CHAPTER 17. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

**17.1 INTRODUCTION** 

**......................................................................................................... 17­1** 

**17.2 METHODOLOGY** 

**........................................................................................................ 17­1** 

**17.2.1 Policy**  **Considerations**

**........................................................................................ 17­2** 

**17.2.1.1 Policy**  **Assumptions**

**......................................................................... 17­2** 

**17.2.1.2 Policy**  **Interactions**

**........................................................................... 17­3** 

**17.2.2 Non­Regulatory**  **Policy Assumptions** 

**................................................................ 17­3** 

**17.2.2.1 No**  **New Regulatory**  **Action**

**............................................................. 17­3** 

**17.2.2.2 Financial**  **Incentives Policies............................................................**  **17­4**

**17.2.2.3 Commercial**  **Customer Tax**  **Credits**

**................................................. 17­4** 

**17.2.2.4 Commercial**  **Customer Rebates........................................................**  **17­5**

**17.2.2.5 Early**  **Replacement Incentives..........................................................**  **17­8**

**17.2.2.6 Bulk**  **Government Purchases............................................................**  **17­8**

**17.2.2.7 Regional**  **Energy Conservation**  **Standards**

**....................................... 17­9** 

**17.2.3 Results**  **Summary**

**............................................................................................... 17­9** 

LIST OF TABLES

**Table 17.2.1**  **Cumulative National**  **Energy Savings**  **in Quads**  **for Commercial** 

**Refrigeration Equipment,**  **2012­2042**

**................................................................ 17­3** 

**Table 17.2.2**  **Tax Credit**  **Energy Savings**  **and NPV** 

**.................................................................. 17­5** 

**Table 17.2.3 Average Percentage Price Reduction due to Rebate Program............................. 17­7** 

**Table 17.2.4**  **Rebate Energy**  **Savings and**  **NPV**

**........................................................................ 17­8** 

**Table 17.2.5 Non­Regulatory Alternatives to Standards........................................................ 17­10** 

**17­i**CHAPTER 17. REGULATORY IMPACT ANALYSIS

17.1 INTRODUCTION

**Under the**  **Process Rule,**  **the U.S.**  **Department of**  **Energy (DOE)**  **is committed**  **to exploring** 

**non­regulatory alternatives**  **to energy**  **conservation standards.**  **DOE will**  **prepare a**  **draft**

**regulatory analysis**  **under Executive**  **Order 12866,**  **“Regulatory Planning**  **and Review,”**  **which**

**will be**  **subject to**  **review by**  **the Office**  **of Information**  **and Regulatory**  **Affairs. 58**  **FR 51735** 

**(September 30,**  **1993).**

**DOE identified**  **five major**  **alternatives to**  **energy conservation**  **standards as**  **feasible policy** 

**options to**  **achieve product**  **energy efficiency.**  **It will**  **evaluate each**  **alternative in**  **terms of**  **its**

**ability to**  **achieve significant**  **energy savings**  **at a**  **reasonable cost,**  **and will**  **compare the** 

**effectiveness of**  **each alternative**  **to the**  **effectiveness of**  **the proposed**  **standard.**

**The non­regulatory**  **means of**  **achieving energy**  **savings that**  **DOE proposes**  **to analyze**  **are**

**listed below.**  **The Technical**  **Support Document**  **(TSD) in**  **support of**  **DOE’s Notice**  **of Proposed** 

**Rulemaking will**  **include a**  **quantitative analysis**  **of each**  **alternative, the**  **methodology for**  **which is** 

**discussed briefly**  **below.**

• **no new**  **regulatory action** 

• **commercial customer**  **tax credits** 

• **commercial customer**  **rebates**

• **early replacement** 

• **bulk government**  **purchases**

17.2 METHODOLOGY

**DOE used**  **the national**  **energy savings**  **(NES) spreadsheet**  **model to**  **calculate the**  **NES and** 

**the net**  **present value**  **(NPV) corresponding**  **to each**  **alternative of**  **the proposed**  **standards. The** 

**NES spreadsheet**  **model is**  **discussed extensively**  **in Chapter**  **10 of**  **the TSD.**  **To compare**  **each**

**alternative quantitatively**  **to proposed**  **energy conservation**  **standards, it**  **was first**  **necessary to** 

**quantify the**  **effect of**  **each alternative**  **on the**  **purchase and**  **use of**  **energy­efficient commercial** 

**equipment. Once**  **each alternative**  **is properly**  **quantified, DOE**  **made the**  **appropriate revisions**  **to**

**the inputs**  **in the**  **NES spreadsheet**  **model. Key**  **inputs that**  **DOE revised**  **in the**  **NES spreadsheet** 

**model are:** 

• **energy prices**  **and escalation**  **factors;**

• **implicit market**  **discount rates**  **for trading**  **off purchase**  **price against**  **operating**

**expense when**  **choosing equipment**  **efficiency;**

• **customer purchase**  **price, operating**  **cost, and**  **income elasticities;** 

• **customer price**  **versus efficiency**  **relationships; and** 

• **equipment stock**  **data (purchase**  **of new**  **equipment or**  **turnover rates**  **for**

**inventories).**

**The key**  **measures of**  **the impact**  **of each**  **alternative will**  **be as**  **listed below.** 

**17­1**• **Commercial energy**  **use in**  **Quads (10**  **15 Btu);**  **the cumulative**  **energy use**  **of the** 

**equipment from**  **2012 to**  **2042. DOE**  **reports electricity**  **consumption in**  **terms of** 

**primary energy.** 

• **National energy**  **savings is**  **the cumulative**  **national energy**  **use from**  **the base**  **case projection**  **less the**  **alternative policy**  **case projection.** 

• **Net present**  **value is**  **the value**  **of future**  **operating cost**  **savings from**  **commercial**

**refrigeration equipment**  **bought in**  **the period**  **from 2012**  **to 2062.**  **DOE calculates** 

**the NPV**  **as the**  **difference between**  **the present**  **value of**  **equipment and**  **operating**

**expenditures (including**  **energy) in**  **the base**  **case, and**  **the present**  **value of** 

**expenditures in**  **each alternative**  **policy case**  **for the**  **life of**  **the equipment.**  **DOE**

**discounts future**  **operating and**  **equipment expenditures**  **to 2006**  **using seven**  **and**

**three percent**  **real discount**  **rates.**

17.2.1 Policy Considerations

17.2.1.1 Policy Assumptions

**The impacts**  **of non­regulatory**  **programs are**  **uncertain by**  **nature, since**  **they depend**  **on**

**program implementation**  **and marketing**  **efforts, and**  **the subsequent**  **response in**  **customer**

**behavior. The**  **projected impacts**  **depend on**  **the assumptions**  **for the**  **customer participation**  **rate,**

**and are**  **therefore subject**  **to greater**  **uncertainty than**  **the impacts**  **of mandatory**  **standards, which** 

**DOE assumed**  **would have**  **full compliance.** 

**DOE assumed**  **that each**  **alternative policy**  **would induce**  **commercial customers**  **to**

**voluntarily purchase**  **at least**  **some additional**  **more energy**  **efficient units**  **as opposed**  **to**

**mandatory purchases**  **of more**  **efficient equipment**  **that would**  **result from**  **the proposed**  **energy**

**conservation standards**  **at any**  **of the**  **candidate standard**  **levels (TSLs).**  **Table 17.2.1**  **shows the** 

**energy savings**  **associated with**  **standards at**  **each of**  **the considered**  **TSLs (see**  **Chapter 11**  **of the** 

**TSD for**  **additional information).**  **In contrast**  **to a**  **standard at**  **one of**  **the TSLs,**  **however, the** 

**adoption rate**  **of the**  **alternative non­regulatory**  **policy cases**  **may not**  **be 100**  **percent, which**  **would**

**result in**  **lower energy**  **savings than**  **a standard.** 

**DOE assumed**  **that the**  **non­regulatory policy**  **effects last**  **from the**  **assumed start**  **date for** 

**the mandatory**  **amended energy**  **conservation standards,**  **2012, through**  **the end**  **of the**  **analysis**

**period, 2042**  **for energy**  **savings and**  **2062 for**  **NPV. This**  **simplifying assumption**  **means that**  **the**

**policy affects**  **the market**  **for the**  **entire analysis**  **period, whether**  **or not**  **the incentives**  **actually**

**continue. DOE**  **did not**  **consider administrative**  **costs for**  **any of**  **the non­regulatory**  **policies in**  **its**

**analysis. Inclusion**  **of such**  **costs would**  **decrease the**  **NPV by**  **a small**  **amount.**

**17­2**Table 17.2.1 Cumulative National Energy Savings in Quads for Commercial Refrigeration

Equipment, 2012­2042

Equipment National Energy Savings (quads*) by Trial Standard

Level

Class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

VOP.RC.M **0.047 0.067**  **0.128 0.128**  **0.336**

VOP.RC.L **0.005 0.009**  **0.010 0.015**  **0.015**

VOP.SC.M **0.005 0.014**  **0.027 0.027**  **0.040**

VCT.RC.M **0.001 0.002**  **0.012 0.018**  **0.018**

VCT.RC.L **0.030 0.334**  **0.344 0.448**  **0.448**

VCT.SC.I **0.007 0.018**  **0.022 0.023**  **0.023**

VCS.SC.I **0.000 0.001**  **0.002 0.002**  **0.002**

SVO.RC.M **0.026 0.039**  **0.077 0.077**  **0.187**

SVO.SC.M **0.004 0.013**  **0.028 0.028**  **0.043**

SOC.RC.M **0.002 0.006**  **0.011 0.011**  **0.040**

HZO.RC.M **0.001 0.004**  **0.006 0.007**  **0.007**

HZO.RC.L **0.010 0.023**  **0.027 0.027**  **0.027**

HZO.SC.M **0.000 0.001**  **0.001 0.002**  **0.002**

HZO.SC.L **0.001 0.002**  **0.006 0.006**  **0.006**

HCT.SC.I **0.002 0.013**  **0.014 0.016**  **0.016**

***0.000 indicates**  **savings are**  **less than**  **0.0005 quadrillion**  **Btu.**

17.2.1.2 Policy Interactions

**DOE calculated**  **the impacts**  **of each**  **regulatory policy**  **separately from**  **those of**  **the other** 

**policies. In**  **actual practice,**  **certain policies**  **are often**  **most effective**  **when implemented**  **in**

**combination to**  **provide incentives,**  **such as**  **early replacement**  **and customer**  **rebates, or**  **early**

**replacement and**  **bulk government**  **purchases. DOE**  **attempted to**  **make conservative**  **assumptions**

**to avoid**  **double­counting policy**  **impacts. Therefore,**  **the policy**  **impacts reported**  **below are**  **not**

**additive (i.e.**  **the combined**  **impact of**  **several or**  **all of**  **the policies**  **may not**  **be inferred**  **by adding** 

**the results**  **together).**

17.2.2 Non­Regulatory Policy Assumptions

17.2.2.1 No New Regulatory Action

**The case**  **in which**  **no regulatory**  **action is**  **taken constitutes**  **the base**  **case scenario** 

**described in**  **the CRE**  **TSD, (See**  **Chapter 11,**  **National Impact**  **Analysis). From**  **its assessment**  **of**

**current market**  **shares and**  **equipment and**  **operating costs,**  **DOE estimated**  **forecasted shipments** 

**and the**  **distribution of**  **efficiencies of**  **the stock,**  **from 2012**  **through 2042.**  **This defines**  **the basis** 

**of comparison**  **for all**  **other scenarios,**  **including the**  **policy cases**  **and the**  **standard cases.**  **By**

**definition, no**  **new regulatory**  **action yields**  **zero energy**  **savings and**  **a net**  **present value**  **of zero** 

**dollars.**

**17­3**17.2.2.2 Financial Incentives Policies

**DOE considered**  **several scenarios**  **in which**  **the Federal**  **government would**  **provide some** 

**form of**  **financial incentive.**  **It analyzed**  **in detail**  **two types**  **of incentives:**  **commercial customer** 

**tax credits**  **and commercial**  **customer rebates.**  **Tax credits**  **could be**  **granted to**  **commercial**

**customers who**  **purchase high**  **efficiency CRE**  **equipment. Alternatively,**  **the government**  **could**

**issue tax**  **credits to**  **manufacturers to**  **offset costs**  **associated with**  **producing high­efficiency** 

**equipment. For**  **this analysis,**  **only a**  **commercial customer**  **tax credit,**  **patterned after**  **provisions**

**in the**  **EPACT of**  **2005, was**  **considered. The**  **second incentive**  **program involved**  **a commercial** 

**customer rebate**  **program that**  **was nominally**  **patterned after**  **existing rebate**  **programs currently** 

**offered by**  **several utilities.** 

17.2.2.3 Commercial Customer Tax Credits

**DOE assumed**  **a (commercial**  **or industrial)**  **customer tax**  **credit that**  **is patterned**  **after the** 

**tax credits**  **that were**  **created in**  **EPACT 2005.**  **EPACT 2005**  **provided tax**  **credits to**  **customers**

**who purchase**  **and install**  **specific products**  **such energy­efficient**  **windows, insulation,**  **doors,**

**roofs, and**  **heating and**  **cooling equipment.**  **For many**  **of these**  **equipment types,**  **the tax**  **credit is** 

**equal to**  **the 10**  **percent of**  **the retail**  **cost, up**  **to specific**  **dollar limits.** 

**For the**  **CRE tax**  **credits analysis,**  **DOE presumed**  **the presence**  **of a**  **certification or**  **other**

**program that**  **could be**  **used to**  **identify high**  **efficiency CRE**  **products by**  **energy consumption.** 

**ARI is**  **currently working**  **to develop**  **such a**  **certification program.**  **DOE proposed**  **TSL 3**  **and**

**TSL 5**  **as likely**  **candidate levels**  **for a**  **tax credit**  **incentive. TSL**  **3 was**  **chosen given**  **that DOE** 

**had already**  **identified it**  **as the**  **minimum life­cycle**  **cost level**  **and maximum­NPV**  **level for**  **CRE**

**customers. TSL**  **5 is**  **the max­tech**  **efficiency level**  **and provides**  **the maximum**  **energy savings**  **for**

**each customer**  **incentivized to**  **purchase TSL**  **5 equipment.** 

**DOE reviewed**  **the incremental**  **customer price**  **increase to**  **reach each**  **efficiency level** 

**across all**  **15 equipment**  **classes. For**  **12 of**  **the equipment**  **classes (VOP.RC.M,**  **VOP.RC.L,**

**VOP.SC.M, VCT.RC.M,**  **VCT.RC.L, VCT.SC.I,**  **VCS.SC.I, SVO.RC.M,**  **SVO.SC.M,**

**HZO.SC.M, HZO.SC.L,**  **and HCT.SC.I),**  **the incremental**  **price at**  **TSL 3**  **was between**  **6.5 and** 

**27.5 percent**  **higher than**  **for baseline**  **equipment. For**  **three equipment**  **classes (SOC.RC.M,** 

**HZO.RC.M, and**  **HZO.RC.L), the**  **incremental cost**  **was less**  **than five**  **percent. For**  **the TSL**  **3**

**tax credit**  **scenario analysis,**  **DOE assumed**  **a tax**  **credit equal**  **to five**  **percent of**  **the customer** 

**prices could**  **be applied**  **to the**  **12 product**  **classes, but**  **did not**  **provide a**  **credit for**  **the three** 

**product classes**  **for which**  **the incremental**  **cost was**  **less than**  **five percent.**  **The credits**  **were**

**assumed to**  **apply only**  **to the**  **retail cost**  **of the**  **equipment and**  **not to**  **any additional**  **costs related** 

**to installation.** 

**The cost**  **increments from**  **the baseline**  **to reach**  **TSL 5**  **is wider**  **than to**  **reach TSL**  **3,**

**ranging from**  **a 3.9**  **percent to**  **a 50.4**  **percent cost**  **increase. Three**  **products at**  **TSL 5**  **had a**  **total**

**incremental cost**  **increase of**  **less than**  **10 percent**  **(HZO.RC.M, HZO.RC.L,**  **and VCS.SC.I).** 

**Three additional**  **equipment classes**  **had an**  **incremental cost**  **of less**  **than 16**  **percent (HZO.SC.M,** 

**HCT.SC.I, HZO.SC.L).**  **The remaining**  **nine equipment**  **classes had**  **incremental cost**  **increases of** 

**20 to**  **50 percent.**  **DOE opted**  **to analyze**  **a scenario**  **DOE where**  **tax credit**  **equal to**  **10 percent**  **of**

**the customer**  **prices would**  **be available**  **for purchase**  **of TSL**  **5 efficiency**  **level equipment**  **for 12** 

**product classes**  **(HZO.SC.M, HCT.SC.I,**  **HZO.SC.L, VOP.RC.L,**  **SOC.RC.M, VCT.RC.M,** 

**17­4 VCT.RC.L,**  **VCT.SC.I, SVO.RC.M,**  **SVO.SC.M, VOP.SC.M,**  **VOP.RC.M). It**  **assumed no**  **tax**

**credit incentive**  **for the**  **three product**  **classes for**  **which the**  **incremental cost**  **was less**  **than 10** 

**percent at**  **TSL 5.** 

**The presence**  **of a**  **commercial customer**  **tax credit**  **in either**  **the TSL**  **3 or**  **TSL 5**  **tax credit** 

**scenario elicits**  **greater purchases**  **of equipment**  **with efficiencies**  **above the**  **baseline, which**  **leads**

**to higher**  **average aggregate**  **efficiency and**  **lower average**  **aggregate energy**  **consumption. The** 

**change in**  **market shares**  **that may**  **result from**  **a five­percent**  **tax credit**  **scenario or**  **the 10­percent** 

**tax credit**  **scenario was**  **estimated per**  **the method**  **described in**  **Chapter 11,**  **and was**  **similarly done** 

**for the**  **analysis for**  **commercial customer**  **rebates. No**  **change in**  **total equipment**  **sales was** 

**presumed.**

**From a**  **societal point**  **of view,**  **tax credits,**  **like rebates,**  **do not**  **change the**  **installed cost**  **of**

**the commercial**  **refrigeration equipment;**  **they simply**  **transfer a**  **portion of**  **the cost**  **from the** 

**customer to**  **taxpayers as**  **a whole.**  **Thus, for**  **calculation of**  **total cost**  **of equipment**  **in the** 

**modified NIA**  **study, the**  **increase in**  **sales by**  **efficiency level**  **due to**  **tax credits**  **estimates are** 

**multiplied by**  **the pre­rebate**  **costs identical**  **to those**  **used in**  **the base**  **NIA discussed**  **in Chapter** 

**11.**

**Table 17.2.2**  **compares the**  **cumulative energy**  **savings and**  **calculated NPV**  **for the** 

**national rebate**  **program envisioned**  **with those**  **of the**  **proposed standards**  **action.**

Table 17.2.2 Tax Credit Energy Savings and NPV

Policy alternatives Cumulative Energy

Savings *

(quads), 2012­2042 Net Present Value**

(billion 2006$), 2012­2062

7%

Discount Rate 3%

Discount Rate

**No New**  **Regulatory Action**  **0 0**  **0**

**Commercial Customer**  **Tax Credits**  **(5% Scenario)**  **0.099 0.139**  **0.315**

**Commercial Customer**  **Tax Credits**  **(10% Scenario)** 

**Today's Standards**  **at TSL**  **5 1.208**  **(0.200) 1.16** 

***** **Energy savings**  **are in**  **source quads.** 

****** **Net present**  **value is**  **the value**  **in the**  **present of**  **a time**  **series of**  **costs and**  **savings.**

17.2.2.4 Commercial Customer Rebates

**DOE modeled**  **the impact**  **of the**  **customer rebate**  **policy by**  **determining the**  **increased**

**customer participation**  **rate due**  **to the**  **rebates (i.e.,**  **the percentage**  **increase in**  **customers**

**purchasing high­efficiency**  **equipment). It**  **then applied**  **the resulting**  **increase in**  **market share**  **of**

**efficient units**  **to the**  **NES Spreadsheet**  **Model to**  **estimate the**  **resulting NES**  **and NPV**  **with**

**respect to**  **the base**  **case.**

**After reviewing**  **several utility**  **rebate programs**  **currently in**  **place (see**  **Chapter 3**  **of the** 

**TSD), DOE**  **decided to**  **pattern the**  **analysis of**  **a national**  **rebate program**  **after the**  **Energy Smart** 

**17­5 Grocer**  **program offered**  **by the**  **California Public**  **Utilities Commission,**  **which provides**  **rebates**

**for the**  **use of**  **specific component**  **technologies. Several**  **other utility**  **programs identified**  **in**

**Chapter 3**  **also appear**  **to provide**  **rebates for**  **similar CRE**  **component technologies.**  **None of**  **the**

**programs base**  **rebates on**  **an energy**  **consumption threshold,**  **as that**  **data is**  **largely unavailable** 

**from either**  **manufacturers or**  **a central**  **source such**  **as a**  **certification program.**  **Eligible**

**participants in**  **the Energy**  **Star Grocer**  **program include**  **grocery and**  **convenience stores,**  **food**

**processors, and**  **refrigerated warehouses**  **operating in**  **Pacific Gas**  **& Electric,**  **Southern California** 

**Edison, or**  **San Diego**  **Gas &**  **Electric service**  **territories.**

**Rebates were**  **not considered**  **in two**  **cases. In**  **the first**  **case, for**  **the rebate**  **programs**

**identified in**  **Chapter 3**  **provide rebates**  **based on**  **improved components,**  **rebates are**  **generally**

**available for**  **both new**  **equipment purchases**  **and for**  **retrofits to**  **existing commercial**  **refrigeration**

**equipment, although**  **often at**  **different rebated**  **levels and**  **with qualifiers.**  **For the**  **RIA, DOE**  **only**

**considered rebates**  **on newly**  **purchased commercial**  **refrigeration equipment**  **and not**  **for retrofit** 

**of existing**  **equipment, as**  **the standards**  **action for**  **which a**  **non regulatory**  **approach is**  **being**

**compared with**  **only addresses**  **newly purchased**  **equipment. In**  **the second**  **case, other**  **utility**

**rebate or**  **incentive programs**  **available to**  **CRE customers**  **provide general**  **rebates based**  **on the** 

**calculated annual**  **kWh or**  **kW reduction**  **estimates, however**  **such programs**  **were not**  **considered**

**by DOE**  **in the**  **RIA as**  **these programs**  **do not**  **specifically target**  **commercial refrigeration** 

**equipment.**

**Under the**  **Energy Smart**  **Grocer programs,**  **commercial and**  **industrial businesses**  **that**

**purchase commercial**  **refrigeration equipment**  **can receive**  **payments for**  **the incorporation**  **of**

**specific technologies**  **and/or for**  **specific performance**  **characteristics achieved**  **in various**  **classes**

**of commercial**  **refrigeration equipment**  **such as**  **display cases,**  **walk in**  **coolers, and**  **equipment**

**with remote**  **condensers. Other**  **rebate programs**  **analyzed did**  **not necessarily**  **define the**  **same set** 

**of minimum**  **conditions for**  **eligibility.**

**DOE reviewed**  **and incorporated,**  **in the**  **RIA, the**  **rebates offered**  **for energy**  **saving**

**technologies considered**  **applicable to**  **the commercial**  **refrigeration equipment**  **product classes** 

**analyzed in**  **the engineering**  **analysis. The**  **technologies examined**  **and rebates**  **applied were:** 

**Low­heat doors,**  **$50/door; ECM**  **motors, $20**  **per display**  **case evaporator**  **fan motor;**  **LED**

**Lamps, $56**  **for each**  **fluorescent lamp**  **replaced. These**  **values are**  **currently used**  **in the** 

**EnergySmart Grocer**  **program and**  **represent values**  **roughly in**  **the middle**  **of the**  **ranges found**  **for**

**other rebate**  **programs. Where**  **these technologies**  **are employed**  **in each**  **class of**  **commercial**

**refrigeration equipment,**  **the average**  **first cost**  **reduction to**  **all customers**  **was calculated**  **for each** 

**of the**  **efficiency levels**  **analyzed in**  **the LCC.**  **The average**  **percentage cost**  **reduction was** 

**calculated for**  **each efficiency**  **level in**  **turn taking**  **the rebates**  **into account.** 

**The rebates**  **were then**  **entered into**  **the LCC**  **analysis spreadsheet**  **for each**  **equipment**

**class as**  **percentage reductions**  **in equipment**  **price. When**  **compared against**  **the incremental**  **retail**

**price of**  **higher efficiency**  **commercial refrigeration**  **equipment, as**  **developed in**  **Chapter 8**  **of the** 

**TSD, the**  **rebates range**  **between 0**  **percent to**  **up to**  **14 percent**  **of the**  **customer price**  **depending on** 

**TSL level**  **and equipment**  **class. Table**  **17.2.3 shows**  **the calculated**  **rebates by**  **equipment class**  **at**

**each TSL**  **Level. For**  **example, under**  **the provisions**  **of the**  **national rebate**  **program constructed** 

**for this**  **analysis, a**  **vertical closed**  **transparent, remote**  **condensing, low**  **temperature display**  **case**

**(VCT.RC.L) would**  **receive a**  **rebate equivalent**  **to 2.9**  **percent of**  **the average**  **purchase price,**  **not**

**17­6 including**  **installation, at**  **TSL 3.**  **At TSL**  **5, the**  **total rebate**  **for incorporation**  **of the**  **set of** 

**technologies would**  **be 5.1**  **percent of**  **the purchase**  **price.**

Table 17.2.3 Average Percentage Price Reduction due to Rebate Program

Equipment

Class * Calculated Average Percentage Price Reduction due to

Rebate Program

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5

VOP.RC.M

VOP.RC.L

VOP.SC.M

VCT.RC.M

VCT.RC.L

VCT.SC.I

VCS.SC.I

SVO.RC.M

SVO.SC.M

SOC.RC.M

HZO.RC.M

HZO.RC.L

HZO.SC.M

HZO.SC.L

HCT.SC.I **1.9% 1.9%**  **1.8% 1.8%**  **14.1%**

**2.9% 2.8%**  **2.8% 7.1%**  **7.1%**

**1.2% 2.9%**  **2.7% 2.7%**  **10.7%**

**0.0% 1.0%**  **3.2% 5.7%**  **5.7%**

**0.9% 2.9%**  **2.8% 5.1%**  **5.1%**

**0.7% 2.3%**  **4.8% 5.3%**  **5.3%**

**0.0% 1.3%**  **2.4% 2.4%**  **2.4%**

**1.4% 1.4%**  **1.4% 1.4%**  **11.9%**

**0.8% 1.5%**  **1.3% 1.3%**  **8.8%**

**0.0% 0.7%**  **0.7% 0.7%**  **7.0%**

**0.0% 1.3%**  **1.3% 1.2%**  **1.2%**

**1.3% 1.2%**  **1.2% 1.2%**  **1.2%**

**0.0% 0.8%**  **1.6% 1.6%**  **1.6%**

**0.0% 0.7%**  **1.3% 1.3%**  **1.3%**

**0.0% 0.0%**  **1.2% 1.2%**  **1.2%**

***** **Equipment class**  **designations consist**  **of a**  **combination (in**  **sequential order**  **separated by**  **periods) of**  **a equipment**  **family code** 

**(VOP=vertical open,**  **SVO=semivertical open,**  **HZO=horizontal open,**  **VCT=vertical transparent**  **doors, VCS=vertical**  **solid doors,** 

**HCT=horizontal transparent**  **doors, HCS=horizontal**  **solid doors,**  **or SOC=service**  **over counter),**  **an operating**  **mode code**  **(RC=remote**

**condensing or**  **SC=self­contained), and**  **a rating**  **temperature code**  **(M=medium temperature**  **(38°F), L=low**  **temperature (0°F),**  **or I=ice** 

**cream temperature**  **(­15°F)). For**  **example, "VOP.RC.M**  **refers to**  **the "vertical**  **open, remote**  **condensing, medium**  **temperature" equipment** 

**class. See**  **Chapter 3,**  **Market and**  **Technology Assessment,**  **of the**  **TSD for**  **a more**  **detailed explanation**  **of the**  **equipment class**  **terminology**

**The rebates**  **elicit increased**  **purchases of**  **higher efficiency**  **equipment that**  **lower the** 

**overall average**  **annual energy**  **consumption per**  **unit. Using**  **the method**  **described in**  **Chapter 11** 

**of the**  **TSD to**  **estimate market**  **shares, a**  **new distribution**  **of sales**  **by efficiency**  **level**

**(corresponding to**  **the various**  **TSLs) was**  **computed. The**  **resulting increase**  **in sales**  **of higher** 

**efficiency level**  **equipment results**  **in energy**  **savings compared**  **with the**  **base case.** 

**Although the**  **rebate program**  **lowers the**  **retail cost**  **to the**  **customer, it**  **must be**  **financed by** 

**tax revenues.**  **So, from**  **a societal**  **point of**  **view, the**  **installed cost**  **at any**  **efficiency level**  **does** not

**change with**  **the rebate**  **policy, it**  **simply transfers**  **part of**  **the cost**  **from the**  **customer to**  **taxpayers**

**as a**  **whole. Thus,**  **the calculation**  **of equipment**  **total cost**  **in the**  **rebate case**  **is calculated**  **as the** 

**revised estimated**  **sales by**  **efficiency level**  **due to**  **the rebates**  **multipled by**  **the pre­rebate** 

**equipment prices**  **(identical to**  **those in**  **the base**  **NIA discussed**  **in Chapter**  **11). Table**  **17.2.4**

**compares the**  **cumulative energy**  **savings and**  **calculated NPV**  **for the**  **national rebate**  **program**

**envisioned with**  **those of**  **the proposed**  **standards action.** 

**17­7**Table 17.2.4 Rebate Energy Savings and NPV

Policy alternatives Cumulative Energy

Savings *

(quads), 2012­2042 Net Present Value**

(billion 2006$), 2012­2062

7%

Discount Rate 3%

Discount Rate

**No New**  **Regulatory Action**  **0 0**  **0**

**Commercial Customer**  **Rebates 0.099**  **0.139 0.315** 

**Today's Standards**  **at TSL**  **5 1.208**  **(0.200) 1.16** 

***** **Energy savings**  **are in**  **source quads.** 

****** **Net present**  **value is**  **the value**  **in the**  **present of**  **a time**  **series of**  **costs and**  **savings.**

17.2.2.5 Early Replacement Incentives

**Early replacement**  **refers to**  **the replacement**  **of commercial**  **refrigeration equipment** 

**before the**  **end of**  **their useful**  **lives. The**  **purpose of**  **this policy**  **is to**  **retrofit or**  **replace old,** 

**inefficient equipment**  **with high**  **efficiency units.**  **DOE studied**  **the feasibility**  **of a**  **Federal**

**program to**  **promote early**  **replacement of**  **appliances and**  **equipment under**  **EPACT 1992.**  **In this** 

**study, DOE**  **identified Federal**  **policy options**  **for early**  **replacement that**  **include a**  **direct national** 

**program, replacement**  **of Federally­owned**  **equipment, promotion**  **through equipment** 

**manufacturers, customer**  **incentives, incentives**  **to utilities,**  **market behavior**  **research, and** 

**building regulations.** 

**While cost­effective**  **opportunities to**  **install units**  **that are**  **more efficient**  **exist, DOE** 

**determined that**  **a Federal**  **early replacement**  **program is**  **not economically**  **justified because**  **the**

**market for**  **CRE is**  **relatively small**  **and distributed**  **across abroad**  **set of**  **customers, the**  **savings are** 

**not expected**  **to be**  **significant. In**  **addition, a**  **temporary surge**  **in CRE**  **sales in**  **the early**  **2000s**

**effectively reduces**  **the size**  **of the**  **market that**  **would be**  **subject to**  **early replacement,**  **thus further** 

**reducing the**  **potential for**  **an effective**  **early replacement**  **program.**

17.2.2.6 Bulk Government Purchases

**In this**  **policy alternative,**  **bulk government**  **purchases refers**  **to Federal,**  **State, and**  **local**

**governments being**  **encouraged to**  **purchase equipment**  **meeting the**  **energy conservation** 

**standards. The**  **motivations for**  **this policy**  **are that**  **(1) aggregating**  **public sector**  **demand could** 

**provide a**  **market signal**  **to manufacturers**  **and vendors**  **that some**  **of their**  **largest customers**  **seek**

**suppliers with**  **equipment that**  **meet an**  **efficiency target**  **at good**  **prices, and**  **(2) this**  **could induce** 

**“market pull”**  **impacts through**  **the effects**  **of manufacturers**  **and vendors**  **achieving economies**  **of**

**scale for**  **high efficiency**  **equipment.**

**As with**  **the early**  **replacement, bulk**  **government purchases**  **may provide**  **cost effective** 

**opportunities to**  **install more**  **efficient equipment**  **on a**  **limited basis,**  **however it**  **was concluded** 

**that a**  **widespread bulk**  **purchase program**  **was not**  **economically justified.**  **This is**  **because the** 

**segment/share of**  **the market**  **that would**  **be affected**  **by a**  **bulk government**  **purchase program**  **is a** 

**small portion**  **of an**  **already relatively**  **small market,**  **as the**  **vast majority**  **of the**  **shipments/sales**

**are to**  **non­governmental customers.** 

**17­8**17.2.2.7 Regional Energy Conservation Standards

**DOE lacks**  **authority to**  **adopt regional**  **standards, so**  **it must**  **reject this**  **alternative.**

**However, DOE**  **does have**  **authority to**  **grant State**  **petitions for**  **an exemption**  **from Federal** 

**preemption of**  **higher standards,**  **if the**  **State filing**  **the petition**  **demonstrates unusual**  **and**

**compelling State**  **or local**  **energy interests**  **(42 U.S.C.**  **6297(d) and**  **6316(b)(2)(D)). The**  **State has** 

**a heavy**  **burden in**  **making such**  **a showing,**  **and DOE**  **must reject**  **the petition**  **if “interested** 

**persons” establish**  **that the**  **State regulation**  **would “significantly**  **burden manufacturing,** 

**marketing, distribution,**  **sale or**  **servicing” of**  **the covered**  **equipment on**  **a national**  **basis.**

**(42 U.S.C.**  **6297(d))**

**Because of**  **the potential**  **variability of**  **standards by**  **State and**  **the widely**  **differing**

**economic and**  **climate situations,**  **DOE did**  **not undertake**  **a quantitative**  **analysis of**  **regional**

**standards.**

17.2.3 Results Summary

**Table 17.2.5**  **shows the**  **national energy**  **savings (NES)**  **and NPV**  **for the**  **non­regulatory**

**alternatives analyzed.**  **The case**  **in which**  **no regulatory**  **action is**  **taken with**  **regard to**  **commercial**

**refrigeration equipment**  **constitutes the**  **base case**  **(or "No**  **Action") scenario.**  **Since this**  **is the** 

**base case,**  **energy savings**  **and NPV**  **are zero**  **by definition.**  **For comparison,**  **the table**  **includes**

**the results**  **of the**  **NES and**  **NPV for**  **TSL 3**  **associated with**  **a possible**  **energy conservation** 

**standard. Energy**  **savings expressed**  **in quadrillion**  **Btu (Quads)**  **in terms**  **of primary**  **or source** 

**energy, which**  **includes generation**  **and transmission**  **losses from**  **electricity utility**  **sector (the** 

**estimation of**  **source energy**  **is explained**  **in Chapter**  **10. The**  **NPVs shown**  **in the**  **table refer**  **to the** 

**NPV for**  **commercial customers**  **based on**  **real discount**  **rates of**  **7 and**  **3 percent.** 

**As indicated**  **in Table**  **17.2.5, none**  **of the**  **policy alternatives**  **DOE examined**  **would save** 

**as much**  **energy as**  **and have**  **a lower**  **NPV than**  **several of**  **the TSLs**  **for energy**  **conservation**

**standards. Also,**  **several of**  **the alternatives**  **would require**  **new enabling**  **legislation, such**  **as**

**commercial customer**  **or Federal**  **tax credits,**  **since authority**  **to carry**  **out those**  **alternatives does** 

**not presently**  **exist.**

**17­9**Table 17.2.5 Non­Regulatory Alternatives to Standards

Policy alternatives Cumulative Energy

Savings *

(quads), 2012­2042 Net Present Value**

(billion 2006$), 2012­2062

7%

Discount Rate 3%

Discount Rate

**No New**  **Regulatory Action**  **0 0**  **0**

**Commercial Customer**  **Tax Credits**  **0.084 0.178**  **0.381**

**Commercial Customer**  **Rebates 0.099**  **0.139 0.315** 

**Today's Standards**  **at TSL**  **3 0.715**  **1.20 3.25** 

***** **Energy savings**  **are in**  **source quads.** 

****** **Net present**  **value is**  **the value**  **in the**  **present of**  **a time**  **series of**  **costs and**  **savings.**

**17­10**REFERENCES

**1. U.S.**  **Department of**  **Energy. Energy**  **Information Administration.**  **Commercial Sector** 

**Demand Model**  **of the**  **National Energy**  **Modeling System:**  **Model Documentation**  **2007.**

**DOE/EIA­M066(2007).**

**17­11**