CHAPTER 13. MANUFACTURER IMPACT ANALYSIS 

TABLE OF CONTENTS 

13.1 INTRODUCTION ......................................................................................................... 13-1 

13.2 METHODOLOGY ........................................................................................................ 13-1 

13.2.1 Phase I: Industry Profile..................................................................................... 13-1 

13.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide............................13-2 

13.2.2.1 Industry Cash-Flow Analysis...............................................................13-2 

13.2.2.2 Interview Guide ................................................................................... 13-2 

13.2.3 Phase III: Sub-Group Analysis .......................................................................... 13-3 

13.2.3.1 Manufacturer Interviews...................................................................... 13-3 

13.2.3.2 Revised Industry Cash-Flow Analysis................................................. 13-4 

13.2.3.3 Manufacturer Sub-Group Analysis...................................................... 13-4 

13.2.3.4 Small-Business Manufacturer Subgroup .............................................13-4 

13.2.3.5 Manufacturing Capacity Impact ..........................................................13-5 

13.2.3.6 Employment Impact............................................................................. 13-5 

13.2.3.7 Cumulative Regulatory Burden ........................................................... 13-5 

13.3 MANUFACTURER IMPACT ANALYSIS KEY ISSUES.......................................... 13-5 

13.3.1 General Service Fluorescent Lamps .................................................................. 13-6 

13.3.1.1 Rare Earth Phosphor Availability and Price ........................................13-6 

13.3.1.2 Reduction in Product Portfolio ............................................................13-6 

13.3.1.3 Profit Margin Impact............................................................................13-6 

13.3.2 Incandescent Reflector Lamps........................................................................... 13-6 

13.3.2.1 Product Performance Issues................................................................. 13-6 

13.3.2.2 Xenon Gas Availability and Price........................................................13-7 

13.3.2.3 Elimination of Product Types in the Manufacturers’ Product Portfolio 13-

7 

13.3.2.4 Elimination of Small Diameter Lamps ................................................ 13-7 

13.3.2.5 Competition.......................................................................................... 13-7 

13.3.2.6 Market Erosion..................................................................................... 13-8 

13.4 GRIM INPUTS AND ASSUMPTIONS........................................................................ 13-8 

13.4.1 Overview of the GRIM ...................................................................................... 13-8 

13.4.2 Sources GRIM Inputs ........................................................................................ 13-9 

13.4.2.1 Corporate Annual Reports ................................................................... 13-9 

13.4.2.2 Standard and Poor Credit Ratings...................................................... 13-10 

13.4.2.3 Dun & Bradstreet Reports..................................................................13-10 

13.4.2.4 Shipment Model................................................................................. 13-10 

13.4.2.5 Product Price Determination.............................................................. 13-10 

13.4.2.6 Manufacturer Interviews.................................................................... 13-10 

13.4.3 Financial Parameters........................................................................................ 13-11 

13.4.4 Corporate Discount Rate.................................................................................. 13-11 

13.4.5 Trial Standard Levels....................................................................................... 13-14 

13.4.6 NIA Shipments Forecast.................................................................................. 13-15 

13.4.6.1 GSFL Base-Case Shipment Scenarios............................................... 13-15 

13.4.6.2 IRL Base-Case Shipment Scenarios .................................................. 13-16 

13.4.6.3 GSFL Standards Shipment Scenarios ................................................ 13-17 

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13.4.6.4 IRL Standards Shipment Scenarios ................................................... 13-17 

13.4.7 Production Costs .............................................................................................. 13-17 

13.4.8 Conversion Costs ............................................................................................. 13-21 

13.4.8.1 Capital Conversion Costs...................................................................13-21 

13.4.8.2 Product Conversion Costs..................................................................13-23 

13.4.8.3 Conversion Costs Timing .................................................................. 13-25 

13.4.9 Markups ........................................................................................................... 13-25 

13.4.9.1 Flat Markup........................................................................................ 13-25 

13.4.9.2 Four-Tier Markup .............................................................................. 13-26 

13.5 GSFL INDUSTRY FINANCIAL IMPACTS.............................................................. 13-32 

13.5.1 Impacts on Industry Net Present Value ........................................................... 13-33 

13.5.2 Impacts on GSFL Annual Cash Flow .............................................................. 13-34 

13.6 IRL INDUSTRY FINANCIAL IMPACTS................................................................. 13-36 

13.6.1 Impacts on Industry Net Present Value ........................................................... 13-37 

13.6.2 Impacts on Annual Cash Flow......................................................................... 13-39 

13.7 OTHER IMPACTS...................................................................................................... 13-42 

13.7.1 Employment.....................................................................................................13-42 

13.7.1.1 GSFL Employment ............................................................................ 13-42 

13.7.1.2 IRL Employment ............................................................................... 13-43 

13.7.2 Manufacturing Capacity................................................................................... 13-49 

13.7.3 Cumulative Regulatory Burden ....................................................................... 13-50 

13.7.3.1 Federal DOE Regulations on Other Products Produced by the GSFL and 

IRL Manufacturers........................................................................................... 13-50 

13.7.3.2 EISA 2007 Requirements .................................................................. 13-52 

13.7.3.3 Restriction of Hazardous Substances Directive................................. 13-53 

13.7.3.4 Reporting Requirements .................................................................... 13-53 

13.7.4 Impacts on Small-Business Subgroup ............................................................. 13-54 

13.8 CONCLUSIONS.......................................................................................................... 13-54

13.8.1 GSFL................................................................................................................ 13-54 

13.8.2 IRL ................................................................................................................... 13-57 

REFERENCES ........................................................................................................................13-61 

LIST OF TABLES 

Table 13.4.1 GRIM Financial Parameters Based on 2002-2007 Weighted Company Financial 

Data..........................................................................................................................................13-11 

Table 13.4.2 Cost of Equity Calculation.................................................................................. 13-13 

Table 13.4.3 Cost of Debt Calculation..................................................................................... 13-14 

Table 13.4.4 GSFL Efficacy Levels by Product Class and TSL ............................................. 13-14 

Table 13.4.5 IRL Efficacy Levels by TSL............................................................................... 13-15 

Table 13.4.6 Total GSFL NIA-Shipments Forecast in 2012 and 2042 for the Existing 

Technologies Base Case .......................................................................................................... 13-16 

Table 13.4.7 Total GSFL NIA-Shipments Forecast in 2012 and 2042 for the Emerging 

Technologies Base Case .......................................................................................................... 13-16 

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Table 13.4.8 Total IRL NIA-Shipments Forecast in 2012, 2020, and 2042 for the Existing 

Technologies Base Case .......................................................................................................... 13-16 

Table 13.4.9 Total IRL NIA-Shipments Forecast in 2012, 2020, and 2042 for the Emerging 

Technologies Base Case .......................................................................................................... 13-17 

Table 13.4.10 Base-Case Production Costs (2008$) used in the GRIM for 4-Foot Medium Bipin 

Product Classes........................................................................................................................ 13-18 

Table 13.4.11 Base-Case Production Costs (2008$) used in the GRIM for 8-Foot Single Pin 

Slimline Product Classes.......................................................................................................... 13-18 

Table 13.4.12 Base-Case Production Costs (2008$) used in the GRIM for 8-Foot Recessed 

Double Contact High Output Product Classes......................................................................... 13-19 

Table 13.4.13 Base-Case Production Costs (2008$) used in the GRIM for 4-Foot T5 Standard 

Output Product Class............................................................................................................... 13-19 

Table 13.4.14 Base-Case Production Costs (2008$) used in the GRIM for 4-Foot T5 High Output 

Product Class ........................................................................................................................... 13-19 

Table 13.4.15 Base-Case Production Costs (2008$) used in the GRIM for IRL Covered Product 

Classes......................................................................................................................................13-20 

Table 13.4.16 Base-Case Production Costs (2008$) used in the GRIM for IRL Non-Covered 

Product Classes........................................................................................................................ 13-20 

Table 13.4.17 Capital Conversion Costs for GSFL by Product Class..................................... 13-21 

Table 13.4.18 Capital Conversion Costs for the IRL Industry (Existing Technologies Base Case)

.................................................................................................................................................. 13-23 

Table 13.4.19 Capital Conversion Costs for the IRL Industry (Emerging Technologies Base 

Case) ........................................................................................................................................ 13-23 

Table 13.4.20 GSFL Product Conversion Costs by Product Class.......................................... 13-24 

Table 13.4.21 Product Conversion Costs for the IRL Industry ............................................... 13-24 

Table 13.4.22 Base Case Four-Tier Markup for GSFL: 4-Foot Medium Bipin Product – Existing 

Technologies Base Case .......................................................................................................... 13-29 

Table 13.4.23 Base Case Four-Tier Markup for GSFL: 8-Foot Single Pin Slimline Product – 

Existing Technologies Base Case ............................................................................................ 13-29 

Table 13.4.24 Base Case Four-Tier Markup for GSFL: 8-Foot Recessed Double Contact – 

Existing Technologies Base Case ............................................................................................ 13-30 

Table 13.4.25 Base Case Four-Tier Markup for GSFL: 4-Foot T5 Product Class – Existing 

Technologies Base Case .......................................................................................................... 13-30 

Table 13.4.26 Base Case Four-Tier Markup for GSFL: 4-Foot T5 High Output Product – 

Existing Technologies Base Case ............................................................................................ 13-30 

Table 13.4.27 Base Case Four-Tier Markup for GSFL: 4-Foot Medium Bipin Product – 

Emerging Technologies Base Case.......................................................................................... 13-31 

Table 13.4.28 Base Case Four-Tier Markup for GSFL: 8-Foot Single Pin Slimline Product – 

Emerging Technologies Base Case.......................................................................................... 13-31 

Table 13.4.29 Base Case Four-Tier Markup for GSFL: 8-Foot Recessed Double Contact – 

Emerging Technologies Base Case.......................................................................................... 13-32 

Table 13.4.30 Base Case Four-Tier Markup for GSFL: 4-Foot T5 Product Class – Emerging 

Technologies Base Case .......................................................................................................... 13-32 

Table 13.4.31 Base Case Four-Tier Markup for GSFL: 4-Foot T5 High Output Product – 

Emerging Technologies Base Case.......................................................................................... 13-32 

Table 13.5.1 Changes in Base-Case Industry Net Present Values for the GSFL Industry......13-33 

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Table 13.5.2 Changes in Industry Net Present Value for the GSFL Industry with a Flat Markup 

Scenario, Existing Technologies Base Case – High Lighting Expertise – Shift in Efficacy 

Distribution .............................................................................................................................. 13-34 

Table 13.5.3 Changes in Industry Net Present Value for the GSFL Industry with a Four-Tier 

Markup Scenario, Emerging Technologies Base Case – Market Segment Based – Roll-up in 

Efficacy Distribution................................................................................................................ 13-34 

Table 13.6.1 Changes in Base-Case Industry Net Present Values for the IRL Industry .........13-37 

Table 13.6.2 Changes in Industry Net Present Value for IRL Industry Under the Existing 

Technologies Base Case - BR Substitution Scenario - Shift in Efficacy Distribution – 

Commercial Lamp Lifetimes................................................................................................... 13-38 

Table 13.6.3 Changes in Industry Net Present Value for IRL Industry Under the Emerging 

Technologies Base Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – 

Commercial Lamp Lifetimes................................................................................................... 13-38 

Table 13.7.1 Change in the Average Number of Domestic Employees in the IRL Industry Under 

the Existing Technologies Base Case – BR Substitution Scenario - Shift in Efficacy Distribution 

– Commercial Lamp Lifetimes................................................................................................ 13-44 

Table 13.7.2 Change in the Average Number of Domestic Employees in the IRL Industry Under 

the Emerging Technologies Base Case – CFL Substitution Scenario – Roll-Up in Efficacy 

Distribution – Commercial Lamp Lifetimes............................................................................ 13-45 

Table 13.7.3 Change in the Average Number of Domestic Employees in the IRL Industry Under 

the Existing Technologies Base Case – BR Substitution Scenario – Roll-Up in Efficacy 

Distribution – Baseline Lifetime Scenario............................................................................... 13-45 

Table 13.7.4 Change in the Average Number of Domestic Employees in the IRL Industry Under 

the Emerging Technologies Base Case – CFL Substitution Scenario – Shift in Efficacy 

Distribution – Baseline Lifetime Scenario............................................................................... 13-45 

Table 13.7.5 Other DOE and Federal Actions Affecting the GSFL and IRL Industries.........13-51 

Table 13.7.6 EISA 2007 GSIL Standards................................................................................ 13-52 

Table 13.7.7 EISA 2007 Modified Spectrum GSIL Standards................................................ 13-52 

LIST OF FIGURES 

Figure 13.4.1 Using the GRIM to Calculate Cash Flow............................................................ 13-9 

Figure 13.4.2 Market Shares of 4-Foot T8 MPB 700, 800, and 800 Plus Series Lamps Under the 

Emerging Technology Base Case ............................................................................................ 13-27 

Figure 13.4.3 Base Case Markups for 4-Foot MPB T8 700, 800, and 800 Plus Series Lamps Over 

Time Under the Emerging Technology Base Case.................................................................. 13-28 

Figure 13.5.1 Annual Net Cash Flow for GSFL Industry with a Flat Markup Scenario, Existing 

Technologies Base Case – High Lighting Expertise – Shift in Efficacy Distribution.............13-35 

Figure 13.5.2 Annual Net Cash Flow for GSFL Industry with a Four-Tier Markup Scenario, 

Emerging Technologies Base Case – Market Segment Based – Roll-up in Efficacy Distribution

.................................................................................................................................................. 13-35 

Figure 13.6.1 Annual Net Cash Flow for IRL Industry Under the Existing Technologies Base 

Case - BR Substitution Scenario - Shift in Efficacy Distribution – Commercial Lamp Lifetimes

.................................................................................................................................................. 13-39 

13-iv 
 

13-v 

Figure 13.6.2 Annual Net Cash Flow for IRL Industry Under the Emerging Technologies Base 

Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – Commercial Lamp 

Lifetimes..................................................................................................................................13-40 

Figure 13.6.3 Annual Net Cash Flow for IRL Industry Under the Existing Technologies Base 

Case - BR Substitution Scenario – Roll-Up in Efficacy Distribution – Baseline Lifetime Scenario

.................................................................................................................................................. 13-40 

Figure 13.6.4 Annual Net Cash Flow for IRL Industry Under the Emerging Technologies Base 

Case – CFL Substitution Scenario – Shift in Efficacy Distribution – Baseline Lifetime Scenario

.................................................................................................................................................. 13-41 

Figure 13.7.1 Total IRL Industry Employment by Year Under the Existing Technologies Base 

Case - BR Substitution Scenario - Shift in Efficacy Distribution – Commercial Lamp Lifetimes

.................................................................................................................................................. 13-46 

Figure 13.7.2 Total IRL Industry Employment by Year Under the Emerging Technologies Base 

Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – Commercial Lamp 

Lifetimes..................................................................................................................................13-47 

Figure 13.7.3 Total IRL Industry Employment by Year Under the Existing Technologies Base 

Case - BR Substitution Scenario - Shift in Efficacy Distribution – Baseline Lifetime Scenario 13-

47 

Figure 13.7.4 Total IRL Industry Employment by Year Under the Emerging Technologies Base 

Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – Baseline Lifetime 

Scenario.................................................................................................................................... 13-48 
 

CHAPTER 13. MANUFACTURER IMPACT ANALYSIS 

13.1 INTRODUCTION 

In determining whether a standard is economically justified, the U.S Department of 

Energy (DOE) is required to consider “the economic impact of the standard on the manufacturers 

and on the consumers of the products subject to such a standard.” (42 U.S.C. 6313(a)(6)(B)(i)) 

The law also calls for an assessment of the impact of any lessening of competition as determined 

in writing by the Attorney General. Id. DOE conducted a manufacturer impact analysis (MIA) to 

estimate the financial impact of higher energy conservation standards on manufacturers of 

general service fluorescent lamps (GSFL) and incandescent reflector lamps (IRL), and to assess 

the impact of such standards on employment and manufacturing capacity. The MIA has both 

quantitative and qualitative aspects. 

The quantitative part of the MIA primarily relies on Government Regulatory Impact 

Models (GRIMs), industry-cash-flow models adapted for this rulemaking. The GRIM inputs 

include information on industry cost structure, shipments, and pricing strategies. The GRIM’s 

key output is the industry net present value (INPV). The model estimates the financial impact of 

higher energy conservation standards by comparing changes in INPV between a base case and 

the various trial standard levels (TSLs). The qualitative part of the MIA addresses factors such as 

product characteristics, characteristics of particular manufacturers, and market and product 

trends. It also assesses the impact of standards on subgroups of manufacturers. 

13.2 METHODOLOGY 

DOE conducted the MIA in three phases. Phase I, “Industry Profile,” consisted of the 

preparation of an industry characterization for both the GSFL and IRL industries, including data 

on market share, sales volumes and trends, pricing, employment and financial structure. Phase II, 

“Industry Cash Flow,” focused on the GSFL and IRL industries individually. In this phase, DOE 

used two separate GRIMs to prepare an industry cash flow analysis for GSFL and IRL. For the 

quantitative portion of the MIA analysis, DOE analyzed the same product classes used in the 

national impact analysis (NIA) and the life-cycle cost (LCC) analysis. Using publicly available 

information developed in Phase I, DOE adapted each GRIM’s generic structure to facilitate 

analysis of amended energy conservation standards. In Phase III, “Sub-Group Impact Analysis,” 

DOE interviewed manufacturers representing over 90 percent of domestic GSFL and 85 percent 

of IRL sales. The companies interviewed included both large and small manufacturers, and 

members and non-members of the National Electrical Manufacturers Association (NEMA) to 

provide a representative cross-section of the industries. During these interviews, DOE discussed 

financial topics specific to each manufacturer and obtained each manufacturer’s view of the 

GSFL and IRL industries. The interviews provided valuable information that DOE used to 

evaluate the impacts of amended energy conservation standards on manufacturers’ cash flows, 

manufacturing capacities, and employment levels. 

13.2.1 Phase I: Industry Profile 

In Phase I of the MIA, DOE prepared a profile of the GSLF and IRL industries that built 

upon the market and technology assessment prepared for this rulemaking (see chapter 3 of this 

13-1 
 

TSD). Before initiating the detailed impact studies, DOE collected qualitative and quantitative 

financial information and past and present market data. This included estimated market shares of 

GSFL and IRL manufacturers, corporate operating ratios, wages, employment, and production 

cost ratios. The industry profile included a topdown cost analysis of GSFL and IRL 

manufacturers that DOE used to derive cost and preliminary financial inputs for the GRIM (e.g., 

revenues; material; labor; overhead; depreciation; selling, general and administrative expenses 

(SG&A); and research and development (R&D) expenses). DOE also used public information to 

further calibrate its initial characterization of the industry, including Securities and Exchange 

Commission (SEC) 10–K and 20-F reports, Standard & Poor’s (S&P) stock reports, and 

corporate annual reports. In addition, DOE relied on information from its engineering analysis, 

product price determination, LCC, and markups analysis to characterize the GSFL and IRL 

manufacturing industries. 

13.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide 

In Phase II, DOE performed industry cash-flow analyses and prepared written guidelines 

for interviewing manufacturers. Phase II focused on the financial impacts of amended standards 

on the GSFL and IRL industries. Amended energy conservation standards can affect GSFL and 

IRL manufacturers in three distinct ways: (1) require additional investment, (2) raise production 

costs, and (3) impact revenues through higher prices and, possibly, lower shipments. The 

analytical tool DOE uses for calculating the financial impacts of amended energy conservation 

standards on manufacturers is the GRIM. DOE performed a cash flow analysis using the GRIM 

for the GSFL and IRL industries to quantify these impacts. 

13.2.2.1 Industry Cash-Flow Analysis 

Both GRIMs use several factors to determine a series of annual cash flows for the year 

standards become effective and several years after implementation. These factors include annual 

shipments; expected revenues; costs of sales; SG&A expenses; taxes; and capital expenditures 

related to amended energy conservation standards. Inputs to the GRIMs included shipment and 

price forecasts developed in other analyses. DOE derived the manufacturing costs using the retail 

prices from the product price determination, an estimated retail markup from public financial 

reports, and interviews with manufacturers. DOE developed alternative markup scenarios based 

on discussions with manufacturers and input from other interested parties during the rulemaking. 

DOE’s shipments analysis, presented in chapter 10 of this TSD, provided the basis for the 

shipment projections under each TSLs in the GRIMs. Another input, financial parameters, was 

developed based on publicly available data and confidentially submitted manufacturer 

information. The results of the GRIM at each TSL are compared against two separate base-case 

projections, which represent the GSFL and IRL industry absent standards. The financial impact 

of amended energy conservation standards is the difference between the two sets of discounted 

annual cash flows. 

13.2.2.2 Interview Guide 

During Phase III of the MIA, DOE conducted interviews with GSFL and IRL 

manufacturers to gather information on the effects of amended energy conservation standards on 

revenues and finances, direct employment, capital assets, and on industry competitiveness. Prior 

13-2 
 

to the interviews, DOE distributed an interview guide that provided a starting point to identify 

relevant issues and help identify the impacts of amended energy conservation standards on 

individual manufacturers or sub-groups of manufacturers. The interview guide covered current 

organizational characteristics, industry structure, inputs to the manufacturer cash-flow analysis, a 

competitive impacts assessment, an employment impacts assessment, and a manufacturing 

capacity impacts assessment. The interview guides used to conduct the manufacturer interviews 

are found in appendix 13A of this TSD. 

13.2.3 Phase III: Sub-Group Analysis 

During the course of the MIA, DOE interviewed manufacturers representing close to 90 

percent of domestic GSFL and 85 percent of domestic IRL lighting sales. These companies also 

participated in interviews for the engineering analysis. However, the MIA interviews broadened 

the discussion from primarily technology-related issues to include business related topics. One 

objective was to obtain feedback from industry on the assumptions used in the GRIM and to 

isolate key issues and concerns. DOE defined two distinctive subgroups for both GSFL and IRL 

that could be impacted by the amended energy conservation standards: major or large 

manufacturers, and small business manufacturers. The following sections summarize the 

methodology and findings of this assessment. 

13.2.3.1 Manufacturer Interviews 

The information gathered in Phase I and the cash-flow analysis performed in Phase II are 

supplemented with information gathered during interviews with manufacturers during Phase III. 

The interview process has a key role in the manufacturer impact analyses, since it provides an 

opportunity for interested parties to express their views privately on important issues, allowing 

confidential or sensitive information to be considered in the rulemaking process. 

DOE established two subgroups for the MIA corresponding to large manufacturers and 

small business manufacturers of GSFL and IRL found within the industries. Based on this 

decision, DOE prepared one interview guide with questions related to both GSFL and IRL 

manufacturing for large and small manufacturers. These interview guides were used to tailor the 

GRIMs to incorporate unique financial characteristics for each product type. Within each of 

these subgroups, DOE contacted companies from its database of manufacturers, which provided 

a representation of each subgroup. Small and large companies, subsidiaries and independent 

firms, and public and private corporations were interviewed. Interviews were scheduled well in 

advance in order to provide every opportunity for key individuals to be available for comment. 

Although a written response to the questionnaire was acceptable, DOE preferred an interactive 

interview process because it helped clarify responses and provide the opportunity to identify 

additional issues. 

DOE conducted detailed interviews with all GSFL and IRL manufacturers that agreed to 

participate to gain insight into the range of potential impacts and to how this range varies at each 

TSL. During the interviews, DOE solicited information on the possible impacts of energy 

conservation standards on sales, direct employment, capital assets, and industry competitiveness. 

Both qualitative and quantitative information are valuable to the interview process. Finally, a 

separate GRIM was developed for both the GSFL and IRL industries. 

13-3 
 

13.2.3.2 Revised Industry Cash-Flow Analysis 

In Phase II of the MIA, DOE provided manufacturers with preliminary GRIM input 

financial figures for review and evaluation. During the interviews, DOE requested comment and 

suggestions regarding the values selected for the parameters. Upon completion of the interviews, 

DOE revised its industry cash flow model based on the feedback provided through the 

interviews. More information on how DOE calculated the parameters for the industry GRIMs is 

found in section 13.4.3 of this chapter. 

13.2.3.3 Manufacturer Sub-Group Analysis 

Using average cost assumptions to develop an industry cash flow estimate is not adequate 

for assessing differential impacts among sub-groups of manufacturers. Smaller manufacturers, 

niche players, or manufacturers exhibiting a cost structure that differs significantly from the 

industry average could be more negatively affected. Ideally, DOE would consider the impact on 

every manufacturer individually; however, it typically uses the results of the industry 

characterization to group manufacturers exhibiting similar characteristics. During the interview 

process, DOE discussed the potential sub-groups and sub-group members that have been 

identified for the analysis. DOE looked to the manufacturers and other stakeholders to suggest 

what sub-groups or characteristics are the most appropriate for the analysis. 

13.2.3.4 Small-Business Manufacturer Subgroup 

DOE used the small business size standards published on August 22, 2008, as amended, 

by the Small Business Administration (SBA) to determine whether any small entities would be 

required to comply with the rule. 61 FR 3286 and codified at 13 CFR Part 121. The size 

standards are listed by North American Industry Classification System (NAICS) code and 

industry description. Lighting manufacturing is classified under NAICS 335110 “Electric Lamp 

Bulb and Part Manufacturer.” To be categorized as a small business, a manufacturer of lighting 

and its affiliates may employ a maximum of 1,000 employees. 

During its market survey, DOE created a list of every company that manufactures both 

covered and non-covered GSFL and IRL for sale in the United States. DOE also asked 

stakeholders and industry representatives if they were aware of any other small manufacturers. 

DOE then reviewed publicly available data and contacted companies on its list, when needed, to 

determine whether they meet the SBA’s definition of a small business manufacturer in the GSFL 

or IRL industries. In total, DOE identified 57 companies that could potentially be small 

businesses. During initial review of the 57 companies in its list, DOE either contacted or 

researched each company to determine if it manufactures covered GSFL and IRL. Based on its 

research, DOE screened out companies that did not offer lamps covered by this rulemaking. 

Consequently, DOE estimated that only 12 companies out of the 57 listed were potentially small 

business manufacturers of covered products. DOE contacted these potential small business 

manufacturers to request an interview about the possible impacts on small business 

manufacturers. Out of the 12 potential small business manufacturers, DOE interviewed four 

while the remaining companies declined or did not respond to the request. However, through 

additional research and inquiring of the remaining companies, DOE determined that these other 

eight companies were not small business manufacturers or did not manufacture covered GSFL or 

13-4 
 

IRL lamps. Based on its initial screening and subsequent interviews, DOE identified only one 

company as a small business manufacturer of covered GSFL based on SBS’s definition of small 

business manufacturer. 

13.2.3.5 Manufacturing Capacity Impact 

One of the significant outcomes of amended energy conservation standards could be the 

consequential obsolescence of existing manufacturing assets, including tooling and investment. 

The manufacturer interview guide has a series of questions to help identify impacts on 

manufacturing capacity, specifically capacity utilization and plant location decisions in the 

United States and North America with and without amending energy conservation standards; the 

ability of manufacturers to upgrade or remodel existing facilities to accommodate the new 

requirements due to amended energy conservation standards; the nature and value of stranded 

assets, if any; and estimates for any one-time restructuring charges.

13.2.3.6 Employment Impact 

The impact of amended energy conservation standards on employment is an important 

consideration in the rulemaking process. To assess how domestic employment patterns might be 

affected, the interview explored current employment trends in the lighting industry. In addition, 

the interviews solicited manufacture views on changes in employment patterns that may result 

from more stringent standard levels. The employment impacts section of the interview guide 

focused on current employment levels associated with manufacturers at each of their production 

facilities, expected future employment levels with and without an amended energy conservation 

standard, and differences in workforce skills and issues related to the retraining of employees.

13.2.3.7 Cumulative Regulatory Burden 

DOE recognizes and seeks to mitigate the overlapping effects on manufacturers of 

amended energy conservation standards and other regulatory actions affecting the same products. 

DOE analyzed and considered the impact on manufacturers of multiple, product-specific 

regulatory actions. Based on its own research and discussions with manufacturers, DOE 

identified several regulations relevant to GSFL and IRL manufacturers. These regulations 

include: (1) Federal energy conservation standards and minimum performance requirements 

prescribed by the Energy Policy Act of 2005 (EPACT 2005) and the Energy Security Act of 

2007 (EISA 2007) for other products and equipment manufactured by these companies; (2) 

environmental regulations; and (3) reporting requirements.

13.3 MANUFACTURER IMPACT ANALYSIS KEY ISSUES 

The first question of each of the MIA interview guides asks: “What are the key issues for 

your company regarding the GSFL or IRL energy conservation standards rulemaking?” This 

open question initiated dialogue with the manufacturers, enabling them to identify key points that 

DOE would explore and discuss during the interview. This section describes the key issues 

manufacturers felt were of the highest importance in relation to the GSFL and IRL energy 

conservation standards rulemaking and that would have the most significant impact on the 

industries. The issues are overall concerns that many manufacturers expressed and in most cases, 

are dependent upon the type of product (GSFL or IRL). 

13-5 
 

13.3.1 General Service Fluorescent Lamps 

13.3.1.1 Rare Earth Phosphor Availability and Price 

All of the GSFL manufacturers DOE interviewed are concerned about the availability and 

price of rare earth phosphors. Due to the importation of rare earth phosphors, any increases in 

duties paid to producing countries, such as China, could have significant impacts on lamp 

manufacturing costs. Any increase in lamp material costs directly affects manufacturer 

profitability. According to manufacturers, meeting higher energy conservation standards for 

GSFL would require an increase in rare earth phosphor content in lamp coatings. These 

manufacturers stated that higher energy conservation standards would drive up demand for and 

prices of rare earth phosphors, which are already in short supply. In addition, manufacturers 

stated that the continued growth in the CFL market will erode future supply, jeopardizing the 

cost-effectiveness of the standards. Depending on the lamp type, rare earth phosphors can be the 

highest input cost of a GSFL. Some manufacturers also noted that higher standards could drive 

manufacturing processes to China, where the vast majority of rare earth phosphors are mined. 

Issues with rare earth phosphors are specifically addressed in appendix 3C of the TSD. 

13.3.1.2 Reduction in Product Portfolio 

Some manufacturers are concerned that energy conservation standards will force 

manufacturers to eliminate some product lines, shrinking their overall marketability. According 

to manufacturers, the ability to survive in the industry is related to the companies’ diverse 

product portfolios. Companies benefit from a wide range of products and efficacies. Depending 

on the characteristics of the product, manufacturers can up-sell to products that reap higher 

profits. Manufacturers are concerned that reducing the product portfolio will reduce options for 

customers and, ultimately, profitability. 

13.3.1.3 Profit Margin Impact 

All manufacturers stated that energy conservation standards have the potential to greatly 

harm their profitability. Manufacturers enjoy a higher profit margin on higher efficacy or 

premium products than lower-end or baseline products. Since higher efficacy or premium 

products tend to incorporate design options that increase efficacy, a high energy conservation 

standard would commoditize such products and subsequently lower the overall manufacturer 

markup on shipments. Several manufacturers stated it is very difficult to pass along cost 

increases to customers because of the competitive nature of the industry. Therefore, they believe 

any cost increase due to standards set by DOE would automatically lower profit margins. 

13.3.2 Incandescent Reflector Lamps 

13.3.2.1 Product Performance Issues 

All manufacturers stated that implementation of design options to meet the proposed 

energy conservation standards could cause a reduction in product lifetime. Manufacturers stated 

that all TSLs analyzed in the advanced notice of proposed rulemaking could be met by lamps 

that combine improved technology with shorter life. In addition to this broad possibility, 

manufacturers indicated that the product lifetime of infrared lamps that meet efficacy levels 

13-6 
 

prescribed by TSL3, TSL4, and TSL5 could be lowered due to the “hot shock”a application 

problem. If infrared lamps are installed in a live fixture, sections of the lamp’s filament can fuse 

together, possibly decreasing the lifetime by 25 to 30 percent. Manufacturers are concerned that 

both the performance issues of hot shock and shorter life could impact consumers’ acceptance of 

covered IRL products. Any dissatisfaction resulting lower lifetimes of standards-compliant 

lamps could hasten the shift to competing technologies, which have much longer lifetimes. 

13.3.2.2 Xenon Gas Availability and Price 

According to several manufacturers, most higher efficacy model lamps at each TSL use 

xenon to increase efficacy. While using a different fill gas does not require significant capital 

investments, manufacturers stated that xenon prices have increased as much as ten-fold in the 

past few years. In the short term, global supplies of xenon are limited by existing production 

capacity, so the IRL industry has to compete with other industries, such as medical applications, 

that are better able to support higher prices. For more information on DOE’s analysis of this 

issue, see appendix 3B of the TSD. 

13.3.2.3 Elimination of Product Types in the Manufacturers’ Product Portfolio 

Manufacturers are concerned that at higher efficacy levels, all lamps will need to switch 

to all infrared technology, significantly reducing product offerings. 

13.3.2.4 Elimination of Small Diameter Lamps 

Manufacturers are concerned that energy conservation standards could eliminate smaller 

diameter lamps. Because of the small size, all manufacturers use a single-ended quartz burner in 

lamps smaller than parabolic aluminized reflector (PAR)30, limiting potential efficacy 

improvements. Although DOE scales its standard to smaller diameter lamps and there are 

existing PAR20 lamps at all TSLs, manufacturers are concerned that the improvements for small 

diameter lamps at high TSLs could be impossible or cost prohibitive. 

13.3.2.5 Competition 

Manufacturers stated that some TSLs could affect competition within the industry. For 

example, one manufacturer has a patent on silverized reflectors. While DOE did not establish 

any TSL that would mandate using this technology (i.e., there are alternate technology pathways 

to all TSLs that do not require the use of the silverized reflector), this manufacturer could meet 

TSL 2 with cheaper lamps than its competitors. One manufacturer has a cross license on the 

technology, but has not made silverized lamps recently and would incur substantial capital and 

conversion costs to produce them. There are competitive concerns at TSL 4 and TSL 5 as well. 

Two manufacturers have a full line of products that currently meet TSL 4. The third 

 

a

 Hot shock, as described by manufacturers, occurs when sections of the lamp’s filament fuse together due to 

installation of the lamp in a live fixture. Due to its structure, the filament is very sensitive to motion and can easily 

bend during installation. As current passes through the filament, the filament’s temperature increases significantly. 

If a lamp is installed while current is passing through the filament (i.e., the fixture is live), a bending of the filament 

can potentially cause the bended segment to fuse together permanently. 

13-7 
 

manufacturer has some products at this level, but is concerned that it would have to incur 

significantly larger capital conversion costs at TSL 4 and TSL 5 to redesign and manufacture 

different burners, which could put it at a competitive disadvantage. Only one manufacturer 

currently has a full line of products at TSL 5. At TSL 5, similar to TSL 2, standards-compliant 

lamps could combine halogen infrared (HIR) technology with an improved reflector, potentially 

putting the company that does not have access to silverized reflectors or equivalent technology at 

a disadvantage. 

13.3.2.6 Market Erosion 

Manufacturers stated that emerging technologies is already starting to penetrate the IRL 

market. A standard on IRL would be unique because it would force investments in a market that 

would shrink over the entire lifetime of the investment. Depending on market penetration of 

emerging technologies, these investments might never be recouped. Also, manufacturers are 

concerned that a standard on IRL could hasten the switch to emerging technologies by lowering 

the difference in their first cost price. If the standard did increase the natural migration toward 

new technology, it would be less likely that manufacturers would make the substantial 

investments to modify IRL production equipment. Finally, manufacturers are concerned that the 

BR exemptions in EISA 2007 could also erode the market: The higher the IRL standard, the 

lower the relative cost of the exempted incandescent lamps. If a lower relative cost causes a large 

shift to exempted incandescent lamps, it is less likely that investments in improved halogen 

lamps could be justified. 

13.4 GRIM INPUTS AND ASSUMPTIONS 

The GRIM serves as the main tool for assessing the impact on industry due to the 

imposition of amended energy conservation standards. DOE relied on several sources to obtain 

inputs for the GRIMs. Data and assumptions from these sources are then fed into an accounting 

model that calculates the base-case cash flows, as well as the impacts on manufacturers due to 

amended energy conservation standards. Two GRIM models were developed, one for GSFL and 

one for IRL. 

13.4.1 Overview of the GRIM 

The basic structure of the GRIM, illustrated in Figure 13.4.1 is a standard annual cash 

flow analysis that uses manufacturer selling prices, shipments, and industry financial information 

as inputs, and accepts a set of regulatory conditions such as changes in costs, shipments, and 

associated margins. The GRIM spreadsheet uses a number of inputs to arrive at a series of annual 

cash flows, beginning with the base year of the analysis, 2009, and continuing to 2042. The 

model calculates the INPV by summing the stream of annual discounted cash flows during this 

period.1

13-8 
 

Figure 13.4.1 Using the GRIM to Calculate Cash Flow

The GRIM projected cash flows using standard accounting principles and compared 

changes in INPV between the selected base-case scenario and different TSLs for the amended 

energy conservation standard (the standard-case scenario). The difference in INPV between the 

base case and the standard case(s) represents the estimated financial impact of the amended 

energy conservation standard on manufacturers. Appendix 13A provides more technical details 

and user information for the GRIM. 

13.4.2 Sources GRIM Inputs 

The GRIM uses several different sources for data inputs in determining the cash flows for 

the industry, including corporate annual reports, credit ratings, the shipments model, the 

engineering analysis, the product price determination, and the manufacturer interviews. 

13.4.2.1 Corporate Annual Reports 

Corporate annual reports to the SEC provided many of the financial inputs to the GRIM.2

These reports exist for publicly held companies and are freely available to the general public. 

DOE developed average financial inputs to the GRIMs by examining the annual SEC 10-K and 

20-F reports filed by publicly-traded companies that manufacture lighting products including 

GSFL and IRL. The SEC 10-Ks and 20-Fs provide consistent financial data for the consolidated 

corporation but do not provide detailed financial information for the company’s lighting product 

lines. Because these companies are typically diversified, producing a range of different products, 

an industry average was assumed by DOE to be representative for the manufacture of both GSFL 

and IRL. Some SEC reports are therefore more relevant than others are to the analysis of the 

GSFL and IRL industries, depending on the prominence that business has in the company’s 

overall operations. In determining financial parameters for GSFL and IRL, DOE weighted 

corporate financial information contained in the SEC 10-Ks or 20-Fs by each company’s 

estimated share in the lighting industry to arrive at industry-weighted averages. DOE used 

corporate annual reports to derive the following GRIM inputs: 

• Tax rate, 

• Working capital,

13-9 
 

• Sales, general, and administration expenses (SG&A), 

• Research and development (R&D) expenses, 

• Capital expenditures, and 

• Net property, plant, and equipment (PPE). 

13.4.2.2 Standard and Poor Credit Ratings 

S&P provides independent credit ratings, research, and financial information. S&P 

reports are available for a nominal fee. DOE relied on S&P reports to determine the industry’s 

average cost of debt for the cost of capital calculation. 

13.4.2.3 Dun & Bradstreet Reports 

Dun & Bradstreet (D&B) provides independent research regarding company cash flows, 

revenues, employees, and credit-worthiness. Besides conducting manufacturer interviews, DOE 

used D&B reports to profile several manufacturers which could potentially be small businesses. 

13.4.2.4 Shipment Model 

The GRIM used shipment projections derived from DOE’s shipments model in the NIA. 

The model relied on NEMA historical shipments data for GSFL and IRL for the final rule 

analysis. As described in the discussion of cash flows in sections 13.5.2 and 13.6.2, DOE used 

two base-case shipment scenarios to characterize the GSFL and IRL industries absent standards. 

One scenario modeled the industry where emerging technologies does not erode the market (the 

Existing Technologies base case) and the other assumed new technologies increasingly erode the 

market (Emerging Technologies base case). In the standard cases, the GRIMs include all 

shipment scenarios from the NIA. Chapter 10 of the TSD describes the methodology and 

analytical model DOE used to forecast shipments. 

13.4.2.5 Product Price Determination 

During the product price determination, DOE developed end-user prices (retail) for lamp 

and lamp-and-ballast designs analyzed by discounting published list prices (i.e., “blue book 

pricing”). The product price determination (chapter 7) discussed the pricing methodology and 

results. By combining the results of the engineering analysis and the product price determination, 

DOE derived the necessary product price inputs for use in the GRIMs. 

13.4.2.6 Manufacturer Interviews 

During the course of the MIA, DOE conducted interviews with manufacturers 

representing over 90 percent of the GSFL and 85 percent of the IRL industry. During these 

discussions, DOE obtained information, which it used to determine and verify GRIM input 

assumptions. Key topics discussed during the interviews and reflected in the GRIM include: 

• Capital conversion costs (one-time investments in property, plant, and 

equipment.) 

13-10 
 

• Product conversion costs (one-time investments in research, equipment 

development, testing, and marketing). 

• The portion of the capital conversion costs that companies use to replace stranded 

assets. 

• Product cost structure: 

• The portion of the manufacturer production costs related to materials, 

labor, overhead, and depreciation. 

• Projected total shipment and shipment distribution mix. 

13.4.3 Financial Parameters 

Table 13.4.1 provides financial parameters for five public companies engaged in 

manufacturing and selling of lighting products. The values listed are averages over a five-year 

period (2002-2007). 

Table 13.4.1 GRIM Financial Parameters Based on 2002-2007 Weighted Company 

Financial Data 

Manufacturer 

Parameter 

IndustryWeighted 

Average A B C D E 

Tax Rate 

(% of Taxable Income) 19.2 11.4 22.7 34.6 -12.0 41.3 

Working Capital 

(% of Revenue) 13.7 18.9 7.3 12.4 1.5 27.2 

SG&A 

(% of Revenue) 22.0 22.3 17.7 34.0 25.3 21.9 

R&D 

(% of Revenues) 5.8 7.6 5.6 1.3 4.1 0.5 

Capital Expenditures 

(% of Revenues) 3.2 2.8 4.3 1.6 4.7 3.4 

Net Property, Plant, and 

Equipment 

(% of Revenues) 

13.9 15.7 11.3 10.1 40.8 29.8 

These companies constitute a significant portion of the GSFL and IRL industries. For 

other companies in the industry, the public data is not available or the lighting segment figures 

could not be adequately disaggregated from other businesses segments and were not used for the 

analysis. The values used in the GRIM, therefore, represent the industry’s weighted average 

estimated with financial data from five publicly traded manufacturers weighted by their 

respective market shares. During manufacturer interviews, manufacturers stated that the financial 

parameters listed in Table 13.4.1 would not be significantly different between GSFL and IRL 

industries. Therefore, for the GRIM, DOE assumed the financial parameters would be the same 

for both GSFL and IRL industries. 

13.4.4 Corporate Discount Rate 

DOE used the weighted-average cost of capital (WACC) for the industry as the discount 

rate to calculate the INPV. Because a company’s assets are financed by a combination of debt 

13-11 
 

and equity, the industry WACC is the total cost of debt and equity weighted by the composite 

companies’ respective proportions of debt and equity in the capital structure of the industry.1

DOE made its initial estimate of the WACC for both the GSFL and IRL industries using publicly 

available information of the five companies used to derive the financial parameters. As described 

below, DOE revised its estimate of the discount rate after independently researching the industry 

WACC. 

DOE made its initial estimate of the IRL and GSFL WACC using the following formula: 

WACC = After-Tax Cost of Debt x (Debt Ratio) + Cost of Equity x (Equity Ratio)

The cost of equity is the rate of return that equity investors (including, potentially, the 

company) expect to earn on a company’s stock. These expectations are reflected in the market 

price of the company’s stock. The capital asset pricing model (CAPM) provides one widely used 

means to estimate the cost of equity. According to the CAPM, the cost of equity (expected 

return) is: 

Cost of Equity = Riskless Rate of Return + β x Risk Premium 

where: 

Riskless rate of return is the rate of return on a “safe” benchmark investment, typically 

considered the short-term Treasury Bill (T-Bill) yield. 

Risk premium is the difference between the expected return on stocks and the riskless 

rate. 

Beta (β) is the correlation between the movement in the price of the stock and that of the 

broader market. In this case, Beta equals one if the stock is perfectly correlated with the 

S&P 500 market index. A Beta lower than one means the stock is less volatile than the 

market index. 

 DOE initially determined that the industry average cost of equity for the lighting industry 

is 22.1 percent, as calculated in Table 13.4.2. 

13-12 
 

Table 13.4.2 Cost of Equity Calculation 

Manufacturer 

Parameter 

IndustryWeighted 

Average (%) A B C D E 

(1) Average Beta 

(2002 – 2007 year) 1.78 2.00 1.59 1.78 1.00 1.00 

(2) Yield on 10 Year TBill (1990-2007) 5.8 - - - - - 

(3) Market Risk Premium 

(1926-1999) 9.2 - - - - - 

Cost of Equity 

(2)+((1)*(3)) 22.1 - - - - - 

Equity/Total Capital 90.9 94.7 98.1 64.4 1.1 78.7 

Bond ratings are a tool to measure default risk and arrive at a cost of debt. Each bond 

rating is associated with a particular spread. One way of estimating a company’s cost of debt is 

to treat it as a spread (usually expressed in basis points) over the risk-free rate. DOE used this 

method to calculate the cost of debt for all five manufacturers. S&P had bond ratings for most 

manufacturers, so DOE used these ratings to estimate the manufacturers’ cost of debt by adding 

the relevant spread to the risk-free rate. There were two manufacturers with no S&P bond rating 

available. In this case, DOE used the company’s size and interest coverage ratio to arrive at the 

spread of corporate debt over risk-free securities. The interest coverage ratio measures a 

company’s ability to service its debt-financing obligation through its earnings.2

In practice, investors use a variety of different maturity Treasury bonds to estimate the 

risk-free rate. DOE used a long-term Treasury bond return (10-year bond return) because it 

captures long-term inflation expectations and is less volatile than short-term rates. The risk free 

rate is estimated as approximately six percent, which is the average 10-year Treasury bond return 

over the period of 1990 to 2007. 

For the cost of debt, S&P’s Credit Services provided the average spread of corporate 

bonds for four of the six public manufacturers over the period 2002-2007. To this, DOE added 

the industry-weighted average spread to the average T-Bill yield over the same period. Since 

proceeds from debt issuance are tax deductible, DOE adjusted the gross cost of debt by the 

industry average tax rate to determine the net cost of debt for the industry. Table 13.4.3 presents 

the derivation of the cost of debt. Also shown is the capital structure of the industry, i.e. the debt 

ratio (debt/total capital). 

13-13 
 

Table 13.4.3 Cost of Debt Calculation 

Manufacturer 

Parameter 

IndustryWeighted 

Average (%) A B C D E 

S&P Bond Rating -- A- AA- BBB- CCC A 

(1) Yield on 10 year T-Bill 

(1990-2007) 5.8 - - - - - 

(2) Gross Cost of Debt 7.5 7.8 6.8 8.1 15.8 7.6 

(3) Tax Rate 19.2 11.4 22.7 34.6 -12.0 41.3 

Net Cost of Debt (2)x((1)-

(3)) 6.1 - - - - - 

Debt/Total Capital 9.1 5.3 1.9 35.6 98.9 21.3 

 

Using the publicly available information above, DOE initially estimated the GSFL and 

IRL industries’ WACC to be approximately 20.7 percent. Subtracting an inflation rate of 2.9 

percent between 1990 and 2007, the inflation adjusted WACC, and the corporate discount rate 

used in the strawman GRIMs was 17.8 percent. 

To verify the accuracy of its initial calculation, DOE used an independent report on the 

cost of capital. Morningstar, Inc. sells these reports broken down by Standard Industrial 

Classification (SIC) Code. GSFL and IRL manufacturing is classified under SIC code 3641 

(Electric Lamp Bulbs and Tubes). Morningstar had a cost of capital report available for SIC code 

364 (Electrical Lighting and Wiring Equipment) that DOE used to judge the accuracy of its 

initial WACC. The WACC shown in that report varied significantly from DOE’s calculation 

using publicly available data. Because of the large discrepancy between the independent report 

and the calculation using public data, DOE asked manufacturers to comment on the industry 

WACC during interviews. DOE revised its number based on manufacturer comments. Using the 

weighted market share of manufacturers that commented on the initial industry WACC, DOE 

used 10.01 percent as the discount rate in the GSFL and IRL GRIM. 

13.4.5 Trial Standard Levels 

DOE developed five TSLs for both GSFL and IRL. Chapter 9 of the TSD describes the 

methodology DOE used to determine each TSL. The lamp efficacies used in the GSFL and IRL 

GRIMs are presented in Table 13.4.4 and Table 13.4.5, respectively. 

Table 13.4.4 GSFL Efficacy Levels by Product Class and TSL

Trial Standard Levels (lm/W) Product Class Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

4-Foot Medium Bipin (MBP) 75 78 81 85 89 93 

8-Foot Single Pin (SP) Slimline 80 86 92 95 97 98 

8-Foot Recessed Double 

Contact High Output (RDC HO) 80 83 86 88 92 95 

4-Foot T5 Miniature Bipin 

Standard Output (MiniBP SO) 86 86 86 86 86 90 

4-Foot T5 Miniature Bipin High 

Output (MiniBP HO) 76 76 76 76 76 76 

13-14 
 

Table 13.4.5 IRL Efficacy Levels by TSL 

Trial Standard Levels (lm/W) 

(Technology Pathway) 

Product 

Class Baseline 

(Halogen) 

TSL 1 

(Improved 

Halogen 

(Xenon)) 

TSL 2 

(Long 

Life HIR, 

Improved 

Halogen 

(Silver)) 

TSL 3 

(HIR) 

TSL 4 

(Improved 

HIR) 

TSL 5 

(Improved 

HIR Plus) 

IRL 

Standard 

Spectrum 

> 2.5 inches 

< 125 V 

10.5 (40–50 Watts) 

11.0 (51–66 Watts) 

12.5 (67–85 Watts) 

14.0 (86–115 Watts) 

14.5 (116–155 Watts) 

15.0 (156–205 Watts) 

4.6P0.27 4.8P0.27 5.4P0.27 5.9P0.27 6.4P0.27

P = rated wattage 

13.4.6 NIA Shipments Forecast 

The GRIM estimates manufacturer revenues based on total-unit-shipment forecasts and 

the distribution of these values by product class and lamp efficacy. Changes in the efficacy mix 

at each standard level are a key driver of manufacturer finances. For this analysis, the GRIM 

used the NIA shipments forecasts for both GSFL and IRL from 2009 to 2042. Further 

explanation of assumptions and calculations of total shipments can be found in the shipment 

analysis section of this TSD (chapter 10). For the NIA, DOE forecasted several different of 

shipment scenarios that were affected by emerging technologies in the market and consumer 

purchasing habits. These shipment scenarios are further explained in the following sections. 

13.4.6.1 GSFL Base-Case Shipment Scenarios 

For the GSFL GRIM, DOE incorporated the two base-case shipment scenarios from the 

NIA (Existing Technologies and Emerging Technologies). In the Existing Technologies basecase shipment scenario, DOE assumed that in the base case customers would not migrate to 

emerging technologies. In the Emerging Technologies scenario, GSFL shipments are eroded in 

the base case as more customers purchase emerging technologies rather than covered GSFL. An 

extensive explanation of each shipment base-case scenario can be found in chapter 10 of the 

TSD. Table 13.4.6 and Table 13.4.7 show total industry shipments for each product class of 

GSFL in 2012 and 2042 Existing and Emerging Technologies base-case shipments. 

13-15 
 

Table 13.4.6 Total GSFL NIA-Shipments Forecast in 2012 and 2042 for the Existing 

Technologies Base Case 

Product Class Total Industry Shipments In 2012* Total Industry Shipments In 2042* 

4-Foot MBP 482,841,000 652,784,000 

8-Foot SP Slimline 22,448,000 6,873,000 

8-Foot RDC HO 17,654,000 2,320,000 

4-Foot T5 MiniBP SO 23,528,000 103,352,000 

4-Foot T5 MiniBP HO 24,243,000 69,689,000 

* Estimates rounded to the nearest hundred 

Table 13.4.7 Total GSFL NIA-Shipments Forecast in 2012 and 2042 for the Emerging 

Technologies Base Case 

Product Class Total Industry Shipments in 2012* Total Industry Shipments in 2042* 

4-Foot MBP 482,841,000 478,900,000 

8-Foot SP Slimline 22,448,000 6,873,000 

8-Foot RDC HO 17,654,000 2,320,000 

4-Foot T5 MiniBP SO 23,528,000 74,763,000 

4-Foot T5 MiniBP HO 24,243,000 69,689,000 

* Estimates rounded to the nearest hundred 

13.4.6.2 IRL Base-Case Shipment Scenarios 

For the IRL GRIM, DOE also incorporated the two base-case shipment scenarios from 

the NIA (Existing Technologies and Emerging Technologies) for the period of 2009 to 2042. An 

extensive explanation of each shipment base-case scenario can be found in chapter 10 of the 

TSD. Table 13.4.8 and Table 13.4.9 show total industry shipments for each product class of IRL 

in 2012 and 2042 Existing and Emerging Technologies base-case shipments. The tables include 

the base-case shipments in 2020 because the impacts under the Emerging Technologies base case 

are most apparent in the years after the standard becomes effective and the differences between 

the base cases are easily demonstrated in 2020. 

Table 13.4.8 Total IRL NIA-Shipments Forecast in 2012, 2020, and 2042 for the Existing 

Technologies Base Case 

Lumen Package Total Industry 

Shipments in 2012* 

Total Industry 

Shipments in 2020* 

Total Industry 

Shipments in 2042* 

PAR38 90W 57,249,000 64,068,000 91,550,000 

PAR38 75W 44,682,000 50,004,000 71,454,000 

PAR30 50W 31,123,000 36,330,000 52,562,000 

* Estimates rounded to the nearest hundred 

13-16 
 

Table 13.4.9 Total IRL NIA-Shipments Forecast in 2012, 2020, and 2042 for the Emerging 

Technologies Base Case 

Lumen Package Total Industry 

Shipments in 2012* 

Total Industry 

Shipments in 2020* 

Total Industry 

Shipments in 2042* 

PAR38 90W 52,376,000 31,932,000 50,837,000 

PAR38 75W 40,879,000 24,922,000 39,677,000 

PAR30 50W 28,340,000 17,418,000 28,544,000 

* Estimates rounded to the nearest hundred 

13.4.6.3 GSFL Standards Shipment Scenarios 

All shipment forecasts in the GSFL GRIM are obtained from the GSFL NIA. 

Consequently the GSFL GRIM included two efficacy distribution scenarios (Shift and Roll-Up), 

and two lighting expertise scenarios (High and Market Segment-Based Lighting Expertise). For 

additional details on the various shipment scenarios, see TSD chapter 10. 

13.4.6.4 IRL Standards Shipment Scenarios 

To characterize consumer behavior in the IRL standards-case GRIM, DOE considered all 

the shipment scenarios found in the NIA. The IRL GRIM considered two efficacy distributions 

scenarios (shift and roll-up) and two product substitution scenarios (BR Substitution and R-CFL 

Substitution). The IRL GRIM also considered the Baseline Lifetimes scenarios in which the 

lifetime of lamps in the standards case are similar to baseline lamp lifetimes. See chapter 10 of 

the TSD for additional details on the IRL standards-case shipment scenarios. 

13.4.7 Production Costs 

Changes in product costs impact revenues and gross profits. As shown in the product 

price determination (chapter 7), products that are more efficacious cost more than baseline 

products for a given product class. For the MIA, DOE derived manufacturing production costs 

by discounting the end user prices found in the product price determinationb by typical markups 

along the retail distribution chain. To calculate manufacturer selling prices (MSP) from these 

end-user prices, DOE divided the medium end-user prices from the product price determination 

by a typical markup for retail locations that sell the covered products. For both GSFL and IRL 

products, DOE estimates the markup for retail prices to MSP to be 1.50. DOE calculated the 

markup for retail locations using the revenues and cost of goods sold (COGS) from the annual 

reports of publicly traded companies. To determine manufacturer production costs (MPC) from 

MSP, DOE divided by the manufacturer markup calculated with the other GRIM financial 

inputs. For both GSFL and IRL products, DOE estimates the manufacturer markup from MSP to 

MPC is 1.52. 

 

b

 The retail prices used in the GRIM differ from those shown in the product price determination. The retail prices 

used in the GRIM reflect scaled retail prices. To generate shipments, DOE established an average lamp lifetime for 

each lamp type (e.g., 4-foot T8 MBP). Because most lamps have lifetimes that differ from this average lifetime, 

DOE scaled the retail lamp prices found in the product price determination in order to accurate calculate industry 

revenue. 

13-17 
 

Table 13.4.10 through Table 13.4.14 provide the total MPCs and MSPs associated with 

each analyzed GSFL product class in the GRIM. Total annual COGS for the industry were 

calculated by multiplying the MPCs by the unit shipments for each product and summing the 

results. During manufacturing interviews, manufacturers provided the breakdown of COGS, 

which DOE weighted by market share to determine the industry-wide breakdown of labor, 

materials, overhead, and depreciation. 

Table 13.4.10 Base-Case Production Costs (2008$) used in the GRIM for 4-Foot Medium 

Bipin Product Classes 

Product 

Class TSL Lamp Efficacy 

Retail 

Prices MSP MPC 

76.8 $2.29 $1.53 $1.01 

Baseline 78.0 $2.46 $1.64 $1.08 

77.9 $1.56 $1.04 $0.69 

80.5 $4.63 $3.08 $2.03 

TSL 1 82.4 $2.77 $1.84 $1.21 

82.9 $5.12 $3.41 $2.25 

85.3 $5.07 $3.38 $2.22 TSL 2 87.8 $5.20 $3.46 $2.28 

4 – Foot 

T12 

MBP 

TSL 3 91.2 $5.10 $3.40 $2.23 

TSL 2 86.2 $1.87 $1.24 $0.82 

TSL 3 90.8 $2.92 $1.94 $1.28 

92.3 $2.55 $1.70 $1.12 

TSL 4 93.8 $3.35 $2.23 $1.47 

93.0 $3.08 $2.05 $1.35 

95.4 $2.99 $1.99 $1.31 

4 – Foot 

T8 

MBP 

TSL 5 96.0 $3.50 $2.33 $1.53 

Table 13.4.11 Base-Case Production Costs (2008$) used in the GRIM for 8-Foot Single Pin 

Slimline Product Classes 

Product 

Class TSL Lamp Efficacy 

Retail 

Prices MSP MPC 

Baseline 85.6 $5.79 $3.86 $2.54 

87.3 $8.95 $5.96 $3.93 TSL 1 87.6 $3.40 $2.27 $1.49 

92.0 $7.91 $5.27 $3.47 TSL 2 92.6 $5.72 $3.81 $2.51 

8 – Foot 

T12 SP 

Slimline 

TSL 3 97.5 $5.93 $3.95 $2.60 

TSL 3 94.8 $4.26 $2.84 $1.87 

TSL 4 98.2 $6.52 $4.34 $2.86 

101.5 $6.16 $4.11 $2.70 

101.8 $4.20 $2.80 $1.84 

8 – Foot 

T8 SP 

Slimline TSL 5 

103.6 $5.25 $3.50 $2.30 

13-18 
 

Table 13.4.12 Base-Case Production Costs (2008$) used in the GRIM for 8-Foot Recessed 

Double Contact High Output Product Classes 

Product 

Class TSL Lamp Efficacy 

Retail 

Prices MSP MPC 

80.1 $6.69 $4.46 $2.93 Baseline 82.5 $3.86 $2.57 $1.69 

TSL 1 83.2 $12.29 $8.19 $5.39 

TSL 2 86.1 $6.84 $4.56 $3.00 

87.6 $12.82 $8.55 $5.62 

8 – Foot T 

12 RDC 

HO 

TSL 3 88.9 $13.13 $8.75 $5.76 

91.9 $5.28 $3.52 $2.32 TSL 4 93.0 $7.21 $4.80 $3.16 8 – Foot T8 

RDC HO TSL 5 95.3 $8.66 $5.77 $3.80 

Table 13.4.13 Base-Case Production Costs (2008$) used in the GRIM for 4-Foot T5 

Standard Output Product Class 

Product 

Class TSL Lamp Efficacy 

Retail 

Prices MSP MPC 

Baseline 86.0 $1.53 $1.02 $0.67 

TSL1, 2, 

3, 4 104.3 $3.40 $2.26 $1.49 

109.7 $4.49 $2.99 $1.97 

4 – Foot 

T5 

MiniBP 

SO TSL 5 111.5 $3.40 $2.26 $1.49 

Table 13.4.14 Base-Case Production Costs (2008$) used in the GRIM for 4-Foot T5 High 

Output Product Class 

Product 

Class TSL Lamp Efficacy Retail Prices MSP MPC 

Baseline 76.0 $2.08 $1.39 $0.91 

92.9 $4.61 $3.07 $2.02 

4 – Foot 

T5 

MiniBP 

HO 

TSL 1, 2, 

3, 4, 5 98.0 $5.46 $3.64 $2.39 

For the IRL GRIM, DOE included the proportion of costs devoted to labor, materials, 

overhead, and depreciation that make up the full cost of each product. Using information 

obtained during manufacturer interviews weighted by market share, DOE estimated the 

proportion of product costs associated with each cost category. Table 13.4.15 and Table 13.4.16

provides the production cost assumptions used in the GRIM for IRL.

13-19 
 

Table 13.4.15 Base-Case Production Costs (2008$) used in the GRIM for IRL Covered 

Product Classes 

Lumen MPC Breakdown 

Package TSL Lamp Efficacy 

Retail 

Price MSP 

Labor Materials Overhead Depreciation

MPC

Baseline 14.6 $4.98 $3.32 $0.51 $1.02 $0.55 $0.11 $2.19 

TSL 1 15.3 $5.90 $3.93 $0.60 $1.21 $0.65 $0.13 $2.59 

15.9 $6.50 $4.33 $0.67 $1.33 $0.71 $0.14 $2.85 TSL 2 

16.6 $6.33 $4.22 $0.65 $1.30 $0.69 $0.14 $2.78 

TSL 3 18.0 $6.50 $4.33 $0.67 $1.33 $0.71 $0.14 $2.85 

TSL 4 19.8 $7.78 $5.19 $0.80 $1.59 $0.85 $0.17 $3.41 

PAR38 

90W 

TSL 5 21.0 $8.34 $5.56 $0.85 $1.71 $0.91 $0.18 $3.66 

Baseline 14.0 $4.98 $3.32 $0.51 1.02 $0.55 $0.11 $2.19 

TSL 1 14.6 $5.90 $3.93 $0.60 $1.21 $0.65 $0.13 $2.59 

15.3 $6.50 $4.33 $0.67 $1.33 $0.71 $0.14 $2.85 TSL 2 

15.9 $6.33 $4.22 $0.65 $1.30 $0.69 $0.14 $2.78 

TSL 3 17.5 $6.50 $4.33 $0.67 $1.33 $0.71 $0.14 $2.85 

TSL 4 19.1 $7.78 $5.19 $0.80 $1.59 $0.85 $0.17 $3.41 

PAR38 

75W 

TSL 5 20.3 $8.34 $5.56 $0.85 $1.71 $0.91 $0.18 $3.66 

Baseline 12.6 $4.40 $2.93 $0.45 $0.90 $0.48 $0.10 $1.93 

TSL 1 13.2 $5.31 $3.54 $0.54 $1.09 $0.58 $0.12 $2.33 

13.5 $5.92 $3.94 $0.61 $1.21 $0.65 $0.13 $2.59 TSL 2 

14.0 $5.74 $3.83 $0.59 $1.18 $0.63 $0.13 $2.52 

TSL 3 15.1 $5.92 $3.94 $0.61 $1.21 $0.65 $0.13 $2.59 

TSL 4 17 $7.20 $4.79 $0.74 $1.47 $0.79 $0.16 $3.16 

PAR30 

50W 

TSL 5 19.1 $7.75 $5.16 $0.79 $1.59 $0.85 $0.17 $3.40 

Table 13.4.16 Base-Case Production Costs (2008$) used in the GRIM for IRL Non-Covered 

Product Classes 

Lumen 

Package Lamp Type Lamp Efficacy 

Retail 

Price MSP MPC 

Compact Fluorescent 

Lamps (CFL) 50.0 $7.47 $4.97 $3.27 PAR38 

90W Bulged Reflector 

Lamps (BR) 10.8 $1.72 $1.15 $0.76

PAR38 CFL 52.2 $7.47 $4.97 $3.27

75W BR 12.2 $1.72 $1.15 $0.76 

PAR30 CFL 46.9 $6.15 $4.10 $2.70

50W BR 9.5 $1.43 $0.95 $0.63 

DOE also estimated MPCs for the IRL representative lamps for the Baseline Lifetime 

scenario. For the MPCs for baseline through TSL 4 under the Baseline Lifetime scenario, DOE 

used the same MPCs shown in Table 13.4.15. For the MPCs at TSL 5 under the Baseline 

Lifetime scenarios, DOE used the same MPCs as at TSL 4 because it is assumed that 

manufacturers will produce the TSL 4 representative lamps with shortened lifetime. 

13-20 
 

13.4.8 Conversion Costs 

New or amended energy conservation standards typically cause manufacturers to incur 

one-time conversion costs to bring their production facilities and product designs in compliance 

with the new regulation. For the purpose of the MIA, DOE classified these one-time conversion 

costs into two major groups, capital conversion costs and product conversion costs. Capital 

conversion costs are one-time investments in property, plant, and equipment to adapt or change 

existing production facilities so that new product designs can be fabricated and assembled under 

the new regulation. Product conversion costs are one-time investments in research, development, 

testing, and marketing focused on making product designs comply with new or amended energy 

conservation standards. The following sections describe in more detail DOE’s assumptions and 

inputs to the GSFL and IRL GRIMs related to amended energy conservation standards and 

conversion costs. 

13.4.8.1 Capital Conversion Costs 

For the GSFL industry, DOE based its capital conversion cost estimates on discussions 

with manufacturers, weighted by market share of the companies responding. During interviews 

DOE learned that the majority of capital conversion costs would be for converting T12 lines to 

T8 lines. As required efficacies increase at higher TSLs, T12 lamps that do not meet the standard 

are discontinued. To maintain capacity, manufacturers must convert existing T12 lines to T8 

lines and in some cases build additional T8 lines (i.e., the T8 lamps DOE modeled achieve 

higher efficacies than the T12 lamps). At TSL 1 through TSL 3, manufacturers can maintain a 

mix of T12 and T8 lines. The capital conversion costs at these three TSLs involve retooling T12 

lines to meet the larger volume of T8 lamps after the effective date of the energy conservation 

standards. At efficacy levels prescribed by TSL 4 and above, all lines would need to be 

converted from T12 to T8. Table 13.4.17 summarizes the estimated breakdown of capital 

conversion costs by TSL for the covered GSFL product classes. 

Table 13.4.17 Capital Conversion Costs for GSFL by Product Class 

Total Industry Capital Conversion Costs (2008$ million) by Product Class 

TSL 4-Foot 

MBP 

8-Foot SP 

Slimline 

8-Foot RDC 

HO 

4-Foot T5 

MiniBP SO 

4-Foot T5 

MiniBP HO Industry Total 

Baseline $0 $0 $0 $0 $0 $0 

TSL 1 $33.0 $5.5 $0.0 $0.0 $0.0 $38.50 

TSL 2 $55.0 $5.5 $0.0 $0.0 $0.0 $60.50 

TSL 3 $88.0 $5.5 $11.0 $0.0 $0.0 $104.50 

TSL 4 $132.0 $36.3 $13.2 $0.0 $0.0 $181.50 

TSL 5 $132.0 $36.3 $13.2 $0.0 $0.0 $181.50 

Manufacturers indicated during interviews that the GSFL market was shifting from a mix 

of T12 and T8 lamps to a mainly T8 lamp market. DOE learned that standards would accelerate 

this natural progression from T12 to T8 by limiting the available T12 lamps at TSL 1 through 

TSL 3 and completely eliminating T12s at TSL 4 and TSL 5. As a result, DOE estimated the 

capital costs for the natural market shift from T12 to T8 in the base cases. DOE estimated that 

during the analysis period the major manufacturers would convert a total of four existing T12 

13-21 
 

lines to T8 absent standards. During interviews, each of these manufacturers gave DOE an 

estimate of its cost to convert a T12 line to T8 production. To avoid further speculation DOE 

used the market share weighted average capital conversion cost of approximately $26 million as 

its cost of converting a T12 line to T8. DOE assumed that each major manufacturer would 

continue to produce a full line of T12 lamps if customers demanded them. DOE estimates that 

the total cost of the natural conversion from T12 lines to T8 lines would be approximately $104 

million. In the GRIM, the total natural line conversion cost is spread out evenly throughout 2009 

to 2018. Estimating the plant changes that would occur absent standards lowers INPV of the 

GSFL industry by $70.4 million in both base cases. 

For the IRL industry, DOE based its capital conversion cost estimates on discussions with 

manufacturers, weighted by the market share of the companies responding. The capital 

conversion costs manufacturers provided during interviews were based on converting 

manufacturing equipment to meet the current volume of shipments. Since the shipments 

projected in the NIA decrease in the base cases, DOE scaled the capital conversion costs to 

account for the decline in shipments from 2008 to the year the standard becomes effective to be 

consistent with manufacturers’ expectations when they provided their capital conversion costs. 

DOE used the decline in shipments under both the Existing Technologies and Emerging 

Technologies base-case shipment scenarios to make this adjustment. Under the Existing 

Technologies case, total shipments decrease by 20.0 percent from 2008 to 2012. Under the 

Emerging Technologies case, total shipments decreased by 25.7 percent from 2008 to 2012. 

DOE lowered the capital conversion costs given by manufacturers by these percentage 

effectively calculating two separate sets of capital conversion costs (one for each base case). 

The capital conversion costs to meet most IRL TSLs are substantial. Approximately 90 

percent of covered IRL shipments are at baseline levels (standard halogen lamps). All standards 

involve increasing the production of currently low volume products. TSL 1 involves only minor 

capital conversion costs because manufacturers do not need to greatly alter production equipment 

to add xenon to existing lamps. The capital conversion costs necessary at TSL 2 through TSL 5 

increase substantially. At TSL 2, manufacturers must either expand production of long-life HIR 

lamps or lamps with improved reflectors. Both of these lamps are currently manufactured in low 

volume and in a manner that varies greatly from the existing high-volume, standard halogen 

lamps. Substantial plant changes must be made to increase the production volume of these types 

of lamps by many multiples over existing production. TSL 3, TSL 4, and TSL 5 involve HIR 

technology. The manufacturing process must be completely revamped in order to meet demand 

with these products, resulting in high capital conversion costs to retool the plant for exclusively 

infrared lamp production (including new coating decks, expanding or creating capsule 

production, and assembly layout). Because lamps at TSL 3 through TSL 5 are manufactured 

differently than standard halogen lamps, much of the existing manufacturing equipment is 

stranded at these TSLs. 

DOE consulted an independent supplier of IRL coaters to identify additional costs above 

TSL 4 needed for manufacturers to meet TSL 5. TSL 5 involves similar plant changes as TSL 4. 

The most significant change is that the coating process at TSL 5 is more involved and takes more 

time. Therefore, more coating machines would be required because the annual throughput of 

each coating machine is lower. DOE separated the capital conversion costs manufacturers gave 

for TSL 4 into changes to the plant and costs for new HIR coaters. DOE then calculated the cost 

13-22 
 

of the additional coaters that would be necessary to meet industry demand. DOE kept costs for 

plant changes the same as at TSL 4. 

Table 13.4.18 and Table 13.4.19 summarize the breakdown of capital conversion costs by 

TSL for the covered IRL product class for each base case. 

Table 13.4.18 Capital Conversion Costs for the IRL Industry (Existing Technologies Base 

Case) 

TSL Capital Conversion Costs 

(2008$ million) 

Baseline $0 

TSL 1 $31.5 

TSL 2 $83.5 

TSL 3 $134.5 

TSL 4 $166.9 

TSL 5 $185.5 

Table 13.4.19 Capital Conversion Costs for the IRL Industry (Emerging Technologies Base 

Case) 

TSL Capital Conversion Costs 

(2008$ million) 

Baseline $0 

TSL 1 $29.3 

TSL 2 $77.5 

TSL 3 $124.8 

TSL 4 $155.0 

TSL 5 $172.2 

 DOE also estimated capital conversion costs for the IRL industry used for the Baseline 

Lifetime scenario. For TSL 4, DOE used the same capital conversion costs under the Baseline 

Lifetime scenario for both the Existing and Emerging Technology base cases. For the capital 

conversion costs at TSL 5 under the Baseline Lifetime scenarios, DOE used the same capital 

conversion costs as at TSL 4 because it is assumed that manufacturers will produce the TSL 4 

representative lamps with shortened lifetime. 

13.4.8.2 Product Conversion Costs 

DOE conducted interviews with manufacturers to better understand the many steps that 

manufacturers have to take before they can release new or improved products. The magnitude of 

the required investments varies by manufacturer and the analyzed TSL. Multiple manufacturers 

estimate that the time and resources spent on research and development, testing, and certification 

of products would be significant depending on the design path chosen to achieve higher efficacy. 

 For the GSFL industry product conversion costs, DOE combined figures provided by 

each manufacturer using a corresponding market share at each TSL. For product conversion 

costs, DOE learned that manufacturers would not have to make significant additional R&D 

investments to achieve higher efficacy levels. To achieve higher efficacy levels, only the 

13-23 
 

phosphor quality and content need to be changed. Because all manufacturers already offer 

products that achieve all efficacy levels prescribed by the TSLs, additional product conversion 

costs would be incurred only for marketing, sales, and some additional testing and certification. 

Table 13.4.20 summarizes the breakdown of product conversion costs by TSL and product class 

in the GSFL industry. 

Table 13.4.20 GSFL Product Conversion Costs by Product Class 

Total Industry Product Conversion Costs (2008$ million) by Product Class 

TSL 4-Foot 

MBP 

8-Foot SP 

Slimline 

8-Foot RDC 

HO 

4-Foot T5 

MiniBP SO 

4-Foot T5 

MiniBP HO 

Industry 

Total 

Baseline $0 $0 $0 $0 $0 $0 

TSL 1 $1.1 $1.1 $1.1 $0.0 $0.0 $ 3.35 

TSL 2 $5.6 $1.1 $2.2 $0.0 $0.0 $ 8.95 

TSL 3 $5.6 $1.1 $2.2 $0.0 $0.0 $ 8.95 

TSL 4 $7.3 $2.2 $2.2 $0.0 $0.0 $ 11.7 

TSL 5 $7.3 $2.2 $2.2 $9.1 $9.1 $ 30.0 

For the IRL product conversion costs, DOE combined figures provided by each 

manufacturer using a corresponding market share at each TSL. The product conversion costs are 

relatively minor (compared to the capital conversion costs) because most manufacturers have 

existing products that meet nearly all TSLs. However, at TSL 1 through TSL 4 there are some 

additional engineering costs. Some manufacturers indicated their existing lamps would require 

some design changes if they became large volume products due to standards. There would also 

be additional testing and certification expenses at each TSL. In addition, one manufacturer 

indicated their competitive concerns at TSL 4 and TSL 5 because these TSLs would require a 

redesign of all existing lamps to use a more efficient burner. For TSL 5, DOE assumed that the 

product conversion costs would be equal to the combination of the costs of the improved 

reflectors (the conversion costs of TSL 2) and improved HIR lamps (the conversion costs of TSL 

4). Table 13.4.21 summarizes the breakdown of product conversion costs by TSL for the IRL 

industry. 

Table 13.4.21 Product Conversion Costs for the IRL Industry 

TSL Product Conversion 

Costs (2008$ million) 

Baseline $0 

TSL 1 $3.5 

TSL 2 $3.5 

TSL 3 $2.3 

TSL 4 $3.5 

TSL 5 $6.9 

 

13-24 
 

13.4.8.3 Conversion Costs Timing 

In the IRL GRIM, the capital conversion costs are spread over the three-year period 

between the announcement year (2009) and the effective date of the energy conservation 

standard (2012). DOE assumes that some IRL manufacturers will begin to purchase additional 

advanced coaters or make other plant changes during the announcement year in order to increase 

the capacity of currently low volume HIR lamps before the effective date of the standard. For 

IRL, the capital conversion costs for TSL 3, TSL 4, and TSL 5 involve both the purchase and 

installation of additional HIR coaters in addition to significant plant changes. 

In the GSFL GRIM, the capital conversion costs are condensed to the two years before 

the effective date, 2010 and 2011. DOE estimates that manufacturers will wait until at least 2010 

to begin to make the line changes required to meet the TSLs. The line changes required to meet 

the GSFL standard require manufacturers to first ramp up production to meet industry wide 

shipments while the lines are being converted. DOE estimates that this ramp-up will occur in 

2009 at the earliest before the lines begin to be converted. 

13.4.9 Markups 

DOE applies different markup scenarios to convert MPC to MSP. DOE considered 

different markup scenarios based on manufacturer input for GSFL and IRL products. For GSFL 

and IRL, DOE used the markup scenarios that best characterized the prevailing markup 

conditions and described the range of market responses as a result of amended energy 

conservation standards. 

After discussions with manufacturers, DOE estimates there are two distinct markup 

scenarios for the GSFL industry: A flat markup and a four-tier markup. For the IRL industry, 

DOE only incorporated the flat markup in its analysis. The following sections describe each 

markup scenario and their respective calculations. 

13.4.9.1 Flat Markup 

Under the Flat Markup scenario, DOE applied a single uniform “flat markup” across all 

efficacy levels for all products. A flat markup assumes no differentiation in gross margin 

percentage across product efficacy levels. DOE calculated the markup from industry data using 

the formula: 

 Markup = 1 / (1 - Gross Margin) 

where: 

 Gross Margin = (Revenues - Cost of Goods Sold) / (Revenues) 

DOE calculated the manufacturer markup—which includes SG&A expenses; research and 

development expenses; interest; and profit—to be approximately 1.52. This markup is consistent 

with the one DOE assumed in both base cases in the GSFL and IRL GRIMs. The Flat Markup 

scenario is the only markup scenario DOE modeled in the IRL GRIM because manufacturers’ 

13-25 
 

concerns about the potential industry impacts are captured in the shipment scenarios and 

markups do not increase as a function of efficacy in the IRL industry. Since the absolute gross 

margin increases with increased production costs to maintain the same gross margin percentage 

markup (flat markup), in the GSFL GRIM DOE assumes that this scenario represents a high 

bound to MSPs under an energy conservation standard. 

13.4.9.2 Four-Tier Markup 

For GSFL, DOE also modeled a “four-tier markup” in which it assumed that the markup 

on lamps varies by efficacy in both the base case and the standards case. The Four-Tier Markup 

scenario was not modeled for IRL because markups do not increase as a function of efficacy as is 

the case for GSFL. For GSFL, DOE learned from manufacturers that pricing is determined on 

the basis of four product tiers, corresponding to different phosphor series (600, 700, 800, and 800 

plus). During the MIA interviews, manufacturers provided information on the change in 

profitability for each level. DOE used this information, product pricing from its product price 

determination, and industry average gross margins to estimate markups for GSFL under the fourtier pricing strategy in the base case. In the standards case of the Four-Tier Markup scenario, 

DOE modeled the situation in which portfolio reduction squeezes the margin of previously 

premium products. This scenario is in line with information submitted during manufacturing 

interviews confirming manufacturers concern that DOE standards have the potential to 

significantly disrupt profitability by commoditizing products. 

In the Four-Tier Markup scenario, DOE accounted for a natural commoditization of 

premium lamps over time. DOE assumed that any 800 or 800 plus series lamp that overtakes the 

market share of a 700 series lamp will be commoditized over time. DOE also assumed that the 

markups on 600 and 700 series lamps would not change over time because they are already 

commodity products. To take into account a natural commoditization of higher-efficacy, 

premium lamps over time, DOE lowered the markups of 800 and 800 plus series lamps over the 

analysis period in both the base case and the standards case beginning in 2013, the year after the 

effective date. As the natural commoditization continues through the analysis period, the 

markups on these premium lamps are gradually lowered to the same markups as the 700 series 

lamps. 

According to DOE’s analysis, 800 or 800 plus series lamps are only gaining market from 

700 series lamps in certain product classes. 800 or 800 plus series lamps completely overtake the 

market share of 700 series lamps between 2035 and 2040, depending on the base-case scenario 

and product class. As an example, Figure 13.4.2 shows the market share of 4-foot T8 MBP 700, 

800, and 800 plus series lamps over the analysis period. 

13-26 
 

Figure 13.4.2 Market Shares of 4-Foot T8 MPB 700, 800, and 800 Plus Series Lamps Under 

the Emerging Technology Base Case

To model how the markups of premium lamps decline over the analysis period, DOE 

used different sets of algorithms that lowered the markup of the premium lamps as they gained 

market share from 700 series lamps. For example, Figure 13.4.2 shows the increase in market 

shares of the 800 plus series lamps as it reaches the same market share as the 700 series lamps. 

DOE converted the percent increase in market share for the 800 plus series lamp into a percent 

decrease in the 800 plus series’ markup. Similarly, for this example DOE converted the percent 

decrease in market share for the 800 series lamp into a percent decrease in the 800 series’ 

markup. According to DOE’s analysis, depending on the product class, the market share of the 

800 or 800 plus series does not always reach the same market share as the initial 700 series. In 

previous example, the markups for those 800 series converge to the 700 series markup at the year 

the 800 plus series lamp market share equals the initial 700 series market share. As shown in 

Figure 13.4.3 for the above example, the original markups for 700 (1.42), 800 (1.53), and 800 

plus (1.64) series lamps converge to a single, lower markup (1.42) over time. 

13-27 
 

Figure 13.4.3 Base Case Markups for 4-Foot MPB T8 700, 800, and 800 Plus Series Lamps 

Over Time Under the Emerging Technology Base Case

 Each shipment scenario can potentially have a separate set of markups in the Four-Tier 

Markup scenario due to the different market share possibilities between each lamp series for each 

shipment scenario. DOE examined when the more efficacious series overtake the less efficacious 

series for each shipment scenario. Since the year the 800 and 800 plus series overtake the 700 

series are similar and do not greatly change the results, DOE used the Existing and Emerging 

Technologies base case shipments with a shift in efficacy distribution to determine the 

algorithms of how these premium products are commoditized overtime. This assumption 

simplifies the analysis, reduces variability, and reduces further speculation, 

To calculate the initial markups in 2012 and to compare the INPV of the both markup 

scenarios, DOE first adjusted the markups in the Four-Tier Markup scenario to yield the same 

base-case INPV as in the Flat Markup scenario. This adjustment was made with a Four-Tier 

Markup scenario in which there was no deline in markups over premium products over time (i.e., 

a scenario where the four-tier markups remain constant over time). For both base cases (Existing 

and Emerging Technologies), DOE multiplied the four-tier markups at each efficacy level by 

multipliers that would result in equal base-case INPV for both markup scenarios. The difference 

in multipliers between Existing and Emerging Technologies scenarios exists because total 

shipments for each scenario vary. Once calculated, these adjusted markups were used as the 

starting markups in 2012 that were reduced over time using the previously described method. 

Table 13.4.21 through Table 13.4.31 show each product analyzed with the corresponding 

phosphors series with its initial and converging markups. 

13-28 
 

Table 13.4.22 Base Case Four-Tier Markup for GSFL: 4-Foot Medium Bipin Product – 

Existing Technologies Base Case 

Product 

Class 

Lamp 

Series 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

700 76.8 1.42 1.42 

700 78.0 1.42 1.42 

600 77.9 1.26 1.26 

800 80.5 1.53 1.53 

700 82.4 1.42 1.42 

800+ 82.9 1.64 1.64 

800 85.3 1.53 1.53 

800+ 87.8 1.64 1.64 

4 – Foot 

T12 MBP 

800+ 91.2 1.64 1.64 

700 86.2 1.42 1.42* 

800 90.8 1.53 1.42* 

800 92.3 1.53 1.42* 

800+ 93.8 1.64 1.42* 

800+ 93.0 1.64 1.42* 

800+ 95.4 1.64 1.42* 

4 – Foot 

T8 MBP 

800+ 97.3 1.64 1.42* 

 * Lamp series that have decreasing markups 

Table 13.4.23 Base Case Four-Tier Markup for GSFL: 8-Foot Single Pin Slimline Product 

– Existing Technologies Base Case 

Product 

Class 

Lamp 

Series 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

700 85.6 1.42 1.42 

800 87.3 1.53 1.53 

600 87.6 1.26 1.26 

800+ 92.0 1.64 1.64 

700 92.6 1.42 1.42 

8 – Foot 

T12 SP 

Slimline 

700 97.5 1.42 1.42 

700 94.8 1.42 1.42 

800 98.2 1.53 1.42* 

800+ 101.5 1.64 1.64 

800+ 101.8 1.64 1.64 

8 – Foot 

T8 SP 

Slimline 

800+ 103.6 1.64 1.64 

 * Lamp series that have decreasing markups 

13-29 
 

Table 13.4.24 Base Case Four-Tier Markup for GSFL: 8-Foot Recessed Double Contact – 

Existing Technologies Base Case 

Product 

Class 

Lamp 

Series 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

700 80.1 1.42 1.42 

600 82.5 1.26 1.26 

800 83.2 1.53 1.42* 

700 86.1 1.42 1.42 

800 87.6 1.53 1.42* 

8 – Foot 

T 12 

RDC HO 

800+ 88.9 1.64 1.64 

700 91.9 1.42 1.42 

700 93.0 1.42 1.42 

8 – Foot 

T8 RDC 

HO 800 95.3 1.53 1.53 

 * Lamp series that have decreasing markups 

Table 13.4.25 Base Case Four-Tier Markup for GSFL: 4-Foot T5 Product Class – Existing 

Technologies Base Case 

Markup 

By Trial 

Standard 

Level 

Product 

Class 

Lamp 

Efficacy 

Baseline 

86.0 1.63 

104.3 1.63 

109.7 1.63 

4 – Foot 

T5 

MiniBP 

SO 111.5 1.63 

Table 13.4.26 Base Case Four-Tier Markup for GSFL: 4-Foot T5 High Output Product – 

Existing Technologies Base Case 

Markup 

By Trial 

Standard 

Level 

Product 

Class 

Lamp 

Efficacy 

Baseline 

76.0 1.63 

92.9 1.63 

4 – Foot 

T5 

MiniBP 

HO 98.0 1.63 

13-30 
 

Table 13.4.27 Base Case Four-Tier Markup for GSFL: 4-Foot Medium Bipin Product – 

Emerging Technologies Base Case 

Product 

Class 

Lamp 

Series 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

700 76.8 1.42 1.42 

700 78.0 1.42 1.42 

600 77.9 1.26 1.26 

800 80.5 1.53 1.53 

700 82.4 1.42 1.42 

800+ 82.9 1.64 1.64 

800 85.3 1.53 1.53 

800+ 87.8 1.64 1.64 

4 – Foot 

T12 MBP 

800+ 91.2 1.64 1.64 

700 86.2 1.42 1.42* 

800 90.8 1.53 1.42* 

800 92.3 1.53 1.42* 

800+ 93.8 1.64 1.42* 

800+ 93.0 1.64 1.42* 

800+ 95.4 1.64 1.42* 

4 – Foot 

T8 MBP 

800+ 97.3 1.64 1.42* 

 * Lamp series that have decreasing markups 

Table 13.4.28 Base Case Four-Tier Markup for GSFL: 8-Foot Single Pin Slimline Product 

– Emerging Technologies Base Case 

Product 

Class 

Lamp 

Series 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

700 85.6 1.42 1.42 

800 87.3 1.53 1.53 

600 87.6 1.26 1.26 

800+ 92.0 1.64 1.64 

700 92.6 1.42 1.42 

8 – Foot 

T12 SP 

Slimline 

700 97.5 1.42 1.42 

700 94.8 1.42 1.42 

800 98.2 1.53 1.42* 

800+ 101.5 1.64 1.64 

800+ 101.8 1.64 1.64 

8 – Foot 

T8 SP 

Slimline 

800+ 103.6 1.64 1.64 

 * Lamp series that have decreasing markups 

13-31 
 

Table 13.4.29 Base Case Four-Tier Markup for GSFL: 8-Foot Recessed Double Contact – 

Emerging Technologies Base Case 

Product 

Class 

Lamp 

Series 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

700 80.1 1.42 1.42 

600 82.5 1.26 1.26 

800 83.2 1.53 1.42* 

700 86.1 1.42 1.42 

800 87.6 1.53 1.42* 

8 – Foot 

T 12 

RDC HO 

800+ 88.9 1.64 1.64 

700 91.9 1.42 1.42 

700 93.0 1.42 1.42 

8 – Foot 

T8 RDC 

HO 800 95.3 1.53 1.53 

 * Lamp series that have decreasing markups 

Table 13.4.30 Base Case Four-Tier Markup for GSFL: 4-Foot T5 Product Class – 

Emerging Technologies Base Case 

Product 

Class 

Lamp 

Efficacy 

Initial 

Markup in 

2012 

Markup 

by 2042 

86.0 1.64 1.64 

104.3 1.64 1.64 

109.7 1.64 1.64 

4 – Foot 

T5 

MiniBP 

SO 111.5 1.64 1.64 

Table 13.4.31 Base Case Four-Tier Markup for GSFL: 4-Foot T5 High Output Product – 

Emerging Technologies Base Case 

Product 

Class 

Lamp 

Efficacy 

Initial 

Markup 

in 2012 

Markup 

by 2042 

76.0 1.64 1.64 

92.9 1.64 1.64 

4 – Foot 

T5 

MiniBP 

HO 98.0 1.64 1.64 

13.5 GSFL INDUSTRY FINANCIAL IMPACTS 

Using the inputs and scenarios described in the previous sections, the GRIM estimated 

the financial impacts on the GSFL industry due to amended energy conservation standards. The 

following sections detail additional inputs and assumptions related to the GSFL industry. The 

main results of the MIA are also reported in this section and consist of two key financial metrics: 

INPV and annual cash flows. 

13-32 
 

13.5.1 Impacts on Industry Net Present Value 

The INPV measures the industry value and is used in the MIA to compare the economic 

impacts of different TSLs. The INPV is different from the DOE’s NPV applied to the whole U.S. 

economy. The INPV is the sum of all net cash flows discounted at the industry’s cost of capital 

or discount rate. The GRIM estimated cash flows between 2007 and 2042, consistent with the 

forecast period used in the NIA (chapter 11). 

In the MIA, DOE compares the INPV of the base case (no amended energy conservation 

standards) to that of each TSL. The difference in INPV is an estimate of the economic impacts 

that implementing that particular TSL would have on the entire industry. For the GSFL industry, 

DOE examined two markup scenarios as described in the mark-up section above. DOE 

incorporated the two base-case shipment scenarios and all the standards-case shipment scenarios 

from the GSFL NIA. 

For the following sections that review the financial impacts on the GSFL industry due to 

amended energy conservation standards, the impacts in the standards cases are relative to one of 

the specific bases cases. In this analysis, DOE used both the Emerging Technologies and 

Existing Technologies base-case shipment scenarios to represent the GSFL industry. The 

Existing Technologies base case has a higher base-case INPV than the Emerging Technologies 

base case. The Emerging Technologies base case models shipments of covered products 

decreasing due to technologies such as light emitting diodes (LEDs) and ceramic metal-halide 

(CMH) lights taking GSFL market share. The base case in which GSFL shipments decrease over 

time has a lower INPV because the decreasing market share reduces cash flow from operations. 

When comparing these two base cases, the GSFL industry has a 6.0 percent lower value if 

emerging technologies take market share compared to the GSFL industry in which emerging 

technologies are not present. When comparing the impacts between base cases, the percentage 

change in INPV is a better indicator of how standards impact the GSFL industry because of the 

base-case industry value depends on how base-case shipments change over the analysis period. 

Table 13.5.1 shows both base-case INPV values under the Emerging and Existing Technologies 

base-case shipment scenarios. 

Table 13.5.1 Changes in Base-Case Industry Net Present Values for the GSFL Industry 

Base Case Existing 

Technologies

Emerging 

Technologies 

INPV (2008$ millions) 639 601 

Difference in base-case 

INPV (2008$ millions) (38) 

Percentage difference in 

INPV -6.0 % 

 Table 13.5.2 and Table 13.5.3 provide the INPV estimates for the GSFL industry under 

the two different scenarios used to bound the MIA results. For INPV estimates for the GSFL 

industry under all possible scenarios, see appendix 13A. 

13-33 
 

Table 13.5.2 Changes in Industry Net Present Value for the GSFL Industry with a Flat 

Markup Scenario, Existing Technologies Base Case – High Lighting Expertise – Shift in 

Efficacy Distribution 

Trial Standard Level 

 Units Base 

Case 1 2 3 4 5 

INPV 2008$ 

Millions 639 697 695 721 635 671 

2008$ 

Millions - 58 56 82 -4 33 Change in INPV 

(%) - 9.11% 8.83% 12.82% -0.64% 5.09% 

Table 13.5.3 Changes in Industry Net Present Value for the GSFL Industry with a FourTier Markup Scenario, Emerging Technologies Base Case – Market Segment Based – Rollup in Efficacy Distribution 

Trial Standard Level 

 Units Base 

Case 1 2 3 4 5 

INPV 2008$ 

Millions 527 662 629 432 365 316 

2008$ 

Millions - 134 102 -95 -162 -211 Change in INPV 

(%) - 25.47% 19.29% -18.08% -30.74% -40.04% 

13.5.2 Impacts on GSFL Annual Cash Flow 

While INPV is useful for evaluating the long-term effects of amended energy 

conservation standards, short-term changes in cash flow are also important indicators of the 

industry’s financial situation. For example, a large investment over a period of one or two years 

could strain the industry’s access to capital. Consequently, the sharp drop in financial 

performance could cause investors to flee, even though recovery may be near. Thus, a short-term 

disturbance can have long-term effects that the INPV cannot capture. To get an idea of the 

behavior of annual net cash flows, DOE reports the annual net or free cash flows from 2007 

through 2042 for the different TSL levels. Figure 13.5.1 and Figure 13.5.2 present the annual net 

cash flows for the base case and each of the five TSLs for the GSFL industry for 2007 through 

2020 for the two scenarios used to bound the MIA results. For annual net cash flows estimates 

for the GSFL industry under all possible scenarios, see appendix 13A. 

13-34 
 

Figure 13.5.1 Annual Net Cash Flow for GSFL Industry with a Flat Markup Scenario, 

Existing Technologies Base Case – High Lighting Expertise – Shift in Efficacy Distribution 

Figure 13.5.2 Annual Net Cash Flow for GSFL Industry with a Four-Tier Markup 

Scenario, Emerging Technologies Base Case – Market Segment Based – Roll-up in Efficacy 

Distribution 

 Prior to the effective date of the amended energy conservation standards, cash flows are 

driven by the level of capital conversion costs and product conversion costs and the proportion of 

these investments spent every year. With the natural transition from T12 to T8 in the base cases, 

13-35 
 

the cash flows show an even decline from 2009 through 2018 as companies use their financial 

resources to convert their T12 lines to T8. With the accelerated conversion from T12 to T8 in the 

standard cases, after the amended standards announcement date, industry cash flows begin to 

decline as companies use their financial resources to redesign products and convert 

manufacturing equipment for more T8 production. The more stringent the energy conservation 

standards, the greater the impact on net industry cash flows in the years running up to the 

effective date, as conversion capital costs and product development costs use up cash flows from 

operations. 

After standards bring higher priced products into the market in 2012, the industry free 

cash flows begin to increase. The magnitude of the increase depends on the ability of the 

industry to maintain margins on what are now premium products. In the years following the 

effective date of the amended standards, the impact on cash flow depends on the operating 

revenue. If manufacturers are able to fully pass along costs to consumers, higher TSLs have a 

positive impact on cash flows relative to the base case. If manufacturers’ margins on premium 

products are squeezed (the Four-Tier Markup scenario), amended standards have a negative 

impact on cash flows relative to the base case. In general, as margins are increasingly squeezed, 

cash flows decrease relative to the base case. The impacts on cash flows for TSL 1 and TSL 2 in 

the Four-Tier Markup scenario are positive because manufacturers are left with a wide variety of 

lamps after standards, mitigating margin pressure even in the Four-Tier Markup scenario. For 

TSL 3, TSL 4, and TSL 5, margin squeezes are significant and negatively impact cash flows. At 

these TSLs under the Four-Tier Markup scenario, manufacturers are left with fewer and fewer 

premium products which leads to lower margins as more lamps are commoditized. The 

magnitude of the positive cash flow impact under the Flat Markup scenarios and the negative 

cash flow impact under the Four-Tier Markup scenario depends on the incremental cost of 

standards compliant products. The higher the incremental cost, the larger the impact on operating 

revenue and cash flow in the years following the effective date of the standards. 

The base-case scenario chosen does not have a significant impact on net cash flow in the 

early years of the analysis. The impacts between the Existing Technologies and Emerging 

Technologies base cases are more prominent in the later years of the analysis (around years 2030 

and above). However, in both base cases the margin pressure due to the commoditization of 

premium products has the impact on free cash flow. 

 

13.6 IRL INDUSTRY FINANCIAL IMPACTS 

Using the inputs and scenarios described in the previous sections, the GRIM estimated 

financial impacts on the IRL industry due to amended energy conservation standards. The 

following sections detail additional inputs and assumptions related to the IRL industry. The main 

results of the MIA are also reported in this section and consist of two key financial metrics: 

INPV and annual cash flows. 

13-36 
 

13.6.1 Impacts on Industry Net Present Value 

The INPV measures the industry value and is used in the MIA to compare the economic 

impacts of different TSLs. The INPV is different from the DOE’s NPV applied to the whole U.S. 

economy. The INPV is the sum of all net cash flows discounted at the industry’s cost of capital 

or discount rate. The GRIM estimated cash flows between 2006 and 2042, consistent with the 

forecast period used in the NIA (chapter 11). 

In the MIA, DOE compares the INPV of the base case (no amended energy conservation 

standards) to that of each TSL. The difference in INPV is an estimate of the economic impacts 

implementing that particular TSL would have on the entire industry. For the IRL industry, DOE 

examined eight total shipment scenarios as described in the shipments section above. DOE 

incorporated the two base-case shipment scenarios and all four standards-case shipment 

scenarios used in the IRL NIA. 

For the following sections that review the financial impacts on the IRL industry due to 

amended energy conservation standards, the impacts in the standards cases are relative to one of 

the specific base cases. In this analysis, DOE used INPV results from the GRIM for both the 

Emerging Technologies and Existing Technologies base cases to represent the IRL industry. The 

Existing Technologies base case has a higher base-case INPV than the Emerging Technologies 

base case. In the Emerging Technologies base case, shipments of covered products decrease over 

the analysis and cash flow from operations follow this decline in IRL shipments. When 

comparing these two base cases, the IRL industry has a 26.8 percent lower value if emerging 

technologies take additional market share compared to the IRL industry in the Existing 

Technologies base case. When comparing the impacts between base cases, the percentage change 

in INPV is a better indicator of how standards impact the IRL industry because the base-case 

industry value depends on how base-case shipments change over the analysis period. Table 

13.6.1 shows both base-case INPV values under the Emerging and Existing Technologies 

shipment scenarios. 

Table 13.6.1 Changes in Base-Case Industry Net Present Values for the IRL Industry 

Base Case Existing 

Technologies

Emerging 

Technologies 

INPV (2008$ millions) 301 221 

Difference in base-case 

INPV (2008$ millions) (81) 

Change in INPV (%) -26.8% 

 In the IRL GRIM, the product substitution shipment scenarios model the case in which 

standards induce some customers that currently purchase covered IRL lamps to purchase BR 

lamps exempted by EISA 2007 (the BR Substitution scenario) or reflector CFL lamps (the RCFL Substitution scenario). The GRIM allows the user to select whether to include the revenue 

of these products as part of the standards-case INPV. For all the results presented below, DOE 

included the revenue for exempted BR lamps but excluded the revenue for R-CFL lamps. For 

INPV estimates for the IRL industry under all possible scenarios, see appendix 13A. 

13-37 
 

Table 13.6.2 Changes in Industry Net Present Value for IRL Industry Under the Existing 

Technologies Base Case - BR Substitution Scenario - Shift in Efficacy Distribution – 

Commercial Lamp Lifetimes 

Units Base Trial Standard Level 

Case 1 2 3 4 5 

INPV (2008$ 

millions) 301 293 233 221 199 190 

(2008$ 

millions) - (8) (66) (81) (102) (111) Change in INPV 

(%) - -2.80% -22.71% -26.78% -34.02% -36.90% 

Table 13.6.3 Changes in Industry Net Present Value for IRL Industry Under the Emerging 

Technologies Base Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – 

Commercial Lamp Lifetimes 

Units Base Trial Standard Level 

Case 1 2 3 4 5 

INPV (2008$ 

millions) 221 205 158 139 123 117 

(2008$ 

millions) - (15) (63) (81) (98) (104) Change in INPV 

(%) - -6.87% -28.58% -36.80% -44.36% -47.18% 

Table 13.6.4 and Table 13.6.5 provide the INPV estimates for the IRL industry under the 

two different Baseline Lifetime scenarios that bound the MIA results. For INPV estimates for the 

IRL industry under all possible scenarios, see appendix 13A. 

Table 13.6.4 Manufacturer Impact Analysis for IRL Under the Existing Technologies Base 

Case - BR Substitution Scenario – Roll-Up in Efficiency Distribution – Baseline Lifetime 

Scenario 

Units Base Case Trial Standard Level 

4 5 

INPV (2008$ millions) 301 281 258 

(2008$ millions) - (21) (43) Change in INPV (%) - -6.81% -14.24%

Table 13.6.5 Manufacturer Impact Analysis for IRL Under the Emerging Technology Base 

Case – R-CFL Product Substitution – Shift in Efficiency Distributions – Baseline Lifetime 

Scenario 

Units Base Case Trial Standard Level 

4 5 

INPV (2008$ millions) 221 160 171

Change in INPV (2008$ millions) - (61) (49)

(%) - -27.52% -22.35%

13-38 
 

13.6.2 Impacts on Annual Cash Flow 

While INPV is useful for evaluating the long-term effects of amended energy 

conservation standards, short-term changes in cash flow are also important indicators of the 

industry’s financial situation. To get an idea of the behavior of annual net cash flows, DOE 

reports the annual net or free cash flows from 2007 through 2042 for the different TSL levels. 

Figure 13.6.1 and Figure 13.6.2 present the annual net cash flows for the base case and each of 

the five TSLs for the IRL industry for 2007 through 2020 for the two scenarios used to bound the 

MIA results with commercial lamp lifetimes. Figure 13.6.3 and Figure 13.6.4 present the annual 

net cash flows for the base case and each of the five TSLs for the IRL industry for 2007 through 

2020 for the two scenarios used to bound the MIA results under the Baseline Lifetime scenarios. 

For annual net cash flows estimates for the IRL industry under all possible scenarios, see 

appendix 13A. 

Figure 13.6.1 Annual Net Cash Flow for IRL Industry Under the Existing Technologies 

Base Case - BR Substitution Scenario - Shift in Efficacy Distribution – Commercial Lamp 

Lifetimes 

 

13-39 
 

Figure 13.6.2 Annual Net Cash Flow for IRL Industry Under the Emerging Technologies 

Base Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – Commercial 

Lamp Lifetimes 

Figure 13.6.3 Annual Net Cash Flow for IRL Industry Under the Existing Technologies 

Base Case - BR Substitution Scenario – Roll-Up in Efficacy Distribution – Baseline 

Lifetime Scenario 

 

13-40 
 

Figure 13.6.4 Annual Net Cash Flow for IRL Industry Under the Emerging Technologies 

Base Case – CFL Substitution Scenario – Shift in Efficacy Distribution – Baseline Lifetime 

Scenario 

 Prior to the effective date of the amended energy conservation standard, the cash flows 

are driven by the level of capital conversion costs and product conversion costs and the 

proportion of these investments spent every year. During these years, the biggest driver of 

impacts on net cash flow is the TSL selected. Higher TSLs require greater outlays to redesign 

products and more costly plant changes to accommodate a higher volume of more efficacious 

products. The large expenditures on capital conversion and product conversion lower net cash 

flow for all TSLs and drive cash flow negative for TSLs 2 through TSL 5. During this time, the 

impacts on net cash flow are slightly worse under the Existing Technologies base case than 

under the Emerging Technologies base case, regardless of the shipment scenario chosen. 

Because the capital conversion costs are scaled for each base case, the Emerging Technologies 

base case has lower capital conversion costs and therefore, due to the lower shipment volumes, 

the cash flow impacts are slightly less. 

 Cash flow increases for all TSLs in the year standards become effective due to stranded 

assets and higher cash flows from operations. In this year, manufacturers receive a one time 

injection of cash from stranded assets for TSL 2 through TSL 5. TSL 1 does not strand existing 

assets because the manufacturing process is effectively unchanged from baseline products. 

However, all higher TSLs have more substantial stranded assets because standards obsolesce a 

greater portion of existing manufacturing equipment. The large stranded assets make free cash 

flows positive for TSL 2 through TSL 5 in 2012 for all shipment scenarios. 

 In the years following the effective date of the standard, standards can have a positive or 

negative impact on free cash flow depending on the year and the shipment scenario selected. 

Manufacturers begin to receive the higher prices of standards-compliant lamps in the year the 

13-41 
 

standards become effective, which positively impacts cash flow from operations. However, 

shipments are highly variable past the effective date of the standard because of the longer lamp 

lifetimes and potentially lower overall shipments. These factors can have a positive or negative 

impact on free cash flow relative to the base case, depending on the year. 

13.7 OTHER IMPACTS 

13.7.1 Employment 

13.7.1.1 GSFL Employment 

To quantitatively assess the impacts of energy conservation standards on GSFL 

manufacturing employment, DOE used the GSFL GRIM to estimate the domestic labor 

expenditures and number of employees. Since standards only require changes to the phosphor 

mixes and will not alter lamp assembly, higher TSLs should not alter employment at the plant 

level. During interviews with manufacturers, DOE learned that GSFL are produced on highspeed, fully automated lines. Production workers are not involved in the physical assembly of the 

final product (e.g., in inserting components, transferring partly assembled lamps, soldering lamp 

bases, etc.). The production workers counted in DOE’s figure include plant workers involved in 

clearing glass, overseeing a portion of the assembly line, monitoring quality control, mixing 

phosphors, and moving finished products to loading. The employment levels required for these 

tasks are a function of the total volume of the facility, not the labor content of the product mix 

produced by the plant. Since higher TSLs involve using more efficient phosphors, employment 

will not be impacted because standards will not change the overall scale of the facility. 

DOE used statistical data from the U.S. Census Bureau’s 2006 Annual Survey of 

Manufacturers (2006 ASM), the results of the product price determination, and interviews with 

manufacturers to estimate the inputs necessary to calculate industry-wide labor expenditures and 

employment levels. DOE multiplied the labor percentage of COGS by the total annual COGS for 

the industry to calculate the total labor expenditure. DOE estimates that approximately 81 

percent of GSFL are manufactured and sold in the U.S. DOE multiplied the total annual labor 

expenditures in the GSFL GRIM by the percentage of U.S. production for domestic consumption 

to calculate domestic labor expenditures for GSFL production labor. The domestic annual labor 

expenditures in the GSFL GRIM were converted to a domestic production employment level by 

dividing domestic production labor expenditures by the annual payment per production worker 

(production worker hours times the labor rate found in the 2006 ASM). The number of nonproduction employees was calculated by multiplying the number of production workers by the 

ratio of non-production workers to production workers calculated using the employment data in 

the 2006 ASM. 

The GSFL GRIM calculates that the GSFL industry’s domestic labor expenditure for 

production labor in 2012 is approximately $79 million. Domestic labor expenditures on 

production labor is calculated by multiplying total COGS in 2012 times the production labor 

percentage of COGS times the percentage of U.S production. Using the $24.90 wage rate and 

2,040 production hours per year per employee found in the 2006 ASM, the GSFL GRIM 

13-42 
 

estimates that there is approximately 1,552 U.S. production workers in the GSFL industry. In 

addition, DOE estimates that there are approximately 354 non-production employees in the U.S. 

support GSFL production.c

 As previously stated, employment levels are not expected to change 

because the overall scale of the facility and labor requirement does not change with higher 

efficacy levels. 

The employment impacts calculated by DOE are independent of the employment impacts 

from the broader U.S. economy, which are documented in chapter 15 of the TSD. The 

employment impacts also do not account for the possible relocation of domestic jobs to lowerlabor-cost countries because the potential relocation of U.S. jobs is uncertain and highly 

speculative. . 

13.7.1.2 IRL Employment 

To quantitatively assess the impacts of energy conservation standards on employment, 

DOE used the GRIM to estimate the domestic labor expenditures and number of employees in 

the base case and at each TSL from 2007 through 2042 for the IRL industry. DOE used statistical 

data from the 2006 ASM, the results of the product price determination, and interviews with 

manufacturers to estimate the inputs necessary to calculate industry-wide labor expenditures and 

domestic employment levels. The total labor expenditures in each year are calculated by 

multiplying the COGS or MPCs by the labor percentage of COGS. From interviews, DOE 

estimated that 65 percent of covered IRL are manufactured and sold in the U.S. DOE multiplied 

the total annual labor expenditures in the GRIM by the percentage of U.S. production for 

domestic sales to calculate domestic labor expenditures for IRL production labor. The domestic 

annual labor expenditures in the GRIMs were converted to domestic production employment 

levels by dividing production labor expenditures by the annual payment per production worker 

(production worker hours times the labor rate found in the 2006 ASM). The number of nonproduction employees was calculated by multiplying the number of production workers by the 

ratio of non-production workers to production workers calculated using the employment data in 

the 2006 ASM. The total direct employment impacts calculated in the GRM are the sum of the 

production and non-production workers. 

 The domestic annual labor expenditures and employment levels were calculated for the 

base case and at each TSL. The impacts on domestic employment due to standards can be 

 

c As defined in the 2006 ASM, production workers number include “workers (up through the line-supervisor level) 

engaged in fabricating, processing, assembling, inspecting, receiving, storing, handling, packing, warehousing, 

shipping (but not delivering), maintenance, repair, janitorial and guard services, product development, auxiliary 

production for plant's own use (e.g., power plant), recordkeeping, and other services closely associated with these 

production operations at the establishment covered by the report. Employees above the working-supervisor level are 

excluded from this item.” Non-production workers are defined as “employees of the manufacturing establishment 

including those engaged in factory supervision above the line-supervisor level. It includes sales (including driversalespersons), sales delivery (highway truck drivers and their helpers), advertising, credit, collection, installation and 

servicing of own products, clerical and routine office functions, executive, purchasing, financing, legal, personnel 

(including cafeteria, medical, etc.), professional, and technical employees. Also included are employees on the 

payroll of the manufacturing establishment engaged in the construction of major additions or alterations utilized as a 

separate work force.” 

13-43 
 

assessed by comparing the employment results in the base case to the results at each TSL. In the 

GRIM, the employment results represent direct U.S. production workers that are impacted by 

this rulemaking. U.S. workers involved in manufacturing or supporting products for exports 

would not be impacted and are not included as part of the labor impacts. 

The GRIM calculates that the IRL industry’s domestic labor expenditure for production 

labor in 2012 is approximately $44 million under the Existing Technologies base case and $40 

million under the Emerging Technologies base case. Using the $24.90 wage rate and 2,040 

production hours per year per employee found in the 2006 ASM, the GRIM estimates there are 

approximately 875 and 797 U.S. production employees manufacturing covered IRL in the 

Existing Technologies and Emerging Technologies base cases, respectively. In addition, DOE 

estimates that 200 and 182 non-production employees in the U.S. support IRL production under 

the Existing Technologies and Emerging Technologies base cases, respectively. The employment 

spreadsheet of the IRL GRIM shows the annual domestic employment impacts in further detail. 

Because the employment impacts change from year to year, DOE reports the average 

employment impacts from the year the standard become effective to the end of the analysis 

period. The average employment for the analysis period gives a better representation of how 

domestic employment changes in response to standards. The total employment figures include 

both domestic production and non-production workers. Table 13.7.1 and Table 13.7.2 illustrate 

the average impact of amended energy conservation standards on domestic employment levels at 

each TSL for the IRL industry calculated by the GRIM for the two scenarios used to bound the 

MIA results with commercial lamp lifetimes. Table 13.7.3 and Table 13.7.4 illustrate the average 

impact of amended energy conservation standards on domestic employment levels at each TSL 

for the IRL industry calculated by the GRIM for the two scenarios used to bound the MIA results 

under the Baseline Lifetime scenarios. For domestic direct employment figures estimates for the 

IRL industry under all possible scenarios, see appendix 13A. 

Table 13.7.1 Change in the Average Number of Domestic Employees in the IRL Industry 

Under the Existing Technologies Base Case – BR Substitution Scenario - Shift in Efficacy 

Distribution – Commercial Lamp Lifetimes 

Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Average Number of 

Domestic IRL Employees 

from 2012 – 2042 

1,400 1,575 1,348 1,538 1,419 1,428 

Change in the Average 

Number of Domestic IRL 

Employees from 2012 – 

2042 

- 175 -51 139 19 28 

13-44 
 

Table 13.7.2 Change in the Average Number of Domestic Employees in the IRL Industry 

Under the Emerging Technologies Base Case – CFL Substitution Scenario – Roll-Up in 

Efficacy Distribution – Commercial Lamp Lifetimes 

Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Average Number of 

Domestic IRL Employees 

from 2012 – 2042 

707 806 652 763 676 698 

Change in the Average 

Number of Domestic IRL 

Employees from 2012 – 

2042 

- 100 -55 56 -30 -9 

Table 13.7.3 Change in the Average Number of Domestic Employees in the IRL Industry 

Under the Existing Technologies Base Case – BR Substitution Scenario – Roll-Up in 

Efficacy Distribution – Baseline Lifetime Scenario 

Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Average Number of 

Domestic IRL Employees 

from 2012 – 2042 

1,400 1,575 1,341 1,557 2,121 2,209 

Change in the Average 

Number of Domestic IRL 

Employees from 2012 – 

2042 

- 175 -58 158 722 809 

Table 13.7.4 Change in the Average Number of Domestic Employees in the IRL Industry 

Under the Emerging Technologies Base Case – CFL Substitution Scenario – Shift in 

Efficacy Distribution – Baseline Lifetime Scenario 

Baseline TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

Average Number of 

Domestic IRL Employees 

from 2012 – 2042 

707 806 652 760 988 1,069 

Change in the Average 

Number of Domestic IRL 

Employees from 2012 – 

2042 

- 100 -55 53 281 363 

13-45 
 

Figure 13.7.1 and Figure 13.7.2 show total annual domestic employment levels for each 

TSL calculated by the GRIM for the two scenarios used to bound the MIA results with 

commercial lamp lifetimes. Figure 13.7.3 and Figure 13.7.4 show total annual domestic 

employment levels for each TSL calculated by the GRIM for the two scenarios used to bound the 

MIA results under Baseline Lifetime scenarios. For domestic direct employment figures 

estimates for the IRL industry under all possible scenarios, see appendix 13A. 

Figure 13.7.1 Total IRL Industry Employment by Year Under the Existing Technologies 

Base Case - BR Substitution Scenario - Shift in Efficacy Distribution – Commercial Lamp 

Lifetimes 

13-46 
 

Figure 13.7.2 Total IRL Industry Employment by Year Under the Emerging Technologies 

Base Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – Commercial 

Lamp Lifetimes

Figure 13.7.3 Total IRL Industry Employment by Year Under the Existing Technologies 

Base Case - BR Substitution Scenario - Shift in Efficacy Distribution – Baseline Lifetime 

Scenario 

13-47 
 

Figure 13.7.4 Total IRL Industry Employment by Year Under the Emerging Technologies 

Base Case – CFL Substitution Scenario – Roll-Up in Efficacy Distribution – Baseline 

Lifetime Scenario 

The employment results show that energy conservation standards will not significantly 

impact IRL direct employment. The impact that amended energy conservation standards will 

have on employment is far less significant than the potential impact from emerging technologies. 

The difference in employment between the Emerging Technologies and the Existing 

Technologies base cases is greater than the employment impacts due to amended efficacy 

standards, regardless of the shipment scenario. For example, the Existing Technologies base case 

has an average of 693 more total U.S. employees than the Emerging Technologies base case. The 

difference in employment in these two base cases far exceeds the employment impacts due to 

proposed standards. 

In the standards cases, the employment impacts in the IRL industry vary depending on 

how shipments change over time. Because labor expenditures are assumed to be a fixed 

percentage of COGS and the MPCs increase with more efficacious products, labor expenditures 

track the increased prices in the GRIM. Employment generally increases for both product 

substitution shipment scenarios, regardless of the base case and the efficacy shipment 

distribution scenario chosen. Under these scenarios, labor expenditures increase with the higher 

prices of standards-compliant lamps. However, regardless of the scenario selected, using the 

average employment over the analysis period shows relatively minor employment impacts in all 

scenarios with commercial lamp lifetimes. The higher shipments at TSL 4 and TSL 5 under the 

Baseline Lifetime scenario create relatively large positive employment impacts. 

The employment impacts calculated by DOE are independent of the employment impacts 

from the broader U.S. economy, which are documented in chapter 15 of the TSD accompanying 

13-48 
 

this notice. The employment conclusions also do not account for the possible relocation of 

domestic jobs to lower-labor-cost countries because the potential relocation of U.S. jobs is 

uncertain and highly speculative. During interviews, manufacturers did not emphasize the risk of 

shifting production facilities. However, some manufacturers did indicate that the IRL standards 

could lower employment in their existing facilities. Because manufactures assume shipments will 

decrease over the analysis period, manufactures indicated that it would be difficult to justify the 

investments necessary to expand the production of more efficacious IRL. If manufacturers do not 

invest to meet existing demand after the effective date of the standard, employment levels would 

be adjusted based on the overall shipment volume of IRL. 

13.7.2 Manufacturing Capacity 

Amended energy conservation standards will not significantly affect the production 

capacity of GSFL manufacturers. For GSFL manufacturers, any necessary redesign of GSFL will 

not change the fundamental assembly of the products because higher TSLs require the use of 

more efficient phosphor coatings. Therefore, in the long-term there should be no capacity 

constraints. However, higher standards also expedite a natural conversion of T12 shipments to 

T8 shipments. Because most production lines are specific to lamp diameter, shifting production 

from T12 to T8 requires shutting down the line and retooling. Based on the duration of line 

changes described by manufactures, DOE estimates that the conversion of machinery to T8 is 

possible between the announcement date and the effective date of the standards. In addition, 

manufactures indicated it is possible to ramp up production before shutting down a line to 

maintain a constant supply of shipments during retooling. 

Manufacturers are concerned that IRL standards could cause capacity constraints if 

standards alter the assembly of standard halogen burners. In particular, IRL manufacturers are 

concerned about the ability to convert their equipment in time to meet an exclusively HIR 

standard (TSL 3, TSL 4, and TSL 5). Although all manufacturers DOE interviewed produce 

lamps with infrared burners, the current volume of these lamps is many times lower than the 

volume of standard halogen lamps. In addition, the production of infrared capsules is much more 

time consuming, requiring additional time for the coating process and quality control due to the 

precision necessary for the technology to increase efficacy. In general, the large manufacturers 

are concerned about their ability to increase the production volume of HIR capsules in time to 

meet the standard. Interviews with suppliers of HIR capsules and coating decks suggest that the 

capacity could be met at an HIR standard. Based on discussions with suppliers of infrared 

coaters, DOE also estimates that lamp manufactures will have enough time in between the 

announcement date and the effective date of the standards to purchase and install the necessary 

coaters to meet an infrared standard and produce all burners in their own facilities. Independent 

of manufacturers’ ability to install coaters to produce all infrared burners in-house, independent 

suppliers of infrared capsules suggested that they have the ability to supply a significant portion 

of the market. Because manufacturers could install additional coaters, purchase infrared burners 

from a supplier, and use existing excess capacity, IRL manufacturers will be able to maintain 

production capacity levels and continue to meet market demand for all IRL standard levels. 

13-49 
 

13.7.3 Cumulative Regulatory Burden 

While any one regulation may not impose a significant burden on manufacturers, the 

combined effects of several impending regulations may have serious consequences for some 

manufacturers, groups of manufacturers, or an entire industry. Assessing the impact of a single 

regulation may overlook this cumulative regulatory burden. For the cumulative regulatory 

burden analysis, DOE describes other product-specific regulations that could affect GSFL and 

IRL manufacturers or their parent company that will take effect three years before or three years 

after the effective date of the amended energy conservation standards for GSFL and IRL.d DOE 

also describes additional state regulations and reporting requirements with which manufactures 

of GSFL and IRL must comply. 

Companies that produce a wider range of regulated products may be faced with more 

capital and product conversion costs than their competitors. This can prompt those companies to 

exit the market or reduce their product offerings, potentially reducing competition. Smaller 

companies can be especially impacted since they have lower sales volumes over which to 

amortize the costs of meeting new regulations. DOE considers that a proposed standard is not 

economically justified if it contributes to an unacceptable level of cumulative regulatory burden. 

13.7.3.1 Federal DOE Regulations on Other Products Produced by the GSFL and 

IRL Manufacturers 

In addition to the energy conservation regulations on GSFL and IRL products, several 

other Federal regulations and pending regulations apply to other products produced by the same 

manufacturers. DOE recognizes that each regulation can significantly impact manufacturers’ 

financial operations. Multiple regulations affecting the same manufacturer can quickly strain 

manufacturers’ profits and possibly cause an exit from the market. Table 13.7.5 lists the Federal 

regulations that could also affect manufacturers of GSFL and IRL in the three years leading up to 

and the three years after the effective date of the amended energy conservation standards for 

these products. It must be noted that while the list of products is long, the amount of cumulative 

burden on any particular firm is extremely variable since the product scope of each company is 

different. 

 

d

 The effective date for GSFL and IRL is 3 years from the date of publication of the final rule (July 2012) 

13-50 
 

Table 13.7.5 Other DOE and Federal Actions Affecting the GSFL and IRL Industries 

Regulation Approximate 

Effective Date* 

Number of 

Impacted 

Companies 

from the 

MTA 

Estimated 

Industry Total 

Conversion 

Costs** (millions) 

Residential Refrigerators and 

Freezers 2010* 2 N/A†

Commercial Distribution 

Transformers 2010 1 $13.5 (2006$)e

Dishwashers 2012 2 N/A†

Dehumidifiers 2012 1 N/A†

Cooking Products 2012 2 $22.6 (2006$)f

Commercial Clothes Washers 2012* 1 N/A†

Packaged Terminal Air Conditioners 

and Heat Pumps 2012* 1 $17.3 (2007$)g

Residential Fluorescent and 

Incandescent Lamps 2012 3 See section 13.4.8 

Residential Clothes Washers 2014* 2 N/A†

Room Air Conditioners 2014* 1 N/A†

Battery Chargers 2014* 2 N/A†

Residential Water Heaters 2015* 1 N/A†

*The dates listed are an approximation. The exact dates are pending final DOE action. 

** Total conversion costs include both capital and product conversion costs for the rulemaking specific industries. 

† For energy conservation standards for ongoing rulemakings that are awaiting DOE final action, DOE does not 

have finalized estimated total industry conversion costs. For minimum performance requirements prescribed by the 

Energy Policy Act of 2005 (EPACT 2005), DOE did not estimate total industry conversion costs because a MIA was 

not completed as part of a rulemaking. 42 U.S.C. 6291-6317. For minimum performance requirements prescribed by 

the Energy Independence and Security Act of 2007 (EISA 2007), DOE did not estimate total industry conversion 

costs because a MIA was not completed as part of a rulemaking. Pub. L. 110-140.

Additional investments necessary to meet these potential standards could have significant 

impacts on manufacturers of GSFL and IRL. However, DOE has limited data on the importance 

of these other regulated products for manufacturers of GSFL and IRL. Differences in market 

shares and manufacturing processes of other regulated products for each manufacturer could 

 

e

 Estimated industry conversion expenses were published in the TSD for the October 2007 distribution transformers 

final rule. 72 FR 58190. The TSD for the 2007 distribution transformers final rule can be found at: 

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers_finalrule.html f

 Estimated industry conversion expenses were published in the TSD for the April 2009 residential cooking products 

final rule. 74 FR 16040. The TSD for the 2009 residential cooking products final rule can be found at: 

http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/74fr16040.pdf g

 Estimated industry conversion expenses were published in the TSD for the September 2008 packaged terminal air 

conditioners and heat pumps final rule. 73 FR 58772. The TSD for the 2008 packaged terminal air conditioners and 

heat pumps final rule can be found at: 

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/refrig_equip_nopr.html 

13-51 
 

cause varying degrees of burdens on these manufacturers. Therefore, DOE did not estimate the 

costs of compliance for other regulations. 

13.7.3.2 EISA 2007 Requirements 

EISA 2007 contained minimum energy conservation standards for general service 

incandescent lamps (GSIL), extended coverage of IRL standards, and contained reporting 

requirements for certain types of lamps (Pub. L. 110-140). The EISA 2007 requirements 

prescribe separate energy conservation standards and minimum rated lifetimes for GSIL and 

modified spectrum GSIL, with effective dates ranging from January 1, 2012 to January 1, 2014. 

The phased-in standards for these two types of lamps are shown in Table 13.7.6 and Table 13.7.7

below. 

Table 13.7.6 EISA 2007 GSIL Standards 

Rated Lumen Ranges Maximum Rate 

Wattage 

Minimum Rate 

Lifetime 

Effective Date 

1490 – 2600 72 1,000 hours 1/1/2012 

1050 – 1489 53 1,000 hours 1/1/2013 

750 – 1049 43 1,000 hours 1/1/2014 

310 – 749 29 1,000 hours 1/1/2014 

Table 13.7.7 EISA 2007 Modified Spectrum GSIL Standards 

Rated Lumen Ranges Maximum Rate 

Wattage 

Minimum Rate 

Lifetime 

Effective Date 

1118 – 1950 72 1,000 hours 1/1/2012 

788 – 1117 53 1,000 hours 1/1/2013 

563 – 787 43 1,000 hours 1/1/2014 

232 – 562 29 1,000 hours 1/1/2014 

All three major manufacturers of GSFL and IRL also manufacture large volumes of 

GSIL. Consequently, these companies will also incur capital and product conversion investments 

to comply with the GSIL minimum energy conservation standards. The GSIL investments could 

also compete with IRL and GSFL for company resources. For example, GSFL, IRL, and GSIL 

share many of the same limited engineering resources. In addition, the capital costs to comply 

with EISA 2007 could potentially limit the funding available for GSFL and IRL conversions 

because these investments will compete for the same sources of capital. 

EISA 2007 also amended EPCA’s definition for incandescent reflector lamp and 

amended the standard in 42 U.S.C. 6295(i)(1). Prior to EISA 2007, the statutory definition for 

IRL excluded ellipsoidal reflector (ER) shaped and BR shaped lamps and lamps with a diameter 

less than 2.75 inches. However, EISA 2007 amended this definition to include ER and BR 

shaped lamps and lamps with diameter greater than 2.25 inches. EISA 2007 also amended 42 

U.S.C. 6295(i)(1) to exempt the following lamps from the minimum efficacy requirements: (1) 

lamps rated at 50 watts of less that are ER30, BR30, BR40, and ER40; (2) lamps rated at 65 

watts that are BR30, BR40, or ER40 lamps; and (3) R20 incandescent reflector lamps rated 45 

watts or less. 

13-52 
 

DOE does not have an estimate for the total conversion costs that manufacturers of GSFL 

and IRL would incur to comply with the EISA 2007 requirements for GSIL and IRL because an 

MIA was not completed for the legislatively determined energy conservation standards. 

Finally, EISA 2007 requires NEMA to report yearly sales volumes for rough service, 

vibration service, 2601 – 3300 lumen general service, 3-way, and shatter-resistant lamps from 

2010 to 2025. NEMA is also required to submit historical shipments for these five types of lamps 

for DOE to construct a shipment model. These five types of lamps could be regulated by DOE if 

the actual sales volume of that type of lamp exceeds the volume predicted in DOE’s model by 

100 percent or more in any given year (42 U.S.C. 6295(l)(4)). 

13.7.3.3 Restriction of Hazardous Substances Directive 

According to manufacturers, the Restriction of Hazardous Substance Directiveh

 (RoHS) 

has had some impact in the lighting industry, specifically the GSFL industry. Under the 

directive, all manufacturers are banned from placing on the European Union market new 

electrical and electronic equipment containing more than agreed levels of lead, cadmium, 

mercury, hexavalent chromium, polybrominated biphenyl and polybrominated diphenyl ether 

flame retardants. Although there is no Federal regulation on RoHS, California has passed SB 20: 

Electronic Waste Recycling Act of 2003. Under this law, California limits the amount of hazards 

substances included in the RoHS directive that can be sold in California. Manufacturers of GSFL 

have said that RoHS impacts in the way GSFL are manufactured because some amount of 

mercury is used in lamp manufacturing. However, manufacturers do not anticipate RoHS will 

significantly impact the GSFL or IRL industries as a whole. According to manufacturers, the 

industry has already lowered mercury and lead levels to below RoHS specifications. 

13.7.3.4 Reporting Requirements 

In November 2006, NRCan published a bulletin proposing to amend Canada's Energy 

Efficiency Regulations. NRCan proposed testing and labeling requirements for light output, 

input wattage, and rated lifetime for GSFL, medium base, integrally ballasted CFLs, and 

reflector and non-reflector GSIL.3

 

In addition to the EPCA mandated product performance reporting (42 U.S.C. 6295(i)(7)), 

California mandates that manufacturers report lamp type, rated lumens, nominal lamp wattage, 

rated color rendering index (for GSFL) and average lamp efficacy for all Federally-regulated 

general service fluorescent lamps, federally regulated incandescent reflector lamps, and state 

regulated incandescent reflector lamps. California also requires manufactures to report rated 

lumens, rated lamp wattage, bulb finish, average lamp efficacy, and ANSI-designated bulb shape 

for state-regulated GSIL.4

 

The Interstate Mercury Education and Reduction Clearinghouse (IMERC) was launched 

in 2001 as single point of contact between industry and member states and to provide assistance 

 

h

 Further information about RoHS can be found at 

http://eur-lex.europa.eu/LexUriServ/site/en/oj/2003/l_037/l_03720030213en00190023.pdf 

13-53 
 

regarding state regulations on mercury legislation. Currently Connecticut, Louisiana, Maine, 

Massachusetts, Minnesota, New York, Rhode Island Vermont, and Washington State require 

labeling in order to sell of mercury-added products. In addition, Connecticut, Louisiana, Maine, 

Massachusetts, New Hampshire, New York , North Carolina, Rhode Island, and Vermont require 

a notification to be filed through IMERC or with each individual state.5 

13.7.4 Impacts on Small-Business Subgroup 

DOE found the small business manufacturer of covered GSFL shared some of the same 

concerns as large manufacturers regarding energy conservation standards. However, the small 

manufacturer was less concerned about the potential of standards to severely harm its business. 

Because the small manufacturer is more focused on specialty products not covered by this 

rulemaking, covered GSFL represents a smaller portion of its revenue and product portfolio. In 

addition, this manufacturer stated that it is possible to pass along cost increases to consumers, 

limiting margin impacts due to amended energy conservation standards. 

DOE could not use the GRIM to model the impacts of energy conservation standards on 

the small business manufacturer. The GSFL GRIM models the impacts on GSFL manufacturers 

if concerns about margin pressure and significant capital conversion investments necessitated by 

standards are realized. The small manufacturer did not share these concerns. While the small 

business manufacturer also stated that more efficacious products earn a premium, unlike larger 

manufacturers, the small business manufacturer stated it can pass costs along to its customers. 

Because of its focus on specialized products, the small business manufacturer is more concerned 

about being able to offer the products to their customers than the impact on its bottom line. 

13.8 CONCLUSIONS 

The following sections summarize the different impacts for the two scenarios that are 

most likely to capture the range of impacts on GSFL and IRL manufacturers as a result of 

amended energy conservation standards. DOE also notes that while these two scenarios bound 

the range of most plausible impacts on manufacturers, there potentially could be circumstances 

which cause manufacturers to experience impacts outside of this range and more closely inline 

with the other scenarios analyzed. 

13.8.1 GSFL 

To assess the lower end of the range of potential impacts for the GSFL industry, DOE 

considered the Flat Markup scenario under the Existing Technologies base-case shipments with 

High lighting expertise and a Shift in efficacy distributions. Besides the impact of shipments on 

the INPV, this case assumed that manufacturers will be able to maintain gross margins as a 

percentage of revenues as production cost increases with efficacy. To assess the higher end of the 

range of potential impacts for the GSFL industry, DOE considered the scenario reflecting the 

Four-Tier Markup scenario under the Emerging Technologies base-case shipments with Market 

Segment Based lighting expertise and a Rollup in efficacy distributions. Besides the impact of 

shipments on the INPV, this case pessimistically assumed standards would reduce 

manufacturers’ portfolio, therefore squeezing the margin of higher efficacy products as they are 

“demoted” to lower relative efficacy tier products. 

13-54 
 

For the GSFL MIA, margin impacts are the most significant driver of INPV. The 

potential margin impacts on manufacturers are based on their ability to maintain higher margins 

as standards remove efficacy as a differentiator of premium products. The potential for standards 

to disrupt the premium margins for efficacy is captured in the high and low bound scenarios 

DOE presents. The lower bound scenario represents the situation where manufacturers maintain 

their current “good, better, best” marketing strategy by basing higher margins on features other 

than efficacy or coming up with more efficacious products. The large impacts on industry value 

in the upper bound scenario are caused by higher standards disrupting manufacturers’ current 

marketing strategy. In this scenario, manufactures cannot maintain higher margins when efficacy 

is lost as a differentiator and higher standards lower profitability. Other drivers of INPV are less 

significant because: (1) the capital costs required at each TSL are relatively small compared to 

the industry revenue; and (2) shipments do not substantially change regardless of the scenario. 

DOE estimated the impacts on INPV at TSL 1 to range from $58 million to $134 million, 

equal to a 9.11 percent to 25.47 percent increase. At this level, the highest impact on cash flow in 

the year leading up to the standards occurs under the Emerging Technologies base case. Under 

this scenario, industry cash flow decreases by approximately 28 percent, to $27 million, 

compared to the base case value of $37.6 million in the year leading up to the standards. Product 

conversion costs are low at TSL 1 because manufacturers have existing products that meet the 

efficacy levels. Capital conversion costs are also low at this TSL because a minimal amount of 

T12 machinery needs to be converted to meet the growing volume of T8 production induced by 

standards. The necessary conversion costs to meet TSL 1 are low relative to the conversion costs 

for the natural market migration from T12 to T8 lamps in the base case, which helps to mitigate 

the impact of the standards-induced conversion costs. The positive INPV predicted in the Flat 

Markup scenario is indicative that product conversion and capital conversion outlays are also 

low relative to the increase in variable production costs. Whereas GSFL production is capital 

intensive, the conversion capital requirements are a function primarily of the tube diameter. 

Energy conservation standards which do not require a change in diameter will typically require a 

change in phosphors which is not capital intensive. Under the Four-Tier Markup scenario 

manufacturers are left with a range of products after standards, so they still earn higher markups 

on a wide variety of premium products. In fact the products eliminated at TSL 1 are commodity 

products which have a lower than average profit margin. Thus, industry revenues and cash flows 

are not negatively affected and manufacturers actually benefit from the higher prices of 

remaining products. 

At TSL 2, DOE estimated the impacts in INPV at TSL 2 to range from $56 million to 

$102 million, equal to a 8.83 percent to 19.29 percent increase. At this level, the highest impact 

on cash flow in the year leading up to the standards occurs under the Emerging Technologies 

base case. Under this scenario, industry cash flow decreases by approximately 65 percent, to $13 

million, compared to the base-case value of $37.6 million in the year leading up to the standards. 

Product conversion costs are still relatively low at TSL 2 because few manufacturers will have to 

have to modify exiting products to meet this standard level. Capital conversion costs are also low 

at this TSL, but the investments required to meet TSL 2 are larger than TSL 1 because more T12 

machinery needs to be converted to meet the growing volume of T8 production induced by 

standards. INPV is less positive at TSL 2 than at TSL 1 because the higher conversion costs 

necessary to meet TSL 2 lower the mitigating impact of the conversion costs for the natural 

market migration from T12 to T8 lamps included in the base case. At TSL 2 more of the most 

13-55 
 

efficacious, higher-priced T12 lamps are shifting to less expensive T8 lamps. INPV in the FourTier Markup scenario is also not as positive because manufacturers have fewer premium 

products and the profit margins on some more efficacious T12 products begin to shrink. While 

TSL 2 eliminates some of the premium T12 lamps, the T8 lamps to which consumers must 

migrate still earn a higher markup. 

At TSL 3, the impact on INPV and cash flow depends heavily on the ability of 

manufacturers to differentiate products and maintain higher margins as standards move 

consumers to previously premium products. DOE estimated that the impacts on INPV at TSL 3 

range from approximately $82 million to -$95 million, equal to a 12.82 percent to -18.08 percent 

change. At this level, the highest impact on cash flow in the year leading up to the standards 

occurs under the Emerging Technologies base case. Under this scenario, industry cash flow 

decreases by approximately 129 percent, to -$11 million, compared to the base-case value of 

$37.6 million in the year leading up to the standards. At TSL 3, most manufacturers expressed 

concerns about the ability to maintain production volumes of T12 and T8 lamps because all but 

the most efficacious T12 lamps are eliminated. Because a large portion of existing T12 

shipments migrate to T8, manufacturers have to convert or replace a significant portion of their 

T12 production lines to T8, making capital conversion costs higher at TSL 3 than at TSL 1 or 

TSL 2. Conversion costs are also higher at TSL 3 because manufacturers have to make more 

R&D expenditures to offer a full line of T12 and T8 products that meet the standard. Because 

TSL 3 greatly accelerates the migration of T12 to T8 products, the conversion costs in the base 

case have a minimal effect on offsetting INPV impacts from high standards-induced conversion 

costs at TSL 3 and all higher TSLs. If manufacturers can pass along the increased production 

costs of more efficacious products by differentiating the products with features such as low 

mercury content and longer life, they can recoup margins, mitigating some of the impacts. If 

manufacturers can fully differentiate their products and earn the same profit margins as in the 

base case (the lower range of impacts), they will benefit from higher prices and INPV will be 

positive at this TSL. However, if manufacturers cannot differentiate their products and the 

margins on previously premium products begin to erode with commoditization, the higher end of 

the range of negative INPV will be reached. 

At TSL 4, DOE estimated the impacts on INPV range from approximately -$4 million to 

-$162 million, equal to a -0.64 percent to -30.74 percent change. At this level, the highest impact 

on cash flow in the year leading up to the standards occurs under the Emerging Technologies 

base case. Under this scenario, industry cash flow decreases by approximately 243 percent, to -

$54 million, compared to the base-case value of $37.6 million in the year leading up to the 

standards. At TSL 4, there are significant capital conversion costs because all T12 production 

lines need to be converted to T8 lines; the capital requirement for this conversion is nearly 

double the amount needed at TSL 3. The large conversion capital costs make INPV negative 

even if manufacturers maintain the margin on all lamps, as in the base case. Also, manufacturers 

expressed concern that the highest grade phosphor mixtures would be necessary on most lamps 

to meet efficacies prescribed by TSL 4. The more efficient phosphor blends substantially 

increase lamp costs, decreasing profitability if the cost increases cannot be passed on to 

consumers. That is, at TSL 4, more T8 lamps that previously earned a premium are 

commoditized because the standard eliminates all T12 lamps from the market, squeezing 

margins on all lamps and causing more negative impacts in the Four-Tier Markup scenario. 

13-56 
 

At TSL 5, DOE estimated that the impacts on INPV range from approximately $33 

million to -$211 million, equal to a 5.09 percent to -40.04 percent change. At this level, the 

highest impact on cash flow in the year leading up to the standards occurs under the Emerging 

Technologies base case. Under this scenario, industry cash flow decreases by approximately 259 

percent, to -$60 million, compared to the base-case value of $37.6 million in the year leading up 

to the standards. At TSL 5, the necessary capital conversion costs is identical to TSL 4 because 

this TSL also requires manufacturers to convert all existing T12 production to T8 production. 

These large costs make INPV negative even if manufacturers pass along all production cost 

increases to the consumer. At TSL 5, all products are commoditized because all lamps must use 

the most efficient phosphor coatings. There are few options available for manufacturers to 

differentiate lamps at TSL 5, making it more likely that manufacturers will be negatively 

affected. 

13.8.2 IRL 

At all TSLs, DOE used the commercial lamp lifetime scenarios to evaluate the potential 

impacts on manufacturers. To assess the lower end of the range of potential impacts for the IRL 

industry using commercial lamp lifetimes, DOE considered the Existing Technologies base case 

reflecting the BR Substitution scenario with a Shift in efficacy distributions. In this scenario: (1) 

manufacturers benefit from higher prices from consumers switching to more efficacious products 

on their own (the Shift scenario); (2) IRL base-case shipments are not eroded due to emerging 

technologies; and (3) standards case IRL shipments are only decreased by substitutions to 

exempted BR lamps. To assess the higher end of the range of potential impacts for the IRL 

industry using commercial lamp lifetimes, DOE considered the Emerging Technologies base 

case reflecting the R-CFL Substitution scenario with a Roll-Up in efficacy distributions. In this 

scenario, (1) IRL base-case shipments are eroded due to emerging technologies, and (2) 

standards-case shipments decrease due to substitutions to R-CFL lamps. At TSL 4 and TSL 5, 

the Baseline Lifetime scenario has a significant impact on the INPV results. At TSL 4 and TSL 5 

DOE also used the Baseline Lifetime scenarios that bound the impacts on manufacturers if lamp 

lifetime is reduced in response to energy conservation standards. DOE examined the BR 

Substitution scenario with a Roll-Up in efficacy distribution and the R-CFL Substitution scenario 

with a Shift in efficacy distribution which bound the impacts on manufacturers under the 

Baseline Lifetime scenarios. 

To meet TSL 1 (improved halogen (xenon)) manufacturers must replace less efficient fill 

gases in the capsule with xenon. At TSL 1, the scenarios that bound the INPV impacts are the 

commercial lifetime scenarios because the Baseline Lifetime scenarios do not impact the results 

at TSL 1. At TSL 1, DOE estimated the impacts on INPV to be between -$8 million and -$15 

million, or a change in INPV of -2.80 percent and -6.87 percent. At this level, the highest impact 

on cash flow in the year leading up to the standards occurs under the Emerging Technologies 

base case. Under this scenario, the industry cash flow decreases by approximately 55 percent, to 

$10.7 million, compared to the base-case value of $23.6 million in the year leading up to the 

standards. All manufacturers have a full range of products that meet this TSL. Conversion costs 

are relatively low at this level because using xenon does not require substantial changes to the 

manufacturing process. The lifetimes of standards-compliant lamps does not change at TSL 1, 

thus shipments in the standards cases are not further impacted by lower shipments due to higher 

lamp lifetimes. In fact, at this TSL, manufacturers benefit from the increased prices of standards13-57 
 

compliant lamps. However, this positive impact on revenues is not enough to overcome the 

product and capital conversion costs, making overall INPV negative. 

TSL 2 is based on a 6,000 hour HIR lamp (long life HIR), but this level may also be 

achieved using an improved reflector (improved halogen (silver)). At TSL 2, the scenarios that 

bound the INPV impacts are the commercial lifetime scenarios because the Baseline Lifetime 

scenarios do not impact the results at TSL 2. At TSL 2, the impact on INPV and cash flow 

depends on manufacturers’ ability to recoup the conversion capital and product conversion costs 

and the extent to which shipments are reduced in the base case due to emerging technologies and 

in the standards shipment case due to changes in the product mix (including lamp lifetime). DOE 

estimated the impacts in INPV at TSL 2 to be between -$68 million and -$63 million or a change 

in INPV of -22.71 percent and -28.58 percent. At this level, the highest impact on cash flow in 

the year leading up to the standards occurs under the Emerging Technologies base case. Under 

this scenario, the industry cash flow decreases by approximately 136 percent, to -$8.5 million, 

compared to the base-case value of $23.6 million in the year leading up to the standards. At TSL 

2, there are negative impacts on manufacturers due to decreased shipments and significant 

product conversion costs. At this TSL, conversion costs vary greatly among manufacturers but 

are significant in the aggregate due to the need to increase production of HIR lamps or invest in 

improved reflector technology. Two manufacturers have a complete line of standards-compliant 

lamps but must spend a considerable amount of resources to expand production of a low-volume, 

premium product for mass production. Another manufacturer must spend a significant amount of 

capital to purchase the machinery to meet demand with exclusively higher technology (infrared) 

lamps in addition to replacing krypton with xenon as fill gas in the capsule. The shipment 

scenarios chosen account for the range in INPV. Shipments have a significant impact on INPV at 

this TSL in all cases because the products that meet this standard have the longest lifetimes in the 

standards cases, further decreasing shipments relative to the base cases. Some manufacturers 

have expressed concerns about competitive impacts at this TSL. One manufacturer has a patent 

on silverized reflectors. Another manufacturer is believed to have a cross license on the 

technology. Despite the large capital conversion costs to expand this reflector technology for all 

baseline lamps to meet this TSL, both these manufacturers could capture market share by selling 

less expensive lamps based on improved reflector coating instead of HIR technology. The other 

manufacturer without access to the enhanced reflectors would incur large capital and product 

conversion costs to produce lamps with a comparable efficacy, but at higher costs. 

TSL 3 is based on 3,000 hour HIR technology. At TSL 3, the scenarios that bound the 

INPV impacts are the commercial lifetime scenarios because the Baseline Lifetime scenarios do 

not impact the results at TSL 3. DOE estimated the impacts on INPV at TSL 3 to be $81 million 

or a change in INPV of -26.78 percent and -36.80 percent. At this level, the highest impact on 

cash flow in the year leading up to the standards occurs under the Emerging Technologies base 

case. Under this scenario, the industry cash flow decreases by approximately 215 percent, to -

$27.1 million, compared to the base-case value of $23.6 million in the year leading up to the 

standards. There are significant capital conversion costs at this TSL that make INPV negative. 

Manufacturers must purchase additional infrared coaters to increase the production of these lowvolume lamps. Since current HIR production is very small relative to standard halogen IRL, all 

manufacturers voiced their concerns about meeting demand at this level. Also, since all existing 

HIR capsules use xenon as the fill gas, manufactures are concerned about the high material costs 

for this gas and the potential for the price to increase over time. The high costs to convert all 

13-58 
 

lamps to HIR technology drive INPV negative and strand existing equipment for standard 

halogen capsules. The range of INPV arises from the shipment scenarios that account for 

different market erosion due to emerging technologies and standards inducing a switch to noncovered BR lamps and R-CFL. 

TSL 4 requires the production of an improved HIR lamp. At TSL 4, DOE analyzed the 

impacts on manufacturers using scenarios both with commercial lifetime lamps and using the 

Baseline Lifetime scenarios. At TSL 4 with commercial lamp lifetimes, DOE estimated the 

impacts in INPV to be between -$102 million and -$98 million, or a change in INPV of -34.02 

percent and -44.36 percent. At TSL 4 under the Baseline Lifetime scenarios, DOE estimated the 

impacts in INPV to be between -$21 million and -$61 million, or a change in INPV of -6.81 

percent and -27.52 percent. At this level, the highest impact on cash flow in the year leading up 

to the standards occurs under the Emerging Technologies base case with commercial lamp 

lifetimes. Under this scenario, the industry cash flow decreases by approximately 267 percent, to 

-$39.5 million, compared to the base-case value of $23.6 million in the year leading up to the 

standards. There are significant capital and product conversion costs at this TSL. At this TSL, all 

manufacturers must expand production of the more efficacious HIR technology to meet demand 

of the entire market. Since current HIR production is relatively low, these substantial costs make 

INPV negative. The capital conversion costs are large because, in addition to HIR technology, 

manufacturers must also use enhanced reflectors or the most efficient burners and add xenon. 

The lifetimes of products that meet this TSL are longer than the baseline in the commercial lamp 

lifetime scenarios, creating a negative impact on INPV from lower shipments. However, 

manufacturers are less impacted if the lifetimes of the lamps at TSL 4 are lowered in response to 

the energy conservation standards. The industry revenues in the standards case are greater due to 

higher total shipments at TSL 4 in the Baseline Lifetime scenarios. The higher revenues help to 

mitigate the impacts of the significant capital conversion costs required to comply with the 

energy conservation standards in the Baseline Lifetime scenarios. Since all existing HIR capsules 

use xenon as the fill gas, manufactures are concerned about the high material costs for this gas 

and the potential for the price to increase over time. Manufacturers also voiced concerns about 

competition at TSL 4. Because lamps can use an enhanced reflector with HIR to meet TSL 4, 

manufacturers have the same competitive concerns as at TSL 2. Finally, two manufacturers 

currently have a full line of lamps that meet TSL 4. A third manufacturer has some products, but 

would have to undertake a costly redesign of its burners in order to sell a full line of those lamps. 

TSL 5 requires the production of lamps with an improved HIR coating and an additional 

improvement (improved HIR plus). At TSL 5, DOE analyzed the impacts on manufacturers 

using scenarios both with commercial lifetime lamps and using the Baseline Lifetime scenarios. 

At TSL 5 with commercial lamp lifetimes, DOE estimated the impacts in INPV to be between -

$111 million and -$104 million, or a change in INPV of -36.90 percent and – 47.18 percent. At 

TSL 5 under the Baseline Lifetime scenarios, DOE estimated the impacts in INPV to be between 

-$43 million and -$49 million, or a change in INPV of -14.24 percent and -22.35 percent. At this 

level, the highest impact on cash flow in the year leading up to the standards occurs under the 

Emerging Technologies base case with commercial lamp lifetimes. Under this scenario, the 

industry cash flow decreases by approximately 301 percent, to -$47.5 million, compared to the 

base-case value of $23.6 million in the year leading up to the standards. In the worst case, the 

impacts at TSL 5 are the most severe for manufactures because the capital and product 

conversion costs are greatest at this TSL. At this TSL, all manufacturers must expand production 

13-59 
 

of a lamp with multiple improvements over standard HIR lamps. Manufacturers must use HIR 

technology with an improved coating and with either enhanced reflectors or more efficient 

burners. Since even standard HIR production is currently low compared to standard halogen, 

expanding the production of the most efficacious HIR technology to meet demand of the entire 

market is very costly. Due to the large conversion costs, INPV is greatly negative even if the 

industry value is not decreased by emerging technologies. However, manufacturers are less 

impacted if the lifetimes of the lamps at TSL 5 are lowered in response to the energy 

conservation standards. The industry revenues in the standards case are greater due to higher 

total shipments at TSL 5 in the Baseline Lifetime scenarios. The higher revenues help to mitigate 

the impacts of the significant capital conversion costs required to comply with the energy 

conservation standards in the Baseline Lifetime scenarios. 

13-60 
 

13-61 

 

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 McKinsey & Company, Inc. Valuation: Measuring and Managing the Value of 

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 Natural Resources Canada. Proposed Requirements for Lighting Products: General Labelling, 

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<http://oee.nrcan.gc.ca/regulations/lighting-products-nov06.cfm?text=N&printview=N.> The 

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