....................................................................................................................... 9.3 44 71 138 

5 ....................................................................................................................... 10 47 76 147 

Total FFC Emissions 

ASHRAE/0 ....................................................................................................... 25 122 195 377 

1 ....................................................................................................................... 60 289 463 896 

2 ....................................................................................................................... 116 552 881 1,708 

3 ....................................................................................................................... 144 684 1,092 2,117 

4 ....................................................................................................................... 168 799 1,275 2,472 

5 ....................................................................................................................... 179 851 1,359 2,635 

Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4 and $121 per metric ton (2014$). 

TABLE VIII.33—GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR WATERSOURCE HEAT PUMPS

Efficiency level 

SCC Scenario * 

5% Discount 

rate, average 

3% Discount 

rate, average 

2.5% Discount 

rate, average 

3% Discount 

rate, 95th percentile 

million 2014$ 

Power Sector Emissions 

ASHRAE/0** .................................................................................................... — — — — 

1 ....................................................................................................................... 9.3 44 71 137 

2 ....................................................................................................................... 106 504 805 1,560 

3 ....................................................................................................................... 198 943 1,507 2,922 

4 ....................................................................................................................... 270 1,285 2,052 3,979 

5 ....................................................................................................................... 370 1,758 2,808 5,446 

Upstream Emissions 

ASHRAE/0** .................................................................................................... — — — — 

1 ....................................................................................................................... 0.5 2.6 4.1 8.0 

2 ....................................................................................................................... 6.1 30 47 92 

3 ....................................................................................................................... 12 55 89 172 

4 ....................................................................................................................... 16 75 121 234 

5 ....................................................................................................................... 21 103 165 320 

Total FFC Emissions 

ASHRAE/0** .................................................................................................... — — — — 

1 ....................................................................................................................... 9.8 47 75 145 

2 ....................................................................................................................... 112 533 852 1,652 

3 ....................................................................................................................... 209 999 1,596 3,094 

4 ....................................................................................................................... 285 1,360 2,173 4,213 

5 ....................................................................................................................... 391 1,862 2,973 5,765 

Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4 and $121 per metric ton (2014$). 

** There are no reductions for the ASHRAE level because there is no market share projected at the Federal baseline in the base case. 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other GHG 

emissions to changes in the future 

global climate and the potential 

resulting damages to the world economy 

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42656 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

continues to evolve rapidly. Thus, any 

value placed in this rulemaking on 

reducing CO2 emissions is subject to 

change. DOE, together with other 

Federal agencies, will continue to 

review various methodologies for 

estimating the monetary value of 

reductions in CO2 and other GHG 

emissions. This ongoing review will 

consider the comments on this subject 

that are part of the public record for this 

and other rulemakings, as well as other 

methodological assumptions and issues. 

However, consistent with DOE’s legal 

obligations, and taking into account the 

uncertainty involved with this 

particular issue, DOE has included in 

this final rule the most recent values 

and analyses resulting from the 

interagency review process. 

DOE also estimated a range for the 

cumulative monetary value of the 

economic benefits associated with NOX

emissions reductions anticipated to 

result from amended standards for the 

small air-cooled air conditioners and 

heat pumps less than 65,000 Btu/h, 

water-source heat pumps, and oil-fired 

storage water heaters that are the subject 

of this final rule. The dollar-per-ton 

values that DOE used are discussed in 

section VII.B.2. 

Table VIII.34 and Table VIII.35 

present the present value of cumulative 

NOX emissions reductions for each 

efficiency level calculated using the 

average dollar-per-ton values and 7- 

percent and 3-percent discount rates. 

TABLE VIII.34—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR SMALL THREE-PHASE

AIR-COOLED AIR CONDITIONERS AND HEAT PUMPS <65,000 Btu/h 

[(2017–2046 for ASHRAE level; 2020–2046 for more-stringent levels; 2019–2048 for split-system air conditioners)] 

Efficiency level 3% Discount 

rate 

7% Discount 

rate 

million 2014$ 

Power Sector Emissions 

ASHRAE/0 ............................................................................................................................................................... 3.5 1.5 

1 ............................................................................................................................................................................... 8.2 3.5 

2 ............................................................................................................................................................................... 16 7.0 

3 ............................................................................................................................................................................... 20 8.6 

4 ............................................................................................................................................................................... 23 10 

5 ............................................................................................................................................................................... 25 11 

Upstream Emissions 

ASHRAE/0 ............................................................................................................................................................... 3.8 1.5 

1 ............................................................................................................................................................................... 9.0 3.6 

2 ............................................................................................................................................................................... 17 7.2 

3 ............................................................................................................................................................................... 22 8.9 

4 ............................................................................................................................................................................... 25 10 

5 ............................................................................................................................................................................... 27 11 

Total FFC Emissions 

ASHRAE/0 ............................................................................................................................................................... 7.3 3.0 

1 ............................................................................................................................................................................... 17 7.1 

2 ............................................................................................................................................................................... 33 14 

3 ............................................................................................................................................................................... 41 17 

4 ............................................................................................................................................................................... 48 20 

5 ............................................................................................................................................................................... 51 22 

Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

TABLE VIII.35—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR WATER-SOURCE HEAT

PUMPS

[(2016–2045 for ASHRAE level; 2020–2045 for more-stringent levels)] 

Efficiency level 3% Discount 

rate 

7% Discount 

rate 

million 2014$ 

Power Sector Emissions 

ASHRAE/0 * ............................................................................................................................................................. ........................ ........................

1 ............................................................................................................................................................................... 1.4 0.6 

2 ............................................................................................................................................................................... 15 6.6 

3 ............................................................................................................................................................................... 29 12 

4 ............................................................................................................................................................................... 39 17 

5 ............................................................................................................................................................................... 54 23 

Upstream Emissions 

ASHRAE/0 * ............................................................................................................................................................. ........................ ........................

1 ............................................................................................................................................................................... 1.5 0.6 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42657 

TABLE VIII.35—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR POTENTIAL STANDARDS FOR WATER-SOURCE HEAT

PUMPS—Continued 

[(2016–2045 for ASHRAE level; 2020–2045 for more-stringent levels)] 

Efficiency level 3% Discount 

rate 

7% Discount 

rate 

2 ............................................................................................................................................................................... 17 6.7 

3 ............................................................................................................................................................................... 31 13 

4 ............................................................................................................................................................................... 42 17 

5 ............................................................................................................................................................................... 58 24 

Total FFC Emissions 

ASHRAE/0 * ............................................................................................................................................................. ........................ ........................

1 ............................................................................................................................................................................... 2.8 1.2 

2 ............................................................................................................................................................................... 32 13 

3 ............................................................................................................................................................................... 60 25 

4 ............................................................................................................................................................................... 82 34 

5 ............................................................................................................................................................................... 112 47 

Note: The potential emissions reduction for efficiency levels more stringent than those specified by ASHRAE Standard 90.1–2013 were calculated relative to the efficiency levels that would result if ASHRAE Standard 90.1–2013 standards were adopted. 

* There are no reductions for the ASHRAE level because there is no market share projected at the Federal baseline in the base case. 

D. Amended Energy Conservation 

Standards 

1. Small Commercial Air-Cooled Air 

Conditioners and Heat Pumps Less 

Than 65,000 Btu/h 

As noted previously, EPCA specifies 

that, for any commercial and industrial 

equipment addressed under 42 U.S.C. 

6313(a)(6)(A)(i), DOE may prescribe an 

energy conservation standard more 

stringent than the level for such 

equipment in ASHRAE Standard 90.1, 

as amended, only if ‘‘clear and 

convincing evidence’’ shows that a 

more-stringent standard would result in 

significant additional conservation of 

energy and is technologically feasible 

and economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)(II)) This requirement 

also applies to split-system air 

conditioners evaluated under the 6-year 

look back. (42 U.S.C. 

6313)(a)(6)(C)(i)(II)) 

In evaluating more-stringent 

efficiency levels than those specified by 

ASHRAE Standard 90.1–2013 for small 

air-cooled air conditioners and heat 

pumps less than 65,000 Btu/h, DOE 

reviewed the results in terms of their 

technological feasibility, significance of 

energy savings, and economic 

justification. 

DOE has concluded that all of the 

SEER and HSPF levels considered by 

DOE are technologically feasible, as 

units with equivalent efficiency 

appeared to be available in the current 

market at all levels examined. 

DOE examined the potential energy 

savings that would result from the 

efficiency levels specified in ASHRAE 

Standard 90.1–2013 and compared these 

to the potential energy savings that 

would result from efficiency levels more 

stringent than those in ASHRAE 

Standard 90.1–2013. DOE estimates that 

0.05 quads of energy would be saved if 

DOE adopts the efficiency levels set in 

ASHRAE Standard 90.1–2013 for each 

small air-cooled air conditioner and 

heat pump class specified in that 

standard. If DOE were to adopt 

efficiency levels more stringent than 

those specified by ASHRAE Standard 

90.1–2013, the potential additional 

energy savings range from 0.02 quads to 

0.45 quads. Associated with proposing 

more-stringent efficiency levels for the 

three triggered equipment classes is a 

three-year delay in implementation 

compared to the adoption of energy 

conservation standards at the levels 

specified in ASHRAE Standard 90.1– 

2013 (see section V.E.10). This delay in 

implementation of amended energy 

conservation standards would result in 

a small amount of energy savings being 

lost in the first years (2017 through 

2020) compared to the savings from 

adopting the levels in ASHRAE 

Standard 90.1–2013; however, this loss 

may be compensated for by increased 

savings in later years. Taken in 

isolation, the energy savings associated 

with more-stringent standards might be 

considered significant enough to 

warrant adoption of such standards. 

However, as noted previously, energy 

savings are not the only factor that DOE 

must consider. 

In considering whether potential 

standards are economically justified, 

DOE also examined the LCC savings and 

national NPV that would result from 

adopting efficiency levels more 

stringent than those set forth in 

ASHRAE Standard 90.1–2013. The 

analytical results show negative average 

LCC savings and negative national NPV 

at both 7-percent and 3-percent discount 

rate for all efficiency levels in all four 

equipment classes. These results 

indicate that adoption of efficiency 

levels more stringent than those in 

ASHRAE Standard 90.1–2013 as Federal 

energy conservation standards would 

likely lead to negative economic 

outcomes for the Nation. Consequently, 

this criterion for adoption of morestringent standard levels does not 

appear to have been met. 

As such, DOE does not have ‘‘clear 

and convincing evidence’’ that any 

significant additional conservation of 

energy that would result from adoption 

of more-stringent efficiency levels than 

those specified in ASHRAE Standard 

90.1–2013 would be economically 

justified. Comments on the NOPR did 

not provide any additional information 

to alter this conclusion. Therefore, DOE 

is adopting amended energy efficiency 

levels for this equipment as set forth in 

ASHRAE Standard 90.1–2013. For splitsystem air conditioners, for which the 

efficiency level was not updated in 

ASHRAE Standard 90.1–2013, DOE is 

making a determination that standards 

for the product do not need to be 

amended for the reasons stated above. 

Table VIII.36 presents the amended 

energy conservation standards and 

compliance dates for small air-cooled 

air conditioners and heat pumps less 

than 65,000 Btu/h. 

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TABLE VIII.36—AMENDED ENERGY CONSERVATION STANDARDS FOR SMALL THREE-PHASE AIR-COOLED AIR

CONDITIONERS AND HEAT PUMPS <65,000 Btu/h 

Equipment type Efficiency level Compliance date 

Three-Phase Air-Cooled Split System Air Conditioners <65,000 Btu/h ........................ 13.0 SEER * ....................... June 16, 2008. 

Three-Phase Air-Cooled Single Package Air Conditioners <65,000 Btu/h ................... 14.0 SEER ......................... January 1, 2017. 

Three-Phase Air-Cooled Split System Heat Pumps <65,000 Btu/h .............................. 14.0 SEER, 8.2 HSPF ....... January 1, 2017. 

Three-Phase Air-Cooled Single Package Heat Pumps <65,000 Btu/h ......................... 14.0 SEER, 8.0 HSPF ....... January 1, 2017. 

* 13.0 SEER is the existing Federal minimum energy conservation standard for three-phase air-cooled split system air conditioners <65,000 

Btu/h. 

2. Water-Source Heat Pumps 

In evaluating more-stringent 

efficiency levels for water-source heat 

pumps than those specified by ASHRAE 

Standard 90.1–2013, DOE reviewed the 

results in terms of their technological 

feasibility, significance of energy 

savings, and economic justification. 

DOE has concluded that all of the EER 

and COP levels considered by DOE are 

technologically feasible, as units with 

equivalent efficiency appeared to be 

available in the current market at all 

levels examined. 

DOE examined the potential energy 

savings that would result from the 

efficiency levels specified in ASHRAE 

Standard 90.1–2013 and compared these 

to the potential energy savings that 

would result from efficiency levels more 

stringent than those in ASHRAE 

Standard 90.1–2013. DOE does not 

estimate any energy savings from 

adopting the levels set in ASHRAE 

Standard 90.1–2013, as very few models 

exist on the market below that level, and 

by 2020, DOE expects those models to 

be off the market. If DOE were to adopt 

efficiency levels more stringent than 

those specified by ASHRAE Standard 

90.1–2013, the potential additional 

energy savings range from 0.03 quads to 

1.0 quads. Associated with proposing 

more-stringent efficiency levels is a 

four-and-a-half-year delay in 

implementation compared to the 

adoption of energy conservation 

standards at the levels specified in 

ASHRAE Standard 90.1–2013 (see 

section VI.E.10). This delay in 

implementation of amended energy 

conservation standards would result in 

a small amount of energy savings being 

lost in the first years (2016 through 

2020) compared to the savings from 

adopting the levels in ASHRAE 

Standard 90.1–2013; however, this loss 

may be compensated for by increased 

savings in later years. Taken in 

isolation, the energy savings associated 

with more-stringent standards might be 

considered significant enough to 

warrant adoption of such standards. 

However, as noted above, energy 

savings are not the only factor that DOE 

must consider. 

In considering whether potential 

standards are economically justified, 

DOE also examined the NPV that would 

result from adopting efficiency levels 

more stringent than those set forth in 

ASHRAE Standard 90.1–2013. With a 7- 

percent discount rate, EL 1 results in 

positive NPV, and ELs 2 through 5 

result in negative NPV. With a 3-percent 

discount rate, ELs 1 and 2 create 

positive NPV, while ELs 3 through 5 

result in negative NPVs. These results 

indicate that adoption of efficiency 

levels more stringent than those in 

ASHRAE Standard 90.1–2013 as Federal 

energy conservation standards might 

lead to negative economic outcomes for 

the Nation, except at EL1, which offers 

very little energy savings. 

Furthermore, although DOE based it 

analyses on the best available data when 

examining the potential energy savings 

and the economic justification of 

efficiency levels more stringent than 

those specified in ASHRAE Standard 

90.1–2013, DOE believes there are 

several limitations regarding that data 

which should be considered before 

proposing amended energy conservation 

standards for water-source heat pumps. 

First, DOE reexamined the 

uncertainty in its analysis of watersource heat pumps. As noted in section 

VI.D, DOE relied on cooling energy use 

estimates from a 2000 study. While DOE 

applied a scaling factor to attempt to 

account for changes in buildings since 

2000, this is only a rough estimate. DOE 

considered running building 

simulations by applying a water-source 

heat pump module to reference 

buildings. However, DOE has been 

unable to obtain reliable information on 

the distribution of water-source heat 

pump applications. Therefore, it is not 

clear which building types would be 

most useful to simulate and how DOE 

would weight the results of the 

simulations. Furthermore, DOE has no 

field data with which to corroborate the 

results of the simulations. The analysis 

of heating energy use is also very 

uncertain; DOE relied on estimates for 

air-source heat pumps, but it is unclear 

whether water-source heat pumps 

would have similar heating usage, as 

they tend to be used in different 

applications. Any inaccuracy in UEC 

directly impacts the energy savings 

estimates and consumer impacts. 

Second, in developing its analysis, 

DOE made refinements to various 

inputs, such as heating UEC and repair 

cost. DOE observed that the NPV results 

were highly sensitive to small changes 

in these inputs, with NPV for EL 2, for 

example, changing from positive to 

negative and back over several 

iterations. This model sensitivity, 

combined with high uncertainty in 

various inputs, makes it difficult for 

DOE to determine that the results 

provide clear and convincing evidence 

that higher standards would be 

economically justified. 

Third, DOE relied on shipments 

estimates from the U.S. Census. As 

noted in the January 2015 NOPR, these 

estimates are considerably higher than 

those found in an EIA report. 80 FR 

1171, 1206. Furthermore, DOE 

disaggregated the shipments into 

equipment class using data from over a 

decade ago. Although DOE requested 

comment, DOE has not received any 

information or data regarding the 

shipments of this equipment. Any 

inaccuracy in the shipment projection 

in total or by equipment class 

contributes to the uncertainty of the 

energy savings results and, thus, makes 

it difficult for DOE to determine that 

any additional energy savings are 

significant. 

Fourth, due to the limited data on the 

existing distribution of shipments by 

efficiency level or historical efficiency 

trends, DOE was not able to assess 

possible future changes in either the 

available efficiencies of equipment in 

the water-source heat pump market or 

the sales distribution of shipments by 

efficiency level in the absence of setting 

more-stringent standards. Instead, DOE 

applied an efficiency trend from a 

commercial air conditioner rulemaking 

published 10 years ago. DOE recognizes 

that manufacturers may continue to 

make future improvements in watersource heat pump efficiencies even in 

the absence of mandated energy 

conservation standards. In particular, 

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water-source heat pumps tend to be a 

fairly efficient product, and the 

distribution of model availability 

indicates that many commercial 

consumers are already purchasing 

equipment well above the baseline. 

Consequently, it is likely that the true 

improvements in efficiency in the 

absence of a standard may be higher 

than estimated. This possibility 

increases the uncertainty of the energy 

savings estimates. To the extent that 

manufacturers improve equipment 

efficiency and commercial consumers 

choose to purchase improved products 

in the absence of standards, the energy 

savings estimates would likely be 

reduced. 

In light of the above, DOE would 

again restate the statutory test for 

adopting energy conservation standards 

more stringent than the levels in 

ASHRAE Standard 90.1. DOE must have 

‘‘clear and convincing’’ evidence in 

order to propose efficiency levels more 

stringent than those specified in 

ASHRAE Standard 90.1–2013, and for 

the reasons explained in this document, 

the totality of information does not meet 

the level necessary to support these 

more-stringent efficiency levels for 

water-source heat pumps. Consequently, 

although certain stakeholders have 

recommended that DOE adopt higher 

efficiency levels for one water-source 

heat pump class (as discussed in section 

III.B), DOE has decided to adopt the 

efficiency levels in ASHRAE Standard 

90.1–2013 as amended energy 

conservation standards for all three 

water-source heat pump equipment 

classes. Accordingly, Table VIII.37 

presents the amended energy 

conservation standards and compliance 

dates for water-source heat pumps. 

TABLE VIII.37—AMENDED ENERGY CONSERVATION STANDARDS FOR WATER-SOURCE HEAT PUMPS

Equipment type Efficiency level Compliance date 

Water-Source (Water-to-Air, Water-Loop) HP <17,000 Btu/h ....................................... 12.2 EER, 4.3 COP ............ October 9, 2015. 

Water-Source (Water-to-Air, Water-Loop) HP ≥17,000 to <65,000 Btu/h .................... 13.0 EER, 4.3 COP ............ October 9, 2015. 

Water-Source (Water-to-Air, Water-Loop) HP ≥65,000 to 135,000 Btu/h ..................... 13.0 EER, 4.3 COP ............ October 9, 2015. 

3. Commercial Oil-Fired Storage Water 

Heaters 

EPCA specifies that, for any 

commercial and industrial equipment 

addressed under 42 U.S.C. 

6313(a)(6)(A)(i), DOE may prescribe an 

energy conservation standard more 

stringent than the level for such 

equipment in ASHRAE Standard 90.1, 

as amended, only if ‘‘clear and 

convincing evidence’’ shows that a 

more-stringent standard would result in 

significant additional conservation of 

energy and is technologically feasible 

and economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)(II)) 

In evaluating more-stringent 

efficiency levels for oil-fired storage 

water-heating equipment than those 

specified by ASHRAE Standard 90.1– 

2013, DOE reviewed the results in terms 

of the significance of their additional 

energy savings. DOE believes that the 

energy savings from increasing national 

energy conservation standards for oilfired storage water heaters above the 

levels specified by ASHRAE Standard 

90.1–2013 would be minimal. As noted 

in the January 2015 NOPR, DOE does 

not have ‘‘clear and convincing 

evidence’’ that significant additional 

conservation of energy would result 

from adoption of more-stringent 

standard levels. 80 FR 1171, 1226–27. 

Comments on the NOPR did not provide 

any additional information to alter this 

conclusion. Therefore, DOE did not 

examine whether the levels are 

economically justified, and DOE is 

adopting the energy efficiency levels for 

this equipment type as set forth in 

ASHRAE Standard 90.1–2013. Table 

VIII.38 presents the amended energy 

conservation standard and compliance 

date for oil-fired storage water heaters. 

TABLE VIII.38—AMENDED ENERGY CONSERVATION STANDARDS FOR OIL-FIRED STORAGE WATER HEATERS

Equipment type Efficiency level (Et) Compliance date 

Oil-Fired Storage Water Heaters >105,000 Btu/h and <4,000 Btu/h/gal ...................... 80% .................................... October 9, 2015. 

IX. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Order 12866 

and 13563 

Section 1(b)(1) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

requires each agency to identify the 

problem that it intends to address, 

including, where applicable, the failures 

of private markets or public institutions 

that warrant new agency action, as well 

as to assess the significance of that 

problem. The problems that the adopted 

standards for small air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h, water-source heat pumps, 

and oil-fired storage water heaters 

address are as follows: 

(1) Insufficient information and the 

high costs of gathering and analyzing 

relevant information leads some 

consumers to miss opportunities to 

make cost-effective investments in 

energy efficiency. 

(2) In some cases the benefits of more 

efficient equipment are not realized due 

to misaligned incentives between 

purchasers and users. An example of 

such a case is when the equipment 

purchase decision is made by a building 

contractor or building owner who does 

not pay the energy costs. 

(3) There are external benefits 

resulting from improved energy 

efficiency of small air-cooled air 

conditioners and heat pumps less than 

65,000 Btu/h, water-source heat pumps, 

and oil-fired storage water heaters that 

are not captured by the users of such 

equipment. These benefits include 

externalities related to public health, 

environmental protection, and national 

energy security that are not reflected in 

energy prices, such as reduced 

emissions of air pollutants and 

greenhouse gases that impact human 

health and global warming. DOE 

attempts to quantify some of the 

external benefits through use of social 

cost of carbon values. 

In addition, DOE has determined that 

the proposed regulatory action is not a 

‘‘significant regulatory action’’ under 

section 3(f)(1) of Executive Order 12866. 

Accordingly, DOE has not prepared a 

regulatory impact analysis (RIA) for this 

rule, and the Office of Information and 

Regulatory Affairs (OIRA) in the Office 

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42660 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

51For more information see: http://

www.hoovers.com/. 

of Management and Budget (OMB) has 

not reviewed this rule. 

DOE has also reviewed this regulation 

pursuant to Executive Order 13563, 

issued on January 18, 2011. (76 FR 3281, 

Jan. 21, 2011) EO 13563 is supplemental 

to and explicitly reaffirms the 

principles, structures, and definitions 

governing regulatory review established 

in Executive Order 12866. To the extent 

permitted by law, agencies are required 

by Executive Order 13563 to: (1) 

Propose or adopt a regulation only upon 

a reasoned determination that its 

benefits justify its costs (recognizing 

that some benefits and costs are difficult 

to quantify); (2) tailor regulations to 

impose the least burden on society, 

consistent with obtaining regulatory 

objectives, taking into account, among 

other things, and to the extent 

practicable, the costs of cumulative 

regulations; (3) select, in choosing 

among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order 13563 requires agencies 

to use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, OIRA has 

emphasized that such techniques may 

include identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes. For the reasons 

stated in the preamble, DOE believes 

that this final rule is consistent with 

these principles, including the 

requirement that, to the extent 

permitted by law, benefits justify costs 

and that net benefits are maximized. 

B. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of an initial regulatory flexibility 

analysis (IRFA) for any rule that by law 

must be proposed for public comment, 

unless the agency certifies that the rule, 

if promulgated, will not have a 

significant economic impact on a 

substantial number of small entities. As 

required by Executive Order 13272, 

‘‘Proper Consideration of Small Entities 

in Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process. 68 FR 7990. DOE 

has made its procedures and policies 

available on the Office of the General 

Counsel’s Web site (http://energy.gov/

gc/office-general-counsel). 

For manufacturers of small air-cooled 

air conditioners and heat pumps less 

than 65,000 Btu/h, water-source heat 

pumps, and oil-fired storage water 

heaters, the Small Business 

Administration (SBA) has set a size 

threshold, which defines those entities 

classified as ‘‘small businesses’’ for the 

purposes of the statute. DOE used the 

SBA’s small business size standards to 

determine whether any small entities 

would be subject to the requirements of 

the rule. 65 FR 30836, 30848 (May 15, 

2000), as amended at 65 FR 53533, 

53544 (Sept. 5, 2000) and 77 FR 49991, 

50000 (August 20, 2012), as codified at 

13 CFR part 121. The size standards are 

listed by North American Industry 

Classification System (NAICS) code and 

industry description and are available at 

http://www.sba.gov/sites/default/files/

Size_Standards_Table.pdf. The 

ASHRAE equipment covered by this 

rule are classified under NAICS 333318, 

‘‘Other Commercial and Service 

Industry Machinery Manufacturing’’ 

(oil-fired water heaters) and NAICS 

333415, ‘‘Air-Conditioning and Warm 

Air Heating Equipment and Commercial 

and Industrial Refrigeration Equipment 

Manufacturing’’ (all other equipment 

addressed by the notice). For an entity 

to be considered as a small business, the 

SBA sets a threshold of 1,000 employees 

or fewer for the first category including 

commercial water heaters and 750 

employees or fewer for the second 

category. 

DOE examined each of the 

manufacturers it found during its 

market assessment and used publiclyavailable information to determine if 

any manufacturers identified qualify as 

a small business under the SBA 

guidelines discussed previously. (For a 

list of all manufacturers of ASHRAE 

equipment covered by this rule, see 

chapter 2 of the final rule TSD.) DOE’s 

research involved individual company 

Web sites and marketing research tools 

(e.g., Hoovers reports 51) to create a list 

of companies that manufacture the types 

of ASHRAE equipment affected by this 

rule. DOE screened out companies that 

do not have domestic manufacturing 

operations for ASHRAE equipment (i.e., 

manufacturers that produce all of their 

ASHRAE equipment internationally). 

DOE also did not consider 

manufacturers that are subsidiaries of 

parent companies that exceed the 

applicable 1000-employee or 750- 

employee threshold set by the SBA to be 

small businesses. DOE identified 16 

companies that qualify as small 

manufacturers: 5 central air conditioner 

manufacturers (of the 23 total 

identified), 7 water-source heat pump 

manufacturers (of the 18 total 

identified), and 7 oil-fired storage water 

heater manufacturers (of the 10 total 

identified). Please note that there are 3 

small manufacturers that produce 

equipment in more than one of these 

categories. 

Based on reviews of product listing 

data in the AHRI Directory for 

commercial equipment, DOE estimates 

that small manufacturers account for 

less than 1 percent of the market for 

covered three-phase central air 

conditioner equipment and less than 5 

percent of the market for covered watersource heat pump equipment. In the oilfired storage water heat market, DOE 

understands that one of the small 

manufacturers is a significant player in 

the market. That manufacturer accounts 

for 34 percent of product listings. DOE 

believes that the remaining oil-fired 

storage water heater manufacturers 

account for less than 5 percent of the 

market. 

DOE has reviewed this rule under the 

provisions of the Regulatory Flexibility 

Act and the policies and procedures 

published on February 19, 2003. 68 FR 

7990. As part of this rulemaking, DOE 

examined the potential impacts of 

amended standard levels on 

manufacturers, as well as the potential 

implications of the proposed revisions 

to the commercial warm air furnace test 

procedures on compliance burdens. 

DOE examined the impact of raising 

the standards to the amended levels by 

examining the distribution of 

efficiencies of commercially-available 

models in the AHRI Directory. For 

water-source heat pumps and oil-fired 

storage water heaters, DOE found that 

all manufacturers in the directory, 

including the small manufacturers, 

already offer equipment at and above 

the amended standards. While these 

small manufacturers would have to 

discontinue a fraction of their models in 

order to comply with the standards 

adopted in this rulemaking, DOE does 

not believe that there would be a 

significant burden placed on industry, 

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as the market would shift to the new 

baseline levels when compliance with 

the new standards is required. 

For small commercial air-cooled air 

conditioners and heat pumps, DOE 

found one small manufacturer of singlepackage units in the directory with no 

models that could meet the adopted 

ASHRAE levels. 

To estimate the impacts of the 

amended standard, DOE researched 

prior energy conservation standard 

analyses of the covered equipment, as 

well as any analyses of comparable 

single-phase products. The 2011 direct 

final rule for residential furnaces, 

central air conditioners, and heat pumps 

included analysis for a 14 SEER 

efficiency level for split-system as well 

as single-package air conditioners and 

heat pumps. 76 FR 37408 (June 27, 

2011). The 2011 analysis indicated that 

manufacturers would need to include 

additional heat exchanger surface area 

and to include modulating components 

to reach the 14 SEER level from a 13 

SEER baseline. The 2011 analyses 

further concluded that these 

improvements could be made without 

significant investments in equipment 

and production assets. The amended 

levels for oil-fired storage water heaters 

or water-source heat pumps have not 

been analyzed as a part of any prior 

energy conservation standard 

rulemakings. 

However, DOE understands that the 

ASHRAE standards were developed 

through an industry consensus process, 

which included consideration of 

manufacturer input, including the 

impacts to small manufacturers, when 

increasing the efficiency of equipment. 

Because EPCA requires DOE to adopt 

the ASHRAE levels or to propose higher 

standards, DOE is limited in terms of 

the steps it can take to mitigate impacts 

to small businesses, but DOE reasons 

that such mitigation has already 

occurred since small manufacturers had 

input into the development of the 

industry consensus standard that DOE is 

statutorily required to adopt. 

As for the specific changes being 

adopted for the commercial warm air 

furnace test procedure, the test 

procedures (ANSI Z21.47–2012 and 

ASHRAE 103–2007) that DOE is 

incorporating by reference do not 

include any updates to the methodology 

in those sections utilized in the DOE 

test procedure. Thus, DOE has 

concluded that this test procedure 

rulemaking would keep the DOE test 

procedure current with the latest 

version of the applicable industry 

testing standards, but it will not change 

the methodology used to generate 

ratings of commercial warm air 

furnaces. Consequently, the test 

procedure amendments would not be 

expected to have a substantive impact 

on manufacturers, either large or small. 

For the reasons stated previously, 

DOE did not prepare an initial 

regulatory flexibility analysis for the 

final rule. DOE will transmit its 

certification and a supporting statement 

of factual basis to the Chief Counsel for 

Advocacy of the SBA for review 

pursuant to 5 U.S.C. 605(b). 

C. Review Under the Paperwork 

Reduction Act of 1995 

Manufacturers of the ASHRAE 

equipment subject to this final rule must 

certify to DOE that their equipment 

complies with any applicable energy 

conservation standards. In certifying 

compliance, manufacturers must test 

their equipment according to the 

applicable DOE test procedures for the 

relevant ASHRAE equipment, 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 the 

ASHRAE equipment in this final rule. 

76 FR 12422 (March 7, 2011); 80 FR 

5099 (Jan. 30, 2015). The collection-ofinformation 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 30 hours per response, 

including the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

D. Review Under the National 

Environmental Policy Act of 1969 

Pursuant to the National 

Environmental Policy Act (NEPA) of 

1969, DOE has determined that the rule 

fits within the category of actions 

included in Categorical Exclusion (CX) 

B5.1 and otherwise meets the 

requirements for application of a CX. 

See 10 CFR part 1021, App. B, B5.1(b); 

1021.410(b) and Appendix B, B(1)–(5). 

The rule fits within the category of 

actions because it is a rulemaking that 

establishes energy conservation 

standards for consumer products or 

industrial equipment, and for which 

none of the exceptions identified in CX 

B5.1(b) apply. Therefore, DOE has made 

a CX determination for this rulemaking, 

and DOE does not need to prepare an 

Environmental Assessment or 

Environmental Impact Statement for 

this rule. DOE’s CX determination for 

this rule is available at http://

cxnepa.energy.gov/. 

E. Review Under Executive Order 13132 

Executive Order 13132, ‘‘Federalism.’’ 

64 FR 43255 (Aug. 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 rule and has determined 

that it would not have a substantial 

direct effect on the States, on the 

relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. EPCA governs and 

prescribes Federal preemption of State 

regulations as to energy conservation for 

the products that are the subject of this 

final rule. States can petition DOE for 

exemption from such preemption to the 

extent, and based on criteria, set forth in 

EPCA. (42 U.S.C. 6297) Therefore, no 

further action is required by Executive 

Order 13132. 

F. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ 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 

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42662 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

and burden reduction. 61 FR 4729 (Feb. 

7, 1996). Regarding the review required 

by section 3(a), section 3(b) of Executive 

Order 12988 specifically requires that 

Executive agencies make every 

reasonable effort to ensure that the 

regulation: (1) Clearly specifies the 

preemptive effect, if any; (2) clearly 

specifies any effect on existing Federal 

law or regulation; (3) provides a clear 

legal standard for affected conduct 

while promoting simplification and 

burden reduction; (4) specifies the 

retroactive effect, if any; (5) adequately 

defines key terms; and (6) addresses 

other important issues affecting clarity 

and general draftsmanship under any 

guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 

12988 requires Executive agencies to 

review regulations in light of applicable 

standards in section 3(a) and section 

3(b) to determine whether they are met 

or it is unreasonable to meet one or 

more of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, this final 

rule meets the relevant standards of 

Executive Order 12988. 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) requires 

each Federal agency to assess the effects 

of Federal regulatory actions on State, 

local, and Tribal governments and the 

private sector. Public Law 104–4, sec. 

201 (codified at 2 U.S.C. 1531). For a 

regulatory action likely to result in a 

rule that may cause the expenditure by 

State, local, and Tribal governments, in 

the aggregate, or by the private sector of 

$100 million or more in any one year 

(adjusted annually for inflation), section 

202 of UMRA requires a Federal agency 

to publish a written statement that 

estimates the resulting costs, benefits, 

and other effects on the national 

economy. (2 U.S.C. 1532(a), (b)) The 

UMRA also requires a Federal agency to 

develop an effective process to permit 

timely input by elected officers of State, 

local, and Tribal governments on a 

‘‘significant intergovernmental 

mandate,’’ and requires an agency plan 

for giving notice and opportunity for 

timely input to potentially affected 

small governments before establishing 

any requirements that might 

significantly or uniquely affect them. On 

March 18, 1997, DOE published a 

statement of policy on its process for 

intergovernmental consultation under 

UMRA. 62 FR 12820. DOE’s policy 

statement is also available at http://

energy.gov/sites/prod/files/gcprod/

documents/umra_97.pdf. 

DOE has concluded that this final rule 

contains neither an intergovernmental 

mandate nor a mandate that may result 

in the expenditure by State, local, and 

Tribal governments, in the aggregate, or 

by the private sector, of $100 million or 

more in any year. Accordingly, no 

assessment or analysis is required under 

the UMRA. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

Pursuant to Executive Order 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights’’ 53 FR 8859 (March 18, 1988), 

DOE has determined that this rule 

would not result in any takings that 

might require compensation under the 

Fifth Amendment to the U.S. 

Constitution. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

Section 515 of the Treasury and 

General Government Appropriations 

Act, 2001 (44 U.S.C. 3516, note) 

provides for Federal agencies to review 

most disseminations of information to 

the public under information quality 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. OMB’s guidelines were published 

at 67 FR 8452 (Feb. 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (Oct. 7, 2002). DOE has 

reviewed this final rule under the OMB 

and DOE guidelines and has concluded 

that it is consistent with applicable 

policies in those guidelines. 

K. Review Under Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use,’’ 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to OIRA at OMB, a 

Statement of Energy Effects for any 

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 significant energy 

action, the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

DOE has concluded that this 

regulatory action, which sets forth 

amended energy conservation standards 

for certain types of ASHRAE equipment, 

is not a significant energy action 

because the standards are not a 

significant regulatory action under 

Executive Order 12866 and are not 

likely to have a significant adverse effect 

on the supply, distribution, or use of 

energy, nor has it been designated as 

such by the Administrator at OIRA. 

Accordingly, DOE has not prepared a 

Statement of Energy Effects on the final 

rule. 

L. Review Under the Information 

Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in 

consultation with the Office of Science 

and Technology Policy (OSTP), issued 

its Final Information Quality Bulletin 

for Peer Review (the Bulletin). 70 FR 

2664 (Jan. 14, 2005). The Bulletin 

establishes that certain scientific 

information shall be peer reviewed by 

qualified specialists before it is 

disseminated by the Federal 

Government, including influential 

scientific information related to agency 

regulatory actions. The purpose of the 

bulletin is to enhance the quality and 

credibility of the Government’s 

scientific information. Under the 

Bulletin, the energy conservation 

standards rulemaking analyses are 

‘‘influential scientific information,’’ 

which the Bulletin defines as ‘‘scientific 

information the agency reasonably can 

determine will have, or does have, a 

clear and substantial impact on 

important public policies or private 

sector decisions.’’ Id at FR 2667. 

In response to OMB’s Bulletin, DOE 

conducted formal in-progress peer 

reviews of the energy conservation 

standards development process and 

analyses and has prepared a Peer 

Review Report pertaining to the energy 

conservation standards rulemaking 

analyses. Generation of this report 

involved a rigorous, formal, and 

documented evaluation using objective 

criteria and qualified and independent 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42663 

reviewers to make a judgment as to the 

technical/scientific/business merit, the 

actual or anticipated results, and the 

productivity and management 

effectiveness of programs and/or 

projects. The ‘‘Energy Conservation 

Standards Rulemaking Peer Review 

Report’’ dated February 2007 has been 

disseminated and is available at the 

following Web site: 

www1.eere.energy.gov/buildings/

appliance_standards/peer_review.html. 

M. Congressional Notification 

As required by 5 U.S.C. 801, DOE will 

report to Congress on the promulgation 

of this rule prior to its effective date. 

The report will state that it has been 

determined that the rule is not a ‘‘major 

rule’’ as defined by 5 U.S.C. 804(2). 

N. Description of Materials Incorporated 

by Reference 

In this final rule, DOE updates its 

incorporations by reference to two 

industry standards related to the test 

procedure for commercial warm-air 

furnaces in 10 CFR 431.76. These 

standards include ANSI Z21.47–2012, 

‘‘Standards for Gas-Fired Central 

Furnaces,’’ and ASHRAE Standard 103– 

2007, ‘‘Method of Testing for Annual 

Fuel Utilization Efficiency of 

Residential Central Furnaces and 

Boilers.’’ sections 7.2.2.4, 7.8, 9.2, and 

11.3.7. These are the most up-to-date 

industry-accepted standards used by 

manufacturers when testing furnaces in 

the United States. DOE previously 

referenced earlier versions of these same 

industry standards. 

X. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this final rule. 

List of Subjects in 10 CFR Part 431 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Incorporation by reference, Reporting 

and recordkeeping requirements. 

Issued in Washington, DC, on June 30, 

2015. 

David T. Danielson, 

Assistant Secretary of Energy, Energy 

Efficiency and Renewable Energy. 

For the reasons set forth in the 

preamble, DOE amends part 431 of 

Chapter II, Subchapter D, of Title 10 of 

the Code of Federal Regulations as set 

forth below: 

PART 431—ENERGY EFFICIENCY 

PROGRAM FOR CERTAIN 

COMMERCIAL AND INDUSTRIAL 

EQUIPMENT 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6317. 

■ 2. Section 431.75 is amended by 

revising paragraphs (b) and (c) to read 

as follows: 

§ 431.75 Materials incorporated by 

reference. 

* * * * * 

(b) ANSI. American National 

Standards Institute. 25 W. 43rd Street, 

4th Floor, New York, NY 10036. (212) 

642–4900 or go to http://www.ansi.org. 

(1) ANSI Z21.47–2012, (‘‘ANSI 

Z21.47’’) ‘‘Standard for Gas-fired 

Central Furnaces,’’ approved March 27, 

2012, IBR approved for § 431.76. 

(2) [Reserved] 

(c) ASHRAE. American Society of 

Heating, Refrigerating and AirConditioning Engineers Inc., 1791 Tullie 

Circle NE., Atlanta, Georgia 30329, (404) 

636–8400, or go to: http://

www.ashrae.org. 

(1) ANSI/ASHRAE Standard 103– 

2007, (‘‘ASHRAE 103’’), ‘‘Method of 

Testing for Annual Fuel Utilization 

Efficiency of Residential Central 

Furnaces and Boilers,’’ sections 7.2.2.4, 

7.8, 9.2, and 11.3.7, approved June 27, 

2007, IBR approved for § 431.76. 

(2) [Reserved] 

* * * * * 

■ 3. Section 431.76 is revised to read as 

follows: 

§ 431.76 Uniform test method for the 

measurement of energy efficiency of 

commercial warm air furnaces. 

(a) Scope. This section covers the test 

requirements used to measure the 

energy efficiency of commercial warm 

air furnaces with a rated maximum 

input of 225,000 Btu per hour or more. 

On and after July 11, 2016, any 

representations made with respect to the 

energy use or efficiency of commercial 

warm air furnaces must be made in 

accordance with the results of testing 

pursuant to this section. At that time, 

you must use the relevant procedures in 

ANSI Z21.47 or UL 727–2006 

(incorporated by reference, see 

§ 431.75). On and after August 17, 2015 

and prior to July 11, 2016, 

manufacturers must test commercial 

warm air furnaces in accordance with 

this amended section or the section as 

it appeared at 10 CFR part 430, subpart 

B in the 10 CFR parts 200 to 499 edition 

revised January 1, 2014. DOE notes that, 

because testing under this section is 

required as of July 11, 2016, 

manufacturers may wish to begin using 

this amended test procedure 

immediately. Any representations made 

with respect to the energy use or 

efficiency of such commercial warm air 

furnaces must be made in accordance 

with whichever version is selected. 

(b) Testing. Where this section 

prescribes use of ANSI Z21.47 or UL 

727–2006 (incorporated by reference, 

see § 431.75), perform only the 

procedures pertinent to the 

measurement of the steady-state 

efficiency, as specified in paragraph (c) 

of this section. 

(c) Test set-up. (1) Test set-up for gasfired commercial warm air furnaces. 

The test set-up, including flue 

requirement, instrumentation, test 

conditions, and measurements for 

determining thermal efficiency is as 

specified in sections 1.1 (Scope), 2.1 

(General), 2.2 (Basic Test 

Arrangements), 2.3 (Test Ducts and 

Plenums), 2.4 (Test Gases), 2.5 (Test 

Pressures and Burner Adjustments), 2.6 

(Static Pressure and Air Flow 

Adjustments), 2.39 (Thermal Efficiency), 

and 4.2.1 (Basic Test Arrangements for 

Direct Vent Central Furnaces) of ANSI 

Z21.47 (incorporated by reference, see 

§ 431.75). The thermal efficiency test 

must be conducted only at the normal 

inlet test pressure, as specified in 

section 2.5.1 of ANSI Z21.47, and at the 

maximum hourly Btu input rating 

specified by the manufacturer for the 

product being tested. 

(2) Test setup for oil-fired commercial 

warm air furnaces. The test setup, 

including flue requirement, 

instrumentation, test conditions, and 

measurement for measuring thermal 

efficiency is as specified in sections 1 

(Scope), 2 (Units of Measurement), 3 

(Glossary), 37 (General), 38 and 39 (Test 

Installation), 40 (Instrumentation, 

except 40.4 and 40.6.2 through 40.6.7, 

which are not required for the thermal 

efficiency test), 41 (Initial Test 

Conditions), 42 (Combustion Test— 

Burner and Furnace), 43.2 (Operation 

Tests), 44 (Limit Control Cutout Test), 

45 (Continuity of Operation Test), and 

46 (Air Flow, Downflow or Horizontal 

Furnace Test), of UL 727–2006 

(incorporated by reference, see 

§ 431.75). You must conduct a fuel oil 

analysis for heating value, hydrogen 

content, carbon content, pounds per 

gallon, and American Petroleum 

Institute (API) gravity as specified in 

section 8.2.2 of HI BTS–2000 

(incorporated by reference, see 

§ 431.75). The steady-state combustion 

conditions, specified in Section 42.1 of 

UL 727–2006, are attained when 

variations of not more than 5 °F in the 

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42664 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

measured flue gas temperature occur for 

three consecutive readings taken 15 

minutes apart. 

(d) Additional test measurements—(1) 

Measurement of flue CO2 (carbon 

dioxide) for oil-fired commercial warm 

air furnaces. In addition to the flue 

temperature measurement specified in 

section 40.6.8 of UL 727–2006 

(incorporated by reference, see 

§ 431.75), you must locate one or two 

sampling tubes within six inches 

downstream from the flue temperature 

probe (as indicated on Figure 40.3 of UL 

727–2006). If you use an open end tube, 

it must project into the flue one-third of 

the chimney connector diameter. If you 

use other methods of sampling CO2, you 

must place the sampling tube so as to 

obtain an average sample. There must be 

no air leak between the temperature 

probe and the sampling tube location. 

You must collect the flue gas sample at 

the same time the flue gas temperature 

is recorded. The CO2 concentration of 

the flue gas must be as specified by the 

manufacturer for the product being 

tested, with a tolerance of ±0.1 percent. 

You must determine the flue CO2 using 

an instrument with a reading error no 

greater than ±0.1 percent. 

(2) Procedure for the measurement of 

condensate for a gas-fired condensing 

commercial warm air furnace. The test 

procedure for the measurement of the 

condensate from the flue gas under 

steady-state operation must be 

conducted as specified in sections 

7.2.2.4, 7.8, and 9.2 of ASHRAE 103 

(incorporated by reference, see § 431.75) 

under the maximum rated input 

conditions. You must conduct this 

condensate measurement for an 

additional 30 minutes of steady-state 

operation after completion of the steadystate thermal efficiency test specified in 

paragraph (c) of this section. 

(e) Calculation of thermal efficiency 

—(1) Gas-fired commercial warm air 

furnaces. You must use the calculation 

procedure specified in section 2.39, 

Thermal Efficiency, of ANSI Z21.47 

(incorporated by reference, see 

§ 431.75). 

(2) Oil-fired commercial warm air 

furnaces. You must calculate the 

percent flue loss (in percent of heat 

input rate) by following the procedure 

specified in sections 11.1.4, 11.1.5, and 

11.1.6.2 of the HI BTS–2000 

(incorporated by reference, see 

§ 431.75). The thermal efficiency must 

be calculated as: Thermal Efficiency 

(percent) = 100 percent ¥ flue loss (in 

percent). 

(f) Procedure for the calculation of the 

additional heat gain and heat loss, and 

adjustment to the thermal efficiency, for 

a condensing commercial warm air 

furnace. (1) You must calculate the 

latent heat gain from the condensation 

of the water vapor in the flue gas, and 

calculate heat loss due to the flue 

condensate down the drain, as specified 

in sections 11.3.7.1 and 11.3.7.2 of 

ASHRAE 103 (incorporated by 

reference, see § 431.75), with the 

exception that in the equation for the 

heat loss due to hot condensate flowing 

down the drain in section 11.3.7.2, the 

assumed indoor temperature of 70 °F 

and the temperature term TOA must be 

replaced by the measured room 

temperature as specified in section 2.2.8 

of ANSI Z21.47 (incorporated by 

reference, see § 431.75). 

(2) Adjustment to the thermal 

efficiency for condensing furnaces. You 

must adjust the thermal efficiency as 

calculated in paragraph (e)(1) of this 

section by adding the latent gain, 

expressed in percent, from the 

condensation of the water vapor in the 

flue gas, and subtracting the heat loss 

(due to the flue condensate down the 

drain), also expressed in percent, both 

as calculated in paragraph (f)(1) of this 

section, to obtain the thermal efficiency 

of a condensing furnace. 

■ 4. Section 431.92 is amended by 

adding in alphabetical order the 

definition of ‘‘water-source heat pump’’ 

to read as follows: 

§ 431.92 Definitions concerning 

commercial air conditioners and heat 

pumps. 

* * * * * 

Water-source heat pump means a 

single-phase or three-phase reversecycle heat pump that uses a circulating 

water loop as the heat source for heating 

and as the heat sink for cooling. The 

main components are a compressor, 

refrigerant-to-water heat exchanger, 

refrigerant-to-air heat exchanger, 

refrigerant expansion devices, 

refrigerant reversing valve, and indoor 

fan. Such equipment includes, but is not 

limited to, water-to-air water-loop heat 

pumps. 

■ 5. Section 431.97 is amended by: 

■ a. Revising paragraph (b); 

■ b. Redesignating Tables 4 through 8 in 

paragraphs (c), (d), (e) and (f), as Tables 

5 through 9 respectively; and 

■ c. Revising the introductory text of 

paragraph (c). 

The revisions read as follows: 

§ 431.97 Energy efficiency standards and 

their compliance dates. 

* * * * * 

(b) Each commercial air conditioner 

or heat pump (not including single 

package vertical air conditioners and 

single package vertical heat pumps, 

packaged terminal air conditioners and 

packaged terminal heat pumps, 

computer room air conditioners, and 

variable refrigerant flow systems) 

manufactured on or after the 

compliance date listed in the 

corresponding table must meet the 

applicable minimum energy efficiency 

standard level(s) set forth in Tables 1, 2, 

3, and 4 of this section. 

TABLE 1 TO § 431.97—MINIMUM COOLING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND HEATING EQUIPMENT

(NOT INCLUDING SINGLE PACKAGE VERTICAL AIR CONDITIONERS AND SINGLE PACKAGE VERTICAL HEAT PUMPS, 

PACKAGED TERMINAL AIR CONDITIONERS AND PACKAGED TERMINAL HEAT PUMPS, COMPUTER ROOM AIR CONDITIONERS, AND VARIABLE REFRIGERANT FLOW MULTI-SPLIT AIR CONDITIONERS AND HEAT PUMPS) 

Equipment category Cooling capacity Sub-category Heating type Efficiency level 

Compliance 

date: equipment 

manufactured on 

and after. . . 

Small Commercial Packaged AirConditioning and Heating 

Equipment (Air-Cooled, 3- 

Phase, Split-System).

<65,000 Btu/h ... AC All ................................................ SEER = 13 ....... June 16, 2008. 

HP All ................................................ SEER = 13 ....... June 16, 2008 1. 

Small Commercial Packaged AirConditioning and Heating 

Equipment (Air-Cooled, 3- 

Phase, Single-Package).

<65,000 Btu/h ... AC All ................................................ SEER = 13 ....... June 16, 2008 1. 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42665 

TABLE 1 TO § 431.97—MINIMUM COOLING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND HEATING EQUIPMENT

(NOT INCLUDING SINGLE PACKAGE VERTICAL AIR CONDITIONERS AND SINGLE PACKAGE VERTICAL HEAT PUMPS, 

PACKAGED TERMINAL AIR CONDITIONERS AND PACKAGED TERMINAL HEAT PUMPS, COMPUTER ROOM AIR CONDITIONERS, AND VARIABLE REFRIGERANT FLOW MULTI-SPLIT AIR CONDITIONERS AND HEAT PUMPS)—Continued 

Equipment category Cooling capacity Sub-category Heating type Efficiency level 

Compliance 

date: equipment 

manufactured on 

and after. . . 

HP All ................................................ SEER = 13 ....... June 16, 2008 1. 

Small Commercial Packaged AirConditioning and Heating 

Equipment (Air-Cooled).

≥65,000 Btu/h 

and <135,000 

Btu/h.

AC No Heating or Electric Resistance Heating.EER = 11.2 ....... January 1, 2010. 

All Other Types of Heating .......... EER = 11.0 ....... January 1, 2010. 

HP No Heating or Electric Resistance Heating.EER = 11.0 ....... January 1, 2010. 

All Other Types of Heating .......... EER = 10.8 ....... January 1, 2010. 

Large Commercial Packaged AirConditioning and Heating 

Equipment (Air-Cooled).

≥135,000 Btu/h 

and <240,000 

Btu/h.

AC No Heating or Electric Resistance Heating.EER = 11.0 ....... January 1, 2010. 

All Other Types of Heating .......... EER = 10.8 ....... January 1, 2010. 

HP No Heating or Electric Resistance Heating.EER = 10.6 ....... January 1, 2010. 

All Other Types of Heating .......... EER = 10.4 ....... January 1, 2010. 

Very Large Commercial Packaged 

Air-Conditioning and Heating 

Equipment (Air-Cooled).

≥240,000 Btu/h 

and <760,000 

Btu/h.

AC No Heating or Electric Resistance Heating.EER = 10.0 ....... January 1, 2010. 

All Other Types of Heating .......... EER = 9.8 ......... January 1, 2010. 

HP No Heating or Electric Resistance Heating.EER = 9.5 ......... January 1, 2010. 

All Other Types of Heating .......... EER = 9.3 ......... January 1, 2010. 

Small Commercial Package AirConditioning and Heating 

Equipment (Water-Cooled).

<65,000 Btu/h ... AC All ................................................ EER = 12.1 ....... October 29, 

2003. 

≥65,000 Btu/h 

and <135,000 

Btu/h.

AC No Heating or Electric Resistance Heating.EER = 12.1 ....... June 1, 2013. 

All Other Types of Heating .......... EER = 11.9 ....... June 1, 2013. 

Large Commercial Package AirConditioning and Heating 

Equipment (Water-Cooled).

≥135,000 and 

<240,000 Btu/

h.

AC No Heating or Electric Resistance Heating.EER = 12.5 ....... June 1, 2014. 

All Other Types of Heating .......... EER = 12.3 ....... June 1, 2014. 

Very Large Commercial Package 

Air-Conditioning and Heating 

Equipment (Water-Cooled).

≥240,000 and 

<760,000 Btu/

h.

AC No Heating or Electric Resistance Heating.EER = 12.4 ....... June 1, 2014. 

All Other Types of Heating .......... EER = 12.2 ....... June 1, 2014. 

Small Commercial Package AirConditioning and Heating 

Equipment (EvaporativelyCooled).

<65,000 Btu/h ... AC All ................................................ EER = 12.1 ....... October 29, 

2003. 

≥65,000 and 

<135,000 Btu/

h.

AC No Heating or Electric Resistance Heating.EER = 12.1 ....... June 1, 2013. 

All Other Types of Heating .......... EER = 11.9 ....... June 1, 2013. 

Large Commercial Package AirConditioning and Heating 

Equipment (EvaporativelyCooled).

≥135,000 and 

<240,000 Btu/

h.

AC No Heating or Electric Resistance Heating.EER = 12.0 ....... June 1, 2014. 

All Other Types of Heating .......... EER = 11.8 ....... June 1, 2014. 

Very Large Commercial Package 

Air-Conditioning and Heating 

Equipment (EvaporativelyCooled).

≥240,000 and 

<760,000 Btu/

h.

AC No Heating or Electric Resistance Heating.EER = 11.9 ....... June 1, 2014. 

All Other Types of Heating .......... EER = 11.7 ....... June 1, 2014. 

Small Commercial Packaged AirConditioning and Heating 

Equipment (Water-Source: 

Water-to-Air, Water-Loop).

<17,000 Btu/h ... HP All ................................................ EER = 11.2 ....... October 29, 

2003 2. 

≥17,000 Btu/h 

and <65,000 

Btu/h.

HP All ................................................ EER = 12.0 ....... October 29, 

2003 2. 

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42666 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

TABLE 1 TO § 431.97—MINIMUM COOLING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND HEATING EQUIPMENT

(NOT INCLUDING SINGLE PACKAGE VERTICAL AIR CONDITIONERS AND SINGLE PACKAGE VERTICAL HEAT PUMPS, 

PACKAGED TERMINAL AIR CONDITIONERS AND PACKAGED TERMINAL HEAT PUMPS, COMPUTER ROOM AIR CONDITIONERS, AND VARIABLE REFRIGERANT FLOW MULTI-SPLIT AIR CONDITIONERS AND HEAT PUMPS)—Continued 

Equipment category Cooling capacity Sub-category Heating type Efficiency level 

Compliance 

date: equipment 

manufactured on 

and after. . . 

≥65,000 Btu/h 

and <135,000 

Btu/h.

HP All ................................................ EER = 12.0 ....... October 29, 

2003 2. 

1And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards. 

2And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards. 

TABLE 2 TO § 431.97—MINIMUM HEATING EFFICIENCY STANDARDS FOR AIR-CONDITIONING AND HEATING EQUIPMENT

(HEAT PUMPS) 

Equipment category Cooling capacity Efficiency level 

Compliance date: equipment manufactured on and 

after. . . 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled, 3-Phase, Split-System).

<65,000 Btu/h .................... HSPF = 7.7 ....................... June 16, 2008.1

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled, 3-Phase, SinglePackage).

<65,000 Btu/h .................... HSPF = 7.7 ....................... June 16, 2008.1

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled).

≥65,000 Btu/h and 

<135,000 Btu/h.

COP = 3.3 ......................... January 1, 2010. 

Large Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled).

≥135,000 Btu/h and 

<240,000 Btu/h.

COP = 3.2 ......................... January 1, 2010. 

Very Large Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled).

≥240,000 Btu/h and 

<760,000 Btu/h.

COP = 3.2 ......................... January 1, 2010. 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Water-Source: Water-to-Air, 

Water-Loop).

<135,000 Btu/h .................. COP = 4.2 ......................... October 29, 2003.2

1And manufactured before January 1, 2017. See Table 3 of this section for updated efficiency standards. 

2And manufactured before October 9, 2015. See Table 3 of this section for updated efficiency standards. 

TABLE 3 TO § 431.97—UPDATES TO THE MINIMUM COOLING EFFICIENCY STANDARDS FOR CERTAIN AIR-CONDITIONING

AND HEATING EQUIPMENT

Equipment category Cooling capacity Sub-category Heating type Efficiency level 

Compliance date: 

equipment manufactured on and after 

Small Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled, 3-Phase, Split-System).<65,000 Btu/h ......... AC All SEER = 13.0 .......... June 16, 2008. 

................................. HP All SEER = 14.0 ........... January 1, 2017. 

Small Commercial Packaged Air-Conditioning and Heating Equipment (AirCooled, 3-Phase, Single-Package).<65,000 Btu/h ......... AC All SEER = 14.0 ........... January 1, 2017. 

................................. HP All SEER = 14.0 ........... January 1, 2017. 

Small Commercial Packaged Air-Conditioning and Heating Equipment (WaterSource: Water-to-Air, Water-Loop).<17,000 Btu/h ......... HP All EER = 12.2 ............. October 9, 2015. 

≥17,000 Btu/h and 

<65,000 Btu/h.

HP All EER = 13.0 ............. October 9, 2015. 

≥65,000 Btu/h and 

<135,000 Btu/h.

HP All EER = 13.0 ............. October 9, 2015. 

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Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 42667 

TABLE 4 TO § 431.97—UPDATES TO THE MINIMUM HEATING EFFICIENCY STANDARDS FOR CERTAIN AIR-CONDITIONING

AND HEATING EQUIPMENT (HEAT PUMPS) 

Equipment category Cooling capacity Efficiency level 

Compliance date: equipment manufactured on and 

after . . . 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled, 3-Phase, Split-System).

<65,000 Btu/h .................... HSPF = 8.2 ....................... January 1, 2017. 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Air-Cooled, 3-Phase, SinglePackage).

<65,000 Btu/h .................... HSPF = 8.0 ....................... January 1, 2017. 

Small Commercial Packaged Air-Conditioning and 

Heating Equipment (Water-Source: Water-to-Air, 

Water-Loop).

<135,000 Btu/h .................. COP = 4.3 ......................... October 9, 2015. 

(c) Each packaged terminal air 

conditioner (PTAC) and packaged 

terminal heat pump (PTHP) 

manufactured on or after January 1, 

1994, and before October 8, 2012 (for 

standard size PTACs and PTHPs) and 

before October 7, 2010 (for non-standard 

size PTACs and PTHPs) must meet the 

applicable minimum energy efficiency 

standard level(s) set forth in Table 5 of 

this section. Each PTAC and PTHP 

manufactured on or after October 8, 

2012 (for standard size PTACs and 

PTHPs) and on or after October 7, 2010 

(for non-standard size PTACs and 

PTHPs) must meet the applicable 

minimum energy efficiency standard 

level(s) set forth in Table 6 of this 

section. 

* * * * * 

■ 6. Section 431.110 is amended by 

revising the table to read as follows: 

§ 431.110 Energy conservation standards 

and their effective dates. 

* * * * * 

Equipment category Size 

Energy conservation standard a

Maximum standby loss c (equipment manufactured on and after 

October 29, 2003) b

Minimum thermal efficiency 

(equipment 

manufactured 

on and after 

October 29, 

2003 and before October 

9, 2015) b

Minimum thermal efficiency 

(equipment 

manufactured 

on and after 

October 9, 

2015) b

Electric storage water heaters .......................... All ................................ 0.30 + 27/Vm (%/hr) ....................... N/A N/A 

Gas-fired storage water heaters ....................... ≤155,000 Btu/hr ........... Q/800 + 110(Vr)c (Btu/hr) ............... 80% 80% 

>155,000 Btu/hr .......... Q/800 + 110(Vr)c (Btu/hr) ............... 80% 80% 

Oil-fired storage water heaters .......................... ≤155,000 Btu/hr ........... Q/800 + 110(Vr)c (Btu/hr) ............... 78% 80% 

>155,000 Btu/hr .......... Q/800 + 110(Vr)c (Btu/hr) ............... 78% 80% 

Gas-fired instantaneous water heaters and hot 

water supply boilers.

<10 gal ........................ N/A ................................................. 80% 80% 

≥10 gal ........................ Q/800 + 110(Vr)c (Btu/hr) ............... 80% 80% 

Oil-fired instantaneous water heaters and hot 

water supply boilers.

<10 gal ........................ N/A ................................................. 80% 80% 

≥10 gal ........................ Q/800 + 110(Vr)c (Btu/hr) ............... 78% 78% 

Equipment Category Size Minimum thermal insulation 

Unfired hot water storage tank ................................................................ All ................................................... R–12.5 

aVm is the measured storage volume, and Vr is the rated volume, both in gallons. Q is the nameplate input rate in Btu/hr. bFor hot water supply boilers with a capacity of less than 10 gallons: (1) The standards are mandatory for products manufactured on and after 

October 21, 2005, and (2) products manufactured prior to that date, and on or after October 23, 2003, must meet either the standards listed in 

this table or the applicable standards in subpart E of this part for a ‘‘commercial packaged boiler.’’ cWater heaters and hot water supply boilers having more than 140 gallons of storage capacity need not meet the standby loss requirement if: 

(1) The tank surface area is thermally insulated to R–12.5 or more; (2) a standing pilot light is not used; and (3) for gas or oil-fired storage water 

heaters, they have a fire damper or fan assisted combustion. 

Note: The following letter will not appear 

in the Code of Federal Regulations. 

March 24, 2015 

Anne Harkavy 

Deputy General Counsel for Litigation, 

Regulation and Enforcement 

U.S. Department of Energy Washington, 

DC 

Dear Deputy General Counsel 

Harkavy: I am responding to your 

January 2, 2015 letter seeking the views 

of the Attorney General about the 

potential impact on competition of 

proposed energy conservation standards 

for certain types of commercial heating, 

air-conditioning, and water-heating 

equipment. Your request was submitted 

under Section 325(o)(2)(B)(i)(V) of the 

Energy Policy and Conservation Act, as 

amended 42 U.S.C. 6295(o)(2)(B)(i)(V), 

which requires the Attorney General to 

make a determination of the impact of 

any lessening of competition that is 

likely to result from the imposition of 

proposed energy conservation 

standards. The Attorney General’s 

responsibility for responding to requests 

from other departments about the effect 

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42668 Federal Register / Vol. 80, No. 137 / Friday, July 17, 2015 / Rules and Regulations 

of a program on competition has been 

delegated to the Assistant Attorney 

General for the Antitrust Division in 28 

CFR 0.40(g). 

In conducting its analysis, the 

Antitrust Division examines whether a 

proposed standard may lessen 

competition, for example, by 

substantially limiting consumer choice, 

by placing certain manufacturers at an 

unjustified competitive disadvantage, or 

by inducing avoidable inefficiencies in 

production or distribution of particular 

products. A lessening of competition 

could result in higher prices to 

manufacturers and consumers, and 

perhaps thwart the intent of the revised 

standards by inducing substitution to 

less efficient products. 

We have reviewed the proposed 

standards contained in the Notice of 

Proposed Rulemaking (80 FR January 8, 

2015) (NOPR). We have also reviewed 

supplementary information submitted to 

the Attorney General by the Department 

of Energy, including a transcript of the 

public meeting held on the proposed 

standards on February 6, 2015 Based on 

this review, our conclusion is that the 

proposed energy conservation standards 

for commercial heating, airconditioning, and water-heating 

equipment are unlikely to have a 

significant adverse impact on 

competition. 

Sincerely, 

William J. Baer 

[FR Doc. 2015–16927 Filed 7–16–15; 8:45 am] 

BILLING CODE 6450–01–P 

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