CHAPTER 2. ANALYTICAL FRAMEWORK 

TABLE OF CONTENTS 

2.1 INTRODUCTION ........................................................................................................... 2-1 

2.2 BACKGROUND ............................................................................................................. 2-3 

2.3 MARKET AND TECHNOLOGY ASSESSMENT ........................................................ 2-4 

2.3.1 Market Assessment .......................................................................................................... 2-4 

2.3.2 Technology Assessment................................................................................................... 2-4 

2.4 SCREENING ANALYSIS .............................................................................................. 2-5 

2.5 ENGINEERING ANALYSIS.......................................................................................... 2-5 

2.5.1 Manufacturing Cost Assessment...................................................................................... 2-6 

2.6 ENERGY AND WATER USE DETERMINATION...................................................... 2-6 

2.7 MARKUPS FOR EQUIPMENT PRICE DETERMINATION ....................................... 2-7 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2-7 

2.9 NATIONAL IMPACT ANALYSIS ................................................................................ 2-8 

2.9.1 National Energy Savings Analysis................................................................................... 2-9 

2.9.2 Net Present Value Analysis ............................................................................................. 2-9 

2.9.3 Forecasted Efficiencies .................................................................................................. 2-10 

2.10 MANUFACTURER IMPACT ANALYSIS.................................................................. 2-10 

2.11 LIFE-CYCLE COST SUBGROUP ANALYSIS .......................................................... 2-11 

2.12 UTILITY IMPACT ANALYSIS ................................................................................... 2-11 

2.13 EMPLOYMENT IMPACT ANALYSIS....................................................................... 2-12 

2.14 ENVIRONMENTAL ASSESSMENT .......................................................................... 2-12 

2.15 REGULATORY IMPACT ANALYSIS........................................................................ 2-13 

LIST OF FIGURES 

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process ..................................... 2-2 

2-i 

EE-2006-STD-0127 COMMENT 39.2
CHAPTER 2. ANALYTICAL FRAMEWORK 

2.1 INTRODUCTION 

Section 6313(a)(6)(A) of 42 U.S.C. requires the U.S. Department of Energy (DOE) to set 

forth energy conservation standards that are technologically feasible and economically justified 

and would result in significant additional energy conservation. This chapter provides a 

description of the general analytical framework that DOE uses in developing such standards, and 

in particular, standards for residential dishwashers, dehumidifiers, and cooking products, and 

commercial clothes washers (“the considered products”). The analytical framework is a 

description of the methodology, the analytical tools, and relationships among the various 

analyses that are part of this rulemaking. For example, the methodology that addresses the 

statutory requirement for economic justification includes analyses of life-cycle cost (LCC); 

economic impact on manufacturers and users; national benefits; impacts, if any, on utility 

companies; and impacts, if any, from lessening competition among manufacturers. 

Figure 2.1.1 summarizes the analytical components of the standards-setting process. The 

focus of this figure is the center column, identified as “Analyses.” The columns labeled “Key 

Inputs” and “Key Outputs” show how the analyses fit into the rulemaking process, and how the 

analyses relate to each other. Key inputs are the types of data and information that the analyses 

require. Some key inputs exist in public databases; DOE collects other inputs from stakeholders 

or persons with special knowledge. Key outputs are analytical results that feed directly into the 

standards-setting process. Dotted lines connecting analyses show types of information that feed 

from one analysis to another. 

The analyses performed in the advance notice of proposed rulemaking (ANOPR) stage 

and reported in this technical support document (TSD) include: 

• A market and technology assessment to characterize the relevant equipment markets and 

existing technology options, including prototype designs. 

• A screening analysis to review each technology option and determine if it is 

technologically feasible; is practical to manufacture, install, and service; would adversely 

affect equipment utility or equipment availability; or would have adverse impacts on 

health and safety. 

• An engineering analysis to develop cost-efficiency relationships that show the 

manufacturer’s cost of achieving increased efficiency. 

• An energy and water use analysis to determine the annual energy and water use of the 

considered products. 

2-1 

EE-2006-STD-0127 COMMENT 39.2
Notice of Proposed Rulemaking (NOPR)

Final Rule

Framework Document

Advance Notice of Proposed Rulemaking (ANOPR)

Approaches Key Inputs Approaches Key Inputs Analyses Key Outputs

Framework Document 

• Identify Firms/Products • Product Classes

Market and Technology Market and Technology • Technology Options • Technology Options

• Characterize Industry • Historical Shipcal Shipments •

• Market Segmentation Assessment • Analysis of Market Data • Non-Regulatory Programs • Non-Regulatory Programs

Product Classes Product Classes Technology Options chnology Options

• Analysis of Product Data • Product Prototypes • Screening Analysis • Design Options Screening Analysis • Design Options

• Efficiency-Level Approach

• Design Option Approach • Manufacturing Cost • Design Options

• Efficiency/Performance Engineering Analysis • Cost-Efficiency Relationship Engineering Analysis • Cost-Efficiency Relationship

• Analysis of Energy Use

Data Energy Use Design Energy/ Use Energy Use Energy-Efficiency • Define Distribution Channels • Annual Energy Use (UEC) Levels • Economic Census Data

AnalysisAnalysis Markups for Markups for Retail Prices

• Retail Price Colleice Collection and Product Price

AnalysisAnalysis Determination Life-Cycle Cost and Life-Cycle Cost and • Life-Cycle Costs

Payback Period • Payback Periods Payback Period • Payback Periods • Energy Prices

• Installation Costs AnalysisAnalysis • Maintenance & Repair Costs

Candidate Candidate • U EC • Energy-Efficiency Levels • Installation • Installation

Standard • Energy Prices • Energy Prices Costs

Levels • Maint Costs Levels • Maint Costs

• Accounting Approach Shipments • Repair Costs

• National Energy Savings • Backcast and Forecast AnalysisAnalysis National Impact National Impact • Net Present Values • Net Present Values • Market Saturation

• Energy Price Forecasts AnalysisAnalysis

• Site-to-Source Factors

Preliminary • Conversion Capital Expenditures Preliminary • Conversion Capital Expenditures • Manufacturer Prices

Manufacturer Impact • Direct Employment Impacts Manufacturer Impact • Direct Employment Impacts • Average Costs

AnalysisAnalysis

Advance Notice of Proposed Rulemaking (ANOPR) 

• Stakeholder Comments Revise ANOPR Revise ANOPR • Trial Standard Levels (TSLs) • Trial Standard Levels (TSLs)

Analyses Analyses TSLs

• Life-Cycle Costs

• Demographics • Payback Periods Life-Cycle Cost

Sub-Group Analysis • Industry Cash Flow • Manufacturer Prices • Sub-Group Cash-Flow • Average Costs • Direct Employment Impacts • Manufacturer Interviews Manufacturer Impact • Competitive Impacts

• Cumulative Regulatory Burden • GRIM Analysis • Manufacturer Financial Data • AnalysisAnalysis

Direct Employment • Utility Load Factors

• NEMS-BT Impacts • National Energy Savings • National Energy Savings Utility Impact

AnalysisAnalysis • Utility Impacts

• National Energy Savings

• National Product Costs

• ImSET • National Operating Costs Employment Impact

AnalysisAnalysis • National Employment Impacts

• Emission Rates

• NEMS-BT • National Energy Savings Environmental • National Energy Savings • Emission Estimates

Assessment

• Non-Regulatory • National Energy Savings Alternatives Regulatory Impact • Net Present Values

AnalysisAnalysis

Notice of Proposed Rulemaking (NOPR) 

• Department of Justice Review

Revise Analyses • Revised Results Revise Analyses • Revised Results • Stakeholder Comments

Final Rule 

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process 

2-2 

EE-2006-STD-0127 COMMENT 39.2
• An LCC and payback period (PBP) analysis to calculate, at the customer level, the 

discounted savings in operating costs (less maintenance and repair costs) throughout the 

estimated average life of the covered products, compared to any increase in the installed 

cost for the equipment likely to result directly from the imposition of the standard. 

• A national impact analysis to assess the aggregate impacts at the national level of the net 

present value (NPV) of total consumer LCC and national energy savings (NES). 

• A preliminary manufacturer impact analysis to assess the potential impacts of energy 

conservation standards on manufacturers, such as impacts on capital conversion 

expenditures, marketing costs, shipments, and research and development costs. 

The analyses DOE will perform in the subsequent notice of proposed rulemaking 

(NOPR) stage include those listed below. In addition, DOE will revise the analyses it performed 

in the ANOPR stage based on comments and new information received. 

• An LCC subgroup analysis to evaluate variations in customer characteristics that might 

cause a standard to impact particular customer sub-populations differently than the 

overall population. 

• A manufacturer impact analysis to estimate the financial impact of standards on 

manufacturers and to calculate impacts on competition, employment, and manufacturing 

capacity. 

• A utility impact analysis to estimate effects of proposed standards on electric and gas 

utilities. 

• An employment impact analysis to assess the aggregate impacts of standards on national 

employment. 

• An environmental assessment to provide estimates of the effects of standards on three 

pollutants—sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury—as well as carbon 

emissions. 

• A regulatory impact analysis to present major alternatives to proposed standards that 

could achieve energy savings at a lower cost. 

2.2 BACKGROUND 

As described in Chapter 1, the Process Rule outlined procedural improvements to the 

standards rulemaking process which included a review of the following elements used in the 

rulemaking process: (1) economic models; (2) analytical tools; (3) methodologies; (4) non2-3 

EE-2006-STD-0127 COMMENT 39.2
regulatory approaches; and (5) prioritization of future rules. See appendix A to subpart C of 

Title 10 Code of Federal Regulations Part 430 (10 CFR Part 430). 

DOE developed this analytical framework for the rulemaking on the considered products 

under the Process Rule. DOE documented this analytical framework in the Rulemaking 

Framework for Commercial Clothes Washers and Residential Dishwashers, Dehumidifiers, and 

Cooking Products (March 15, 2006), and presented the analytical approach to stakeholders 

during a public meeting held on April 30, 2006. The Framework Document is available at 

http://www.eere.energy.gov/buildings/appliance_standards/pdfs/home_appl_framework_31506.pdf. The 

following sections provide a general description of the different analytical components of the 

rulemaking framework. 

2.3 MARKET AND TECHNOLOGY ASSESSMENT 

The market and technology assessment characterizes the relevant product markets and 

existing technology options, including prototype designs, for the considered products. 

2.3.1 Market Assessment 

When initiating a standards rulemaking, DOE develops information on the present and 

past industry structure and market characteristics for the equipment concerned. This activity 

assesses the industry and equipment, both quantitatively and qualitatively, based on publicly 

available information. As such, for the considered products, DOE addressed the following: (1) 

manufacturer market share and characteristics; (2) existing regulatory and non-regulatory 

equipment efficiency improvement initiatives; and (3) trends in product characteristics and retail 

markets. This information serves as resource material throughout the rulemaking. 

DOE reviewed existing literature and interviewed manufacturers to get an overall picture 

of the markets for the considered products in the United States. Industry publications and trade 

journals, government agencies, and trade organizations provided the bulk of the information, 

including information on: (1) manufacturers and their market share; (2) shipments by capacity; 

and (3) market saturation. The appropriate sections of this TSD describe the resulting 

information as DOE used it in the analysis. 

DOE has used and will use the most reliable and accurate data available at the time of 

each analysis in this rulemaking. All data will be available for public review. DOE welcomes 

and will consider any recommendations of additional data. 

2.3.2 Technology Assessment 

DOE typically uses information relating to existing and past technology options and 

prototype designs as inputs to determine what technologies manufacturers use to attain higher 

performance levels. In consultation with stakeholders, DOE develops a list of technologies for 

2-4 

EE-2006-STD-0127 COMMENT 39.2
consideration. Initially, these technologies encompass all those it believes are technologically 

feasible. 

DOE developed its list of technologically feasible design options for the considered 

products through consultation with manufacturers of components and systems, and from trade 

publications and technical papers. Since many options for improving product efficiency are 

available in existing equipment, product literature and direct examination provided additional 

information. 

2.4 SCREENING ANALYSIS 

The screening analysis examines various technologies as to whether they: (a) are 

technologically feasible; (b) are practicable to manufacture, install, and service; (c) have an 

adverse impact on equipment utility or availability; and (d) have adverse impacts on health and 

safety. As described in section 2.3.2 above, DOE develops an initial list of efficiencyenhancement options from the technologies identified as technologically feasible in the 

technology assessment. Then DOE, in consultation with interested parties, reviews the list to 

determine if these options are practicable to manufacture, install, and service, would adversely 

affect equipment utility or availability, or would have adverse impacts on health and safety. In 

addition, DOE removed from the list technology options that lack energy consumption data as 

well as technology options whose energy consumption could not be adequately measured by 

existing DOE test procedures. In the engineering analysis, DOE further considers efficiency 

enhancement options that it did not screen out in the screening analysis. 

2.5 ENGINEERING ANALYSIS 

As presented in Chapter 5, the engineering analysis establishes the relationship between 

the cost and efficiency of the considered products. This relationship serves as the basis for 

cost/benefit calculations in terms of individual consumers, manufacturers, and the nation. 

Chapter 5 discusses the product classes DOE analyzed, the representative baseline units, the 

incremental efficiency levels, the methodology DOE used to develop manufacturing costs, the 

methodology it used to develop the energy consumption model, the cost-efficiency consumption 

curves, the impact of efficiency improvements on the considered products, and the methodology 

DOE used to extend the analysis to low-shipment-volume product classes. 

In determining the relationship between manufacturer selling price and energy efficiency 

for the considered products, DOE estimated the increase in manufacturer selling price associated 

with technological changes that increase the efficiency of the baseline models. DOE obtained 

cost estimates for the engineering analysis (which it also will use in the manufacturer impact 

analysis) from detailed incremental cost data supplied by manufacturers, disaggregated into the 

cost of incremental material, labor, and overhead. DOE created an industry-wide analysis based 

2-5 

EE-2006-STD-0127 COMMENT 39.2
primarily on the manufacturer-supplied data, and supplemented this analysis with cost estimates 

of specific design options. 

For each of the product classes presented in Chapter 5, DOE selected efficiency levels 

and obtained incremental cost data at each of these levels. DOE conducted the engineering 

analysis on all product classes for all of the products except dishwashers and dehumidifiers. For 

dishwashers, DOE did not receive incremental cost data for compact dishwashers since fewer 

than three manufacturers produce such products. Therefore, DOE only analyzed standard 

dishwashers. For dehumidifiers, DOE evaluated the 0–35.00 pints/day, 35.01–45.00 pints/day, 

and 54.01–74.99 pints/day product classes for which incremental cost data was received. The 0-

35.00 pints/day represents an aggregation of the 0-25.00 pints/day and 25.01-35.00 pints/day 

product classes. The engineering analysis was subsequently extended to the 45.01-54.00 

pints/day and 75.00 and greater pints/day product classes in later analyses. 

2.5.1 Manufacturing Cost Assessment 

The manufacturing cost assessment estimated the manufacturing costs associated with an 

increase in energy efficiency for the considered products. This approach involved the 

disassembly of specific units, analysis of the materials and manufacturing processes, and 

development of a spreadsheet cost model, using a clear and consistent manufacturing cost 

assessment methodology. DOE built a detailed manufacturing cost assessment model that 

accurately predicts manufacturing cost, and reports the manufacturing costs in aggregated form 

to maintain confidentiality of the data. DOE obtained input from stakeholders on the 

manufacturing cost estimates and assumptions to confirm their accuracy. 

2.6 ENERGY AND WATER USE DETERMINATION 

The energy and water use determination assessed the energy-savings potential of 

different equipment efficiencies for the considered products. For commercial clothes washers 

and residential dishwashers, DOE also evaluated the water-savings potential of more-efficient 

products. 

As part of the energy and water use determination, DOE made certain engineering 

assumptions regarding equipment application, including how the equipment is operated and 

under what conditions. For example, DOE has recently revised its test procedure for 

dishwashers to more accurately reflect their annual energy and water consumption. 68 FR 

51887. DOE relied on the assumptions in this test procedure to establish the typical annual 

energy and water consumption of this product. For cooking products, DOE also has relatively 

recently revised its test procedures to more accurately reflect their annual energy consumption. 

62 FR 51976. As with dishwashers, DOE relied on the assumptions in this test procedure to 

establish the typical annual energy consumption of cooking products. 

2-6 

EE-2006-STD-0127 COMMENT 39.2
For commercial clothes washers and dehumidifiers, the test procedures that are being 

codified in the Code of Federal Regulations (CFR) provide good methods for establishing each 

product’s rated efficiency—e.g., liters/kWh for dehumidifiers and cubic feet/kWh for 

commercial clothes washers, but neither provides an accurate means for establishing annual 

energy consumption. In the case of commercial clothes washers, because the test procedure is 

based on rating the performance of residential clothes washers, the cycles-per-year values do not 

reflect commercial clothes washer usage. In the case of dehumidifiers, the test procedure does 

not offer a method for establishing annual energy consumption. Thus, DOE needed to conduct 

further research to establish the energy and water consumption of these two products. 

2.7 MARKUPS FOR EQUIPMENT PRICE DETERMINATION 

For the LCC and PBP analysis and the manufacturer impact analysis, retail prices are 

required for the baseline efficiency level and all other efficiency levels under consideration. 

DOE derived retail prices by applying manufacturer-to-customer markups to the manufacturerselling-price estimates. To develop markups, DOE identified distribution channels (i.e., how the 

equipment is distributed from the manufacturer to the customer). Once it established proper 

distribution channels for each of the product classes, DOE relied on economic census data from 

the U.S. Census Bureau and input from the industry to define how products are marked up from 

the manufacturer to the customer. 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 

The effects of new energy conservation standards on equipment result in changes in 

operating expenses—usually a decrease—and changes in customer price—usually an increase. 

DOE analyzed the net effect of new standards on customers by evaluating the net LCC using the 

cost-efficiency relationship derived in the engineering analysis, as well as the energy costs 

derived from the energy and water use determination. Inputs to the LCC calculation include the 

installed cost to the customer (customer price plus installation cost), operating expenses (energy 

expenses and maintenance costs), the lifetime of the appliance, and a discount rate. 

The installed and operating costs of equipment typically change in response to new 

standards (installed cost typically increases while operating cost typically decreases). Thus, 

there is a specific time in the life of higher-than-baseline efficiency equipment when the net 

operating cost benefit (in dollars) from the time of purchase is equal to the incremental first cost 

of purchasing the higher efficiency equipment. The length of time required for equipment to 

reach this cost-equivalence point is known as the payback period. 

For the ANOPR, DOE conducted the LCC and PBP analysis using typical values to 

reflect the conditions in the field for equipment life, equipment retail price, national or regional 

energy costs, energy consumption, and discount rates. DOE will conduct the LCC subgroup 

analysis for the NOPR and will include an assessment of impacts on subgroups of consumers. 

2-7 

EE-2006-STD-0127 COMMENT 39.2
To estimate the LCC for each of the considered products, DOE had to determine several 

input values, including retail prices; electricity and natural gas prices; discount rates; 

maintenance, service, and installation costs; and equipment lifetimes. DOE reviewed the Energy 

Information Administration (EIA)’s energy price data to establish electricity and natural gas 

prices for residential and commercial customers. DOE used EIA’s Annual Energy Outlook 

(AEO) as the default source of projections of future energy prices in its LCC and PBP analysis. 

DOE developed discount rates separately for residential consumers and for companies 

that purchase commercial clothes washers. It derived the discount rates from estimates of the 

interest or “finance cost” to purchase residential products. Following financial theory, the 

finance cost of raising funds to purchase these products can be interpreted as: (1) the financial 

cost of any debt incurred to purchase products, principally interest charges on debt, or (2) the 

opportunity cost of any equity used to purchase products, principally interest earnings on 

household equity. 

DOE considered expected changes to maintenance, repair, and installation costs for the 

equipment covered in this rulemaking. Typically, small incremental changes in equipment 

efficiency incur no, or only very small, changes in repair and maintenance costs over baseline 

efficiency products. There is a greater probability that equipment with efficiencies that are 

significantly greater than the baseline will incur increased repair and maintenance costs since 

such equipment is more likely to incorporate technologies that are new to the industry and not 

widely available. DOE relied on input from manufacturers and other stakeholders in developing 

appropriate repair and maintenance costs. 

DOE used information from various literature sources (e.g., Appliance Magazine) and 

input from manufacturers and other stakeholders to establish average equipment lifetimes for use 

in the LCC and subsequent analyses. 

2.9 NATIONAL IMPACT ANALYSIS 

The national impact analysis assesses the NPV of total customer LCC and NES. DOE 

determined both the NPV and the NES for the performance levels considered for the product 

classes it analyzed. To make the analysis more accessible and transparent to all stakeholders, 

DOE prepared an NES Spreadsheet Model in Microsoft Excel to forecast energy savings and the 

national economic costs and savings resulting from new standards. The model assessed the 

aggregate economic impacts of standards at the national level. The NES Spreadsheet Model 

does not use probability distributions for inputs or outputs. To assess the impact of input 

uncertainty on the NES and NPV results, DOE can conduct sensitivity analyses by running 

scenarios on input variables that are of interest to stakeholders. 

2-8 

EE-2006-STD-0127 COMMENT 39.2
2.9.1 National Energy Savings Analysis 

The inputs for the determination of NES are: (1) annual energy consumption per unit; (2) 

shipments; (3) equipment stock; (4) national energy consumption; and (5) site-to-source 

conversion factors. DOE calculated the national energy consumption by multiplying the number 

of units, or stock, of equipment (by vintage) by the unit energy consumption (also by vintage).a 

DOE calculated national annual energy savings as the difference between national energy 

consumption in the base case (without new efficiency standards) and in each higher efficiency 

standards case. The analysis included estimated energy savings by fuel type used for generating 

electricity. DOE estimated energy consumption and savings based on site energy, and converted 

the electricity consumption and savings to source energy. Cumulative energy savings are the 

sum of the annual NES, which DOE determined over specified time periods. 

The stock of equipment is dependent on annual shipments and the lifetime of the 

equipment. DOE conducted shipments projections under the base efficiency case and higher 

efficiency standards cases for a variety of possible equipment efficiency scenarios and equipment 

efficiency trends. DOE determined that shipment projections under the higher standard 

efficiency cases were lower than those from the base efficiency case projection, because of the 

higher installed cost of the more-efficient equipment. The projections indicated that higher 

installed costs would cause some customers to forego equipment purchases. As a result, DOE 

used the higher efficiency standard case shipments projection and, in turn, the resulting stock of 

equipment under the higher efficiency standards case, to determine the NES. Calculating the 

NES in this way avoids the inclusion of savings resulting from displaced shipments. 

2.9.2 Net Present Value Analysis 

The inputs for the determination of NPV are: (1) total annual installed cost; (2) total 

annual operating cost savings; (3) discount factor; (4) present value of costs; and (5) present 

value of savings. DOE calculated NPV as the difference between the present value of operating 

cost savings and the present value of increased total installed costs. It calculated net savings 

each year as the difference between total operating cost savings (including electricity, repair, and 

maintenance cost savings) and increases in total installed costs (including equipment price and 

installation cost). DOE calculated savings over the life of the equipment, accounting for 

differences in yearly energy rates, and discounted future costs and savings to the present with a 

discount factor. 

DOE calculated increases in total installed costs as the product of the difference in the 

total installed cost between the base case and standards case and the annual shipments in the 

standards case. Because costs of the more-efficient equipment bought in the standards case are 

higher than those of equipment bought in the base case, price increases appear as negative values 

in the NPV analysis. 

a

 Vintage represents the age of the equipment. 

2-9 

EE-2006-STD-0127 COMMENT 39.2
DOE expressed operating cost savings as decreases in operating costs associated with the 

lower energy consumption of equipment bought in the standards case compared to the base 

efficiency case. Total operating cost savings are the product of savings per unit and the number 

of units of each vintage surviving in a particular year. 

2.9.3 Forecasted Efficiencies 

Several of the inputs for the determination of NES (e.g., the annual energy consumption 

per unit) and NPV (e.g., the total annual installed cost and the total annual operating cost 

savings) are dependent on the efficiency of the equipment. Thus, DOE forecasted efficiencies 

for the base case and standards cases. The forecasted efficiencies specify the annual shipmentweighted average equipment efficiencies for future years. 

For each of the products considered, DOE based the development of the product 

efficiencies in the base case on the assignment of equipment efficiencies in the year 2005. In 

other words, DOE determined the distribution of product efficiencies currently in the 

marketplace to develop a shipment-weighted efficiency for the year 2005. As described in 

Chapter 10, DOE assumed that forecasted efficiencies remained frozen at the efficiency level in 

the year 2005 until the end of the forecast period. 

DOE based its standards case forecasts (i.e., forecasts of efficiency trends after standards 

take effect) on the use of a roll-up efficiency scenario. Under a roll-up scenario, all equipment at 

performance levels below a prospective standard are moved, or rolled up, to the minimum 

performance level allowed under the new standard. The distribution of equipment at efficiency 

levels above the new minimum standard levels is unaffected (i.e., this equipment remains at its 

pre-standard performance levels). The roll-up efficiency scenario dictates how DOE determined 

efficiency distributions in the first year a new standard takes effect, but does not define how 

equipment efficiency will be distributed in the future. As was done for the base case, DOE 

assumed that forecasted efficiencies under the standards case remained frozen at the level in the 

year that standards became effective until the end of the forecast period. 

2.10 MANUFACTURER IMPACT ANALYSIS 

The manufacturer impact analysis (MIA) assesses the impacts of new energy efficiency 

standards on manufacturers of the considered products. Potential impacts would include 

financial effects, both quantitative and qualitative, that might lead to changes in the 

manufacturing practices for these products. DOE will identify these potential impacts through 

interviews with manufacturers and other stakeholders. 

DOE conducts the MIA in three phases, and further tailors the analytical framework 

based on stakeholder comments. In Phase I, an industry profile is created to characterize the 

industry, and a preliminary MIA is conducted to identify important issues that require 

consideration. DOE has conducted the preliminary MIA for dishwashers, dehumidifiers, and 

2-10 

EE-2006-STD-0127 COMMENT 39.2
commercial clothes washers. In Phase II, an industry cash flow model and an interview 

questionnaire are prepared to guide subsequent discussions. In Phase III, manufacturers are 

interviewed, and the impacts of standards are assessed both quantitatively and qualitatively. 

Industry and sub-group cash flow and NPV are assessed through use of the Government 

Regulatory Impact Model (GRIM). Then impacts on competition, manufacturing capacity, 

employment, and cumulative regulatory burden are assessed based on manufacturer interview 

feedback and discussions. 

2.11 LIFE-CYCLE COST SUBGROUP ANALYSIS 

The LCC subgroup analysis evaluates economic impacts of standards on any identifiable 

groups of customers who might be disproportionately affected by a change in the national energy 

efficiency standard levels for the considered products. During the NOPR stage of the 

rulemaking, DOE intends to evaluate the impacts of particular subgroups of customers in part by 

using the LCC Spreadsheet Model to analyze the LCC and PBP for these particular customers. 

In the case of dishwashers, dehumidifiers, and cooking products, DOE may choose to 

consider subgroups such as low-income households and senior citizens. In the case of 

commercial clothes washers, DOE may choose to consider small businesses. DOE also intends 

to evaluate variations in regional energy prices and use that might affect the NPV of an energy 

efficiency standard to customer subgroups. To the extent possible, DOE will obtain estimates of 

the variability of each input parameter and consider this variability in its calculation of customer 

impacts. DOE intends to perform sensitivity analyses to consider how differences in energy use 

will affect various subgroups of customers. 

DOE will determine the impact on customer subgroups using the LCC Spreadsheet 

Model, which allows for different data inputs. The standard LCC analysis focuses on the 

households that use dishwashers, dehumidifiers, and cooking products, and the different 

establishments that use commercial clothes washers. DOE can use the LCC Spreadsheet Model 

to analyze the LCC for any subgroup by sampling only that subgroup. 

2.12 UTILITY IMPACT ANALYSIS 

The utility impact analysis will assess the impact of higher efficiency standards on 

the electric and gas utility industries. To carry out this analysis, DOE will use a variant of the 

EIA’s National Energy Modeling System (NEMS). NEMS is a large, multi-sectoral, partialequilibrium model of the United States energy sector that EIA has developed over the past 

decade, primarily for the purpose of preparing the AEO. DOE will use a variant known as 

NEMS-BT to provide key inputs to the analysis.b 

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information 

Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000, 

2-11 

EE-2006-STD-0127 COMMENT 39.2
NEMS produces a widely recognized baseline energy forecast for the United States 

through the year 2030, and is available in the public domain. The typical NEMS outputs include 

forecasts of electricity sales, price, and avoided electric generating capacity. DOE plans to 

conduct the utility impact analysis as a scenario departing from the latest AEO reference case. In 

other words, DOE will model the energy savings impacts from amended energy conservation 

standards using NEMS-BT to generate forecasts that deviate from the AEO reference case. 

2.13 EMPLOYMENT IMPACT ANALYSIS 

The imposition of standards can impact employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the plants that produce the 

covered equipment, and at the affiliated distribution and service companies, resulting from the 

imposition of new standards. DOE will evaluate direct employment impacts in the manufacturer 

impact analysis. Indirect employment impacts may result from expenditures shifting between 

goods (the substitution effect) and changes in income and overall expenditure levels (the income 

effect) that occur due to the imposition of standards. DOE will investigate the combined direct 

and indirect employment impacts using the Pacific Northwest National Laboratory (PNNL)’s 

“Impact of Sector Energy Technologies” (ImSET) model. PNNL developed the ImSET model 

for DOE’s Office of Planning, Budget, and Analysis. The model estimates the employment and 

income effects of energy-saving technologies in buildings, industry, and transportation. In 

comparison with simple economic multiplier approaches, ImSET allows for more complete and 

automated analysis of the economic impacts of energy conservation investments. 

2.14 ENVIRONMENTAL ASSESSMENT 

The environmental assessment will track the impact of possible standards on three 

energy-related pollutants—oxides of nitrogen (NOx), sulfur dioxide (SO2), and mercury—as 

well as carbon dioxide (CO2) emissions. The primary environmental effects of energy 

conservation standards for the considered products will be reduced emissions resulting from 

reduced electricity and natural gas consumption. DOE intends to base these calculations on the 

NEMS-BT modeling work proposed for the utility impact analysis. This approach has the 

advantage of examining the marginal impact of higher efficiency standards for the considered 

products on the utility generation mix and the subsequent environmental emissions. 

NEMS-BT tracks CO2 emissions using a detailed module that produces robust results 

because of its broad coverage of all sectors and inclusion of interactive effects. NEMS-BT also 

DOE/EIA-0581(2000), March 2000. EIA approves use of the name NEMS to describe only an official version of 

the model without any modification to code or data. Because this analysis entails some minor code modifications 

and the model is run under various policy scenarios that are variations on EIA assumptions, DOE refers to the model 

by the name NEMS-BT (BT is DOE’s Building Technologies Program, under whose aegis this work has been 

performed). NEMS-BT was previously called NEMS-BRS. 

2-12 

EE-2006-STD-0127 COMMENT 39.2
includes a module for SO2-allowance trading and delivers a forecast of SO2-allowance prices. It 

is important to note, however, that simulation of SO2 trading tends to imply that physical 

emissions effects will be zero. However, there is an SO2 benefit from conservation in the form 

of a lower allowance price and, if big enough to be calculable by NEMS, this value can be 

reported. NEMS-BT also has algorithms for estimating NOX and mercury emissions from power 

generation. As with SO2 emissions, recent caps on NOX and mercury emissions mean that 

equipment efficiency standards may have no physical effect on these emissions, although 

standards could produce an environmental-related economic benefit in the form of lower prices 

for emissions allowance credits. 

2.15 REGULATORY IMPACT ANALYSIS 

In the NOPR stage, DOE will prepare a regulatory impact analysis (RIA) under 

Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735, October 4, 1993, 

which is subject to review under the Executive Order by the Office of Information and 

Regulatory Affairs (OIRA) at the Office of Management and Budget. The RIA will evaluate 

non-regulatory alternatives to standards, in terms of their ability to achieve significant energy 

savings in the considered products at a reasonable cost, and will compare the effectiveness of 

each one to the effectiveness of the proposed standards rule. 

DOE recognizes that voluntary or other non-regulatory efforts by manufacturers, utilities, 

and other interested parties can result in substantial improvements to energy efficiency or 

reductions in energy consumption. DOE intends to consider the likely effects of non-regulatory 

initiatives on product energy use, consumer utility, and LCC. DOE will base its assessment on 

the actual impacts of any such initiatives to date, but also will consider information presented 

regarding the impacts that any existing initiative might have in the future. 

2-13 

EE-2006-STD-0127 COMMENT 39.2