17

- i CHAPTER 17

. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

17.1 INTRODUCTION

................................................................................................... 17-1

17.2 NON

- REGULATORY POLICIES

.......................................................................... 17-2

17.2.1 Methodology ............................................................................................................ 17-2

17.2.2 Assumptions Regarding Non- Regulatory Policies

.................................................. 17-3

17.2.3 Policy Interactions

................................................................................................... 17-6

17.3 NON

- REGULATORY POLICY AS SUMPTIONS

................................................ 17-6

17.3.1 No New Regulatory Action

..................................................................................... 17-7

17.3.2 Consumer Rebates

................................................................................................... 17-7

17.3.2.1 Clothes Dryers ....................................................................................... 17-8

17.3.2.2 Room Air Conditioners ........................................................................ 17-12

17.3.3 Consumer Tax Credits ........................................................................................... 17-17

17.3.4 Manufacturer Tax Credits

...................................................................................... 17-20

17.3.5 Voluntary Energy Efficiency Targets .................................................................... 17-23

17.3.5.1 Clothes Dryers ..................................................................................... 17-24

17.3.5.2 Room Air Conditioners ........................................................................ 17-24

17.3.6 Early Replacement

................................................................................................. 17-25

17.3.7 Bulk Government Purchases .................................................................................. 17-28

17.3.7.1 Clothes Dryers ..................................................................................... 17-29

17.3.7.2 Room Air Conditioners ........................................................................ 17-30

17.4 IMPACTS OF NON

- REGULATORY ALTERNATIVES

................................... 17-30

17.4.1 Clothes Dryers ....................................................................................................... 17-31

17.4.2 Room Air Conditioners .......................................................................................... 17-40

17.5 SUPER

- EFFICIENT VOLUNTARY TARGETS

................................................. 17-50

LIST OF TABLES

Table 17.1.1 Non

- Regulatory Alternatives to National Standards ...................................... 17-2

Table 17.2.1 Efficiency Levels in Proposed Standard Levels for Clothes Dryers .............. 17-5

Table 17.2.2 Efficiency Levels in Proposed Standard Levels for Room Air

Conditioners .................................................................................................... 17-6

Table 17.3.1 Benefit/Cost Ratios Without and With Rebates for Clothes Dryers (2009$) .......................................................................................................... 17-10

Table 17.3.2 Market Penetrations in 2014 Without and With Rebates for Clothes Dryers ............................................................................................................ 17-12

Table 17.3.3 Benefit/Cost Ratios Without and With Rebates for Room Air

Conditioners .................................................................................................. 17-14

Table 17.3.4 Market Penetration in 2014 Without and With Rebates for Room Air

Conditioners .................................................................................................. 17-16

Table 17.3.5 17-17

Table 17.3.6 Market Penetrations in 2014 Attributable to Consumer Tax Credits for Clothes Dryers .............................................................................................. 17-1917

- ii Table 17.3.7 Market Penetrations in 2014 Attributable to Consumer Tax Credits for

Room Air Conditioners ................................................................................. 17-20

Table 17.3.8 Market Penetrations in 2014 Attributable to Manufacturer Tax Credits for Clothes Dryers ......................................................................................... 17-22

Table 17.3.9 Market Penetrations in 2014 Attributable to Manufacturer Tax Credits

for Room Air Conditioners ........................................................................... 17-23

Table 17.4.1 Impacts of Non- Regulatory Alternatives for Vented Electric Standard Dryers that Meet the Proposed Standard (TSL 4) ......................................... 17-35

Table 17.4.2 Impacts of Non- Regulatory Alternatives for Vented Electric Compact 120V Dryers that Meet the Proposed Standard (TSL 4) ............................... 17-36

Table 17.4.3 Impacts of Non- Regulatory Alternatives for Vented Electric Compact 240V Dryers that Meet the Proposed Standard (TSL 4) ............................... 17-37

Table 17.4.4 Impacts of Non- Regulatory Alternatives for Vented Gas Dryers that Meet the Proposed Standard (TSL 4) ........................................................... 17-38

Table 17.4.5 Impacts of Non- Regulatory Alternatives for Vent

- less Electric Compact 240V Dryers that Meet the Proposed Standard (TSL 4) ............................... 17-39

Table 17.4.6 Impacts of Non- Regulatory Alternatives for Vent

- less Electric Combination Washer/Dryer Dryers that Meet the Proposed Standard (TSL 4) .......................................................................................................... 17-40

Table 17.4.7 Impacts of Non-Regulatory Alternatives for Room Air Conditioners Group 1 - Less than 6,000 Btu/h, with Louvers, that Meet the Proposed Standard (TSL 4) .......................................................................................... 17-45

Table 17.4.8 Impacts of Non-Regulatory Alternatives for Room Air Conditioners in Group 2 - based on 8,000-13,999 Btu/h, with Louvers, that Meet the Proposed Standard (TSL 4) ........................................................................... 17-46

Table 17.4.9 Impacts of Non- Regulatory Alternatives for Room Air Conditioners in Group 3 - based on 20,000-24,999 Btu/h, with Louvers, that Meet the Proposed Standard (TSL 4) ........................................................................... 17-47

Ta ble 17.4.10 Impacts of Non-Regulatory Alternatives for Room Air Conditioners in Group 4 - based on 25,000 Btu/h or more Btu/h, with Louvers, that Meet the Proposed Standard (TSL 4) ..................................................................... 17-48

Table 17.4.11 Impacts of Non-Regulatory Alternatives for Room Air Conditioners in Group 5 - based on 8,000-10,999 Btu/h, without Louvers, that Meet the Proposed Standard (TSL 4) ........................................................................... 17-49

Table 17.4.12 Impacts of Non-Regulatory Alternatives for Room Air Conditioners in Group 6 - based on 11,000-13,999 Btu/h, without Louvers, that Meet the Proposed Standard (TSL 4) ........................................................................... 17-50

Table 17.5.1 Super- efficient Voluntary Targets Program Parameters for Cl othes Dryers ............................................................................................................ 17-51

Table 17.5.2 Super- efficient Voluntary Targets Program Parameters for Room Air

Conditioners .................................................................................................. 17-52

Table 17.5.3 Super- efficient Voluntary Targets Program Benefit/Cost Ratios for Clothes Dryers by Census Division .............................................................. 17-53

Table 17.5.4 Super- efficient Voluntary Targets Program Benefit/Cost Ratios for Room Air Conditioners by Census Division (Residential Sector) ............... 17-5417

- iii Table 17.5.5 Super- efficient Voluntary Targets Program Benefit/Cost Ratios for Room Air Conditioners by Census Division (Commercial Sector) .............. 17-55

Table 17.5.6 Super- efficient Voluntary Targets Program Total Installed Cost of Clothes Dryers (2009$) ................................................................................. 17-57

Table 17.5.7 Super- efficient Voluntary Targets Program Total Installed Cost of Room Air Conditioners (Residential Sector) (2009$) ............................................. 17-58

Table 17.5.8 Super- efficient Voluntary Targets Program Total Installed Cost of Room Air Conditioners (Commercial Sector) (2009$) ........................................... 17-59

Table 17.5.9 Super- efficient Voluntary Targets Program Market Penetration of Clothes Dryers .............................................................................................. 17-60

Table 17.5.10 Super- efficient Voluntary Targets Program Market Penetration of Room Air Conditioners (Residential Sector) ........................................................... 17-61

Table 17.5.11 Super- efficient Voluntary Targets Program Market Penetration of Room Air Conditioners (Commercial Sector) ......................................................... 17-62

Table 17.5.12 Super- efficient Voluntary Targets Program Outputs for Clothes Dryers ..... 17-63

Table 17.5.13 Super- efficient Voluntary Targets Program Outputs for Room Air

Conditioners .................................................................................................. 17-64

LIST OF F IGURES

Figure 17.3.1 Market Penetration Curve for Vented Standard Electric Dryers .................. 17-10 Figure 17.3.2 Market Penetration Curve for Vented Gas Dryers ........................................ 17-11 Figure 17.3.3 Market Penetration Curve for Room Air Conditioners, Less than 6,000 Btu/h, with Louvers ...................................................................................... 17-14 Figure 17.3.4 Market Penetration Curve for Room Air Conditioners, 28,000-13,999 Btu/h, with Louvers ...................................................................................... 17-15 Figure 17.3.5 Estimated Replacement Shipments of Clothes Dryers With and Without an Early Replacement Program .................................................................... 17-27 Figure 17.3.6 Estimated Replac ement Shipments of Room Air Conditioners With and Without an Early Replacement Program ...................................................... 17-28 Figure 17.4.1 Market Penetration of Vented Electric Standard Clothes Dryers Meeting Target Level in Policy Cases ........................................................................ 17-31 Figure 17.4.2 Market Penetration of Vented Electric Compact 120V Clothes Dryers Meeting Target Level in Policy Cases .......................................................... 17-32 Figure 17.4.3 Market Penetration of Vented Electric Compact 240V Clothes Dryers Meeting Target Level in Policy Cases .......................................................... 17-32 Figure 17.4.4 Market Penetration of Vented Gas Clothes Dryer s Meeting Target Level in Policy Cases .............................................................................................. 17-33 Figure 17.4.5 Market Penetration of Vent- less Electric Compact 240V Clothes Dryers

Mee ting Target Level in Policy Cases .......................................................... 17-33 Figure 17.4.6 Market Penetration of Vent- less Electric Combination Washer/Dryer Meeting Targ et Level in Policy Cases .......................................................... 17-34 Figure 17.4.7 Market Penetration of Room Air Conditioners Less than 6,000 Btu/h, with Louvers, Meeting Target Level in Policy Cases ................................... 17-4117

- iv Figure 17.4.8 Market Penetration of Room Air Conditioners 8,000-13,999 Btu/h, with Louvers, Meeting Target Level in Policy Cases ........................................... 17-41 Figure 17.4.9 Market Penetration of Room Air Conditioners 20,000-24,999 Btu/h, with Louvers, Meeting Target Level in Policy Cases ................................... 17-42 Figure 17.4.10 Market Penetration of Room Air Conditioners 25,000 Btu/h or more, with Louvers, Meeting Target Level in Policy Cases ................................... 17-42 Figure 17.4.11 Market Penetration of Room Air Conditioners 8,000-10,999 Btu/h, without Louvers Meeting Target Level in Policy Cases .............................. 17-43 Figure 17.4.12 Market Penetration of Room Air Conditioners 11,000-13,999 Btu/h, without Louvers Meeting Target Level in Policy Cases .............................. 17-4317

- 1 CHAPTER 17. REGULATORY IMPACT ANALYSIS

17.1 INTRODUCTION

The U.S. Department of Energy (DOE) has determined that energy conservation standards for clothes dryers and room air conditioners constitute an “economically significant regulatory action” under Executive Order (E.O.) 12866, Regulatory Planning and Review. 58 FR 51735, Volume 58, No. 190, page 51735. (October 4, 1993). Under 10 CFR part 430, subpart C, appendix A, section III.12, DOE committed to evaluating non

- regulatory alternatives to proposed

standard s by performing a regulatory impact analysis (RIA). 61 FR 36981, Volume 61, No. 136, page 36978. ( November 15, 1996). This RIA, which DOE has prepared pursuant to E.O. 12866, evaluates potential non-regulatory alternatives, comparing the costs and benefits of each to those of the proposed standard s. 58 FR 51735, page 51741. As noted in E.O. 12866, this RIA is subject to review by the Office of Management and Budget’s Office of Information and Regulatory Affairs. 58 FR 51735, page 51740.

For this R egulatory Impact Analysis , DOE used integrated NIA

- RIA integrated models built on the NIA models discussed in chapter 10 for its analysis. DOE studied the impacts of the

non- regulatory policies on the representative product classes analyzed for the direct final rule . It then applied the assumptions of the impacts of each policy on these representative product classes to the shipments of the remaining product classes associated with each representative

class . Thus, the savings reported in this chapter represent the savings for all the considered product classes for clothes dryers. For room air conditioners DOE studied the impacts of the policies on only the residential product classes.

DOE identified six non- regulatory policy alternatives that feasibly could provide

incentives for the same energy efficiency levels as the proposed standards for the products that are the subject of this rulemaking. The non- regulatory policy alternatives are listed in Table

17 .1.1. DOE evaluated each alternative in terms of its ability to achieve significant energy savings at a reasonable cost, and compared the effectiveness of each to the effectiveness of the proposed standard.17

- 2 Table 17.1.1 Non -Regulatory Alternatives to National Standards No New Regulatory Action

Consumer Rebates

Consumer Tax Credits

Manufacturer Tax Credits
Voluntary E nergy Efficiency Targets
Early Replacement

Bulk Government Purchases

In addition to the above six non- regulatory policy alternatives, for this rulemaking DOE

evaluated a super- efficient voluntary targets (SEV T) program. Sections 17.2 and 17.3 discuss the analysis of the six policies listed above, and section 17.3.8 describes the SEVT policy. Sections 17.4 and 17.5 present the results of the six policy alternatives , and s ection 17.6 describes the analysis of the SEVT policy and presents the results.

17.2 NON

- REGULATORY POLICIES

This section describes the method DOE used to analyze the energy savings and cost

effectiveness of the six non- regulatory policy alternatives (excluding the alternative of no new regulatory action) for the identified clothes dryers and room air conditioners. This section also describes the assumptions underlying the analysis.

17.2.1 Methodology

DOE used its integrated national impact analysis

– regulatory impact analysis (NIA

- RIA) spreadsheet models to calculate the national energy savings (NES) and net present value (NPV)

associated with each non

- regulatory policy alternative . Chapter 10 of the technical support document (TSD) describes the NIA spreadsheet models. Appendix 17-A, section 17-A.2,

discusse s the new NIA

- RIA inte grated model approach.

DOE quantified the effect of each alternative on the purchase of products that meet target
levels , which are defined as the efficiency levels in the proposed standard s. After establishing the quantitative assumptions underlying each alternative, DOE appropriately revised inputs to the

NIA

- RIA spreadsheet models. The primary model inputs revised were market shares of prod ucts meeting target efficiency levels and equipment replacement rates. The shipments of products for any given yea r reflect a distribution of efficiency levels. DOE assumed that the proposed

standard s would affect 100 percent of the shipments of products that did not meet target levels in the base case, a

a T he base case for the NIA is a market

- weighted average of units at several efficiency levels. whereas the non -regulatory policies would affect a smaller perce ntage of those shipments. DOE made certain assumptions about the percentage of shipments affected by each alternative policy

. DOE used those percentages to calculate the shipment

- weighted average energy consumption and costs of clothes dryers and room air conditioners attributable to each policy alternative.17

- 3 Increasing the efficiency of a product often increases its average installed cost. On the other hand, operating costs generally decrease because energy consumption declines. DOE

therefore calculated an NPV for each non- regulatory alternative in the same way it did for the proposed standard s. In some scenarios, increases in total installed cost are mitigated by government rebates or tax credits. Because DOE assumed that consumers would re- pay credits and rebates in some way (such as additional taxes) , DOE did not include rebates or tax credits as a consumer benefit when calculating national NPV. DOE’s analysis also excluded any administrative costs for the non-regulatory policies; including such costs would decrease the NPVs slightly.

The following are key measures for evaluating the impact of each alternative.

**•** National energy savings, given in quadrillion Btus (quads), describes the cumulative national primary energy savings for products bought during the period from the effective date of the policy (2014 ) through the end of the analysis period (2043 ).

**•** Net present value represents the value in 2009$ (discounted to 2010) of net monetary savings from products bought during the period from the effective date of the policy (2014) through the end of the analysis period (2043 ).

**•** DOE calculated the NPV as the difference between the present value of installed equipment cost and operating expenditures in the base case and the present value of

th o se costs in each policy case. DOE calculated operating expenses (including energy

costs ) for the life of the product.

17.2.2 Assumptions Regarding Non- Regulatory Policies

The effects of non -regulatory policies are by nature uncertain, because they depend on program implementation and marketing efforts and on consumers’ responses to a program. Because the projected effects depend on assumptions regarding the rate of consumer participation, they are subject to more uncertainty than are the impacts of mandatory standards, which DOE assumes will meet with full compliance. To increase the robustness of the analysis, DOE conducted a literature review regarding each non -regulatory policy and consulted with recognized experts to gather i nformation on similar incentive programs that have been implemented in the United States. By studying experiences with the various types of programs, DOE sought to make credible assumptions regarding potential market impacts. Section 17.3 presents the sources DOE relied on in developing assumptions about each alternative policy and reports DOE’s conclusions as they affected the assumptions that underlie the modeling of each policy.

Each non-regulatory policy that DOE considered would improve the average e fficiency of new clothes dryers and room air conditioners relative to their base case efficiency scenarios (which involve no new regulatory action). The analysis considered that each alternative policy would induce consumers to purchase units having the sa me efficiency levels as required by the17

- 4 proposed standard s (the target levels ). As opposed to the standards case, however, the policy cases may not lead to 100 percent market penetration of units that meet target levels.

Tables 17.2.1 and 17.2.2 show the efficiency levels stipulated in the proposed standards

for clothes dryers and room air conditioners.17

- 5 Table 17.2.1 Efficiency Levels in Proposed Standard Levels for Clothes Dryers

Product Class TSL 4

CEF

Vented Electric Standard 3.73 Vented Electric Compact 120V 3.61 Vented Electric Compact 240V 3.27

Vented Gas 3.30

Vent

- less Electric Compact 240V 2.55

Vent

- less Electric Combination Washer/Dryer 2.0817

- 6 Table 17.2.2 Efficiency Levels in Proposed Standard Levels for Room Air

Conditioners

Product Class TSL 4

CEER Group 1

– includes PC 1 11.10 Group 2

– includes PC 2, 3, 4, 11 10.90 Group 3

– includes PC 5a, 9, 13 9.40 Group 4

– includes PC 5b, 10 9.00 Group 5

– includes PC 6, 7, 8a, 12 9.60 Group 6

– includes PC 8b, 14, 15, 16 9.50

Besides the above policy alternatives, DOE evaluated a Super-Efficient Voluntary Targets policy where a new voluntar y efficiency target program would be implemented in

addition to the proposed standards. The voluntary efficiency targets would feature “super

efficient” products at one efficiency level above the current max

- tech levels . The program would target consumers in the highest electricity price regi ons of the country, to make the products maximally cost

- effective.

DOE assumed that the effects of non- regulatory policies would last from the effective date of standards—2014—through the end of the analysis period, which is 2043.

17.2.3 Policy Interactions

DOE calculated the effects of each non -regulatory policy separately from those of the other policies. In practice, some policies are most effective when implemented in combination, such as early replacement implemented with consumer rebates, or early replacement implemented with bulk government purchases. However, DOE attempted to make conservative assumptions to avoid double- counting policy impacts. The resulting policy impacts are not

additive: the combined effect o f several or all policies cannot be inferred from summing their

results.

Section 17.3 presents graphs that show the market penetration estimated under each nonregulatory policy for clothes dryers and room air conditioners.

17.3 NON

- REGULATORY POLIC Y ASSUMP TIONS

The following subsections describe DOE’s analysis of the impacts of the six nonregulatory policy alternatives to proposed standard s for clothes dryers and room air conditioners. (Because the alternative of No New Regulatory Action has no energy or NPV impacts, essentially representing the NIA base case, DOE did not perform additional analysis for that alternative.) DOE developed estimate s of the market penetration of high

- efficien cy products both

with and without each of the non- regulatory policy alternatives

.17

- 7 17.3.1 No New Regulatory Action

The case in which no new regulatory action is taken with regard to the energy efficiency

of clothes dryers and room air conditioners constitutes the base case, as described in c hapter 10, National Impact Analysis. The base case provides the basis of comparison for all other policies. By definition, no new regulatory action yields zero energy savings and an NPV of zero dollars.

17.3.2 Consumer Rebates

DOE considered this scenario in which the Federal government would provide financial

incentives in the form of rebate s to consumers for purchasing energy efficient appl iances

. This policy provides a consumer rebate for purchasing clothes dryers or room air conditioners that

operate at (or above) the same efficiencies as stipulated in proposed standards (target levels)

.

To inform its estimate of the market impacts of co nsumer rebates, DOE performed a thorough search for existing rebate programs nationwide . It gathered data on utility or agency

rebates for clothes dryers or room air conditioners throughout the count ry . DOE also reviewed the current State Energy Efficient Appliance Rebate Program (SEEARP) funded by the
American Recovery and Reinvestment Act (ARRA)

. 1

, b This program may be considered a combination of a consumer rebate and an early replacement program, with intention to induce appliance sales during the economic recession. DOE analyzed summary material from DOE on

SEEARP rebates for room air conditioners. 2

DOE based its evaluation methodology for consumer rebates on a comprehensive study

of California’s potential for achieving energy efficiency . This study, performed by XENERGY,

Inc., c summarize d experience s with various utility rebate programs. 3 XENE RGY’s analytical

method utilized graphs, or penetration curves
, that estimate the market penetration of a technology based on its benefit/cost (B/C) ratio. DOE consulted with experts and reviewed other methods of estimating the effect of consumer rebate programs on the market penetration of

efficient technologies. The other methods, developed after the referenced XENERGY report was published, 4, 5, 6, 7, 8 , 9 used different approaches: other economic parame ters (e.g., payback period), expert surveys, or model calibration based on specific utility program data rather than

multi

- utility data . Some models in use by energy efficiency program evaluation experts were so

client

- specific that generic relationships between economic parameters and consumer res ponse
could not be established. 7 DOE decided that the most appropriate available method for this RIA analysis was the XENERGY approach of penetration curves based on B/C ratio, which incorporates lifetime operati ng cost savings.

b DOE provided funding for State

- run rebate programs for consumer purchases of new ENERGY STAR ® qualified home appliances. The resulting SEEARP was implemented beginning in late 2009 by t he 50 States and six U.S. territories, each selecting its own appliances, rebate levels, efficiency levels, appliance recycling requirements, and eligible populations.

c XENERGY is now owned by KEMA, Inc. ( www.kema.com )17

- 8 XENERGY’s model estimates market impacts induced by financial incentives based on the premise that two types of information diffusion drive the adoption of new technologies.

Internal sources of information encourage consumers to purchase new products primarily through word-of-mouth from early adopters. External sources affect consumer purchase decisions through marketing efforts and information from outside the consumer group. Appendix 17-A, section 17-A.3.1, contains additional details on internal and external information diffusion.

XENERGY’s model equation accounts for the influences of both internal and external sources of information by superimposing the two components. Combining the two mechanisms for information diffusion, XENERGY ’s model generates a set of penetration (or implementation) curves for a measure. XENERGY then calibrated the curves based on participation data from utility rebate programs. The curves illustrate the increased penetration (i.e., increased market share) of efficient products driven by consumer response to changes in B/C ratio induced by rebate programs. The penetration curves depict various diffusion patterns based on perceived barriers (from no barriers to extremely high barriers ) to consumer purchase of h igh

- efficiency products.

DOE adjusted the XENERGY penetration curves based on expert advice founded on more recent utility program experience. 7, 10 DOE also devised an interpo lation method to create penetration curves based on relationships between the actual base case market penetrations and

actual B/C ratios for each representative product class. Appendix 17-A , section s 17-A.3.2 and 17-A.3.3, contain discussion on DOE’s methodology for adjusting and interpolating the curves.

DOE modeled the effects of a consumer rebate policy for clothes dryers and room air

conditioners by determining the increase s in market penetration of products meeting the target

level relative to their market penetration s in the base case. It did this using the interpolated penetration curves created for each representative product class based on the XENERGY methodology to best reflect the market barrier levels faced by each product class.

S ection 17.3.2.1 shows examples of these interpolated curves for two clothes washer product classes: vented electric standard and vented gas . Section 17.3.2.2 shows examples of these interpolated curves for two room air conditioner product classes: PC 1 (Group 1) and PC 3 (Group 2).

17.3.2.1 Clothes Dryers

For clothes dryer s , DOE estimated the effect of increasing the B/C ratio via a rebate that would pay part or all of the incr eased installed cost of a unit that met the target efficiency level compared to one meeting the baseline efficiency level

. d

d The baseline technology for each product class is defined in the e ngineering a nalysis , chapter 5 , as the technology that represents the basic characteristics of products in that class . A baseline unit typically is one that just meets current Federal energy conservation standards and provides basic consumer utility

. DOE based the rebate am ounts on a large sample of utility and agency rebate programs for clothes dryers.17

- 9 For gas clothes dryers, DOE gathered data on 16 rebate programs initiated by 1 6 utilities or agencies in several State s. For electric clothe s dryers, DOE gathered data on four rebate programs initiated by three utilities or agencies in States throughout the country, and for electric

combination washer/dryer units it found one program. (Appendix 17-A, section 17- A.5

, identifies the rebate programs.) To represent the rebate level for gas, electric, and combination clothes dryer s, DOE used t he simple average of the rebate amounts in these respective sets of

programs. DOE assumed that these average s would apply to models at all efficiency levels at or above the target level for each representative product class

. None of the rebates specified an efficiency level, but rather specified a moisture sensor or a conversion from electric to gas. DOE assumed that the impact of these rebates would be equivalent to those of rebates at the target
levels.

DOE assumed that rebates would remain in effect at the same levels throughout the forecast period (2014–2043 ).

For clothes dryer s, DOE first calculated B/C ratios without a rebate using the difference

in total installed costs and lifetime operating cost savings between the unit meeting the target

level and the baseline unit. It then calculated B/C ratio s given a rebate for the unit meeting the target efficiency level

. Because the rebate reduced the incremental cost, the u nit receiving the

rebate had a l arger B/C ratio. Table 17.3.1 shows the effects of consumer rebates on B /C ratios

for the two largest product classes, vented standard electric and vented gas clothes dryers

. Each

B/C ratio value for units with rebates represen ts a weighted average e of the values for the efficiency levels at or above the target level to which the rebate would apply.

e The weighting factor is the 2014 base case market share of each of the corresponding efficiency levels.17

- 10 Table 17.3.1 Benefit/Cost Ratios Without and W ith Rebates for Clothes Dryers (2009$)

Vented

Standard

Electric Vented Gas

B/C Ratio W ith out Rebate 1.8 1.2

Rebate Amount $ 31 $91

B/C Ratio W ith Rebate I nf

. I nf

.

Calculated Market Barrier C urve Low

- Moderate No

- Low
Inf. = infinite B/C ratio, which occurs when the rebate pays the full incremental cost.

DOE used the B/C ratios along with the penetration curve s such as those shown in Figures 17.3.1 and 17.3.2 to estimate the percentage of consumers who would purchase clothes dryer s that meet the target levels both with and without a rebate incentive.

Figure 17.3.1 Market Penetration Curve for Vented Standard

Electric Dryers17

- 11 Figure 17.3.2 Market Penetration Curve for Vented Gas Dryers

The curve calculated b y DOE to represent the market behavior for vented standard electric clothes dryers was between the low and moderate barriers penetration curves. F or vented

gas clothes dryers the curve was between the no barriers and low barriers penetration curve.

For each product class, DOE next estimated the percent increase represented by the change in penetration rate shown on the penetration curve. It then added that percent increase to

t he market share of units that meet the target level in the base case to obtain the market share of units that meet the target level in the rebate case. Table 17.3.2 summarizes the market shares of clothes dryers in 2014. DOE used the resulting increase s in market shares as inputs t o represent the policy case scenarios in its NIA -RIA model. Appendix 17-A, section 17-A.4, shows the annual market share increases due to this policy. Section 17.4 presents the resulting efficiency trends for the policy case of consumer rebates for clothes dryers17

- 12 Table 17.3.2 Market Penetrations in 2014 W ith out and W ith Rebates for Clothes

D ryers
Vented

Electric

Standard

% Vented

Gas %

Base

- Case Market Share of Units that Meet Target Levels 25 41 Market Share of Units that Meet Target

Levels With Rebate s 76 92

Increased Market Share of Units that Meet Target Level With Rebate s 51 51

17.3.2.2 Room Air Conditioners

For room air conditioners , DOE estimated the effect of increasing the B/C ratio via a

rebate that would pay part or all of the increased installed cost of a unit that met the target efficiency level compared to the cost of a unit meeting the baseline level . DOE based the rebate

amounts on a large sample of utility and agency rebate programs for room air conditioners.

DOE gathered data on 62 rebate programs provided by 61 utilities or agencies in various

States . (Appendix 17-A, section 17- A.5 , identifies the rebate programs.) To repre sent the rebate

level for room air conditioners, DOE used t he simple average of the rebate amounts in these 62

programs. DOE assumed that t his average amount would apply to models at all efficiency levels at or above the target level for each representative product class. For each of these effic iency levels, the rebate amount represented a certain percent of the increase in total installed cost

. Since nearly all of the utility/agency rebates were for room air conditioners at the ENERGY STAR level, while the proposed standard levels for room air conditioners were set at a higher efficiency level, DOE sought data on rebates requiring levels higher than ENERGY STAR to

determine w hether to adjust this average rebate level amount. Most of the SEEARP room air

conditioner rebates were also for the ENE RG Y STAR efficiency level , but one rebate was for the

CEE Tier 1 level

. DOE adjust ed the rebate amount by the ratio of the rebate amount for the higher efficiency level to the average of the rebate amounts for the ENERGY STAR level.

DOE assumed that rebat es would remain in effect until the market had been transformed; that is, the shift in market share of efficient units seen in the first year of the rebate program would be maintained throughout the forecast period (2014–2043 ).

For room air conditioners, DOE first calculated B/C ratio s without a rebate using the difference in lifetime operating costs and total installed costs between the unit meeting the target

level and the baseline unit. It then calculated B/C ratio s given a rebate for the unit meetin g the target efficiency

. Because the rebate reduced the incremental cost, the unit receiving the rebate had a larger B/C ratio. Table 17.3.3 shows the effects of consumer rebates on B/C ratios for the two largest product classes of room air conditioners. Each B/C ratio value for units with rebates17

- 13 represent s a weighted average f of the values for the efficiency levels at or above the target level to which the rebate would apply.

f The weighting factor is the 2014 base case market share of each of the corresponding efficiency levels.17

- 14 Table 17.3.3 Benefit/Cost Ratios Without and W ith Rebates for Room Air

Conditioners

Grou p 1 (PC1) Group 2 (PC3)

B/C Ratio W ithout Rebate 2 6.3 41.0

Rebate Amount $65 $65

B/C Ratio W ith Rebate Inf. Inf.

Calculated Market Barrier C urve Extremely High Extremely High
Inf. = infinite B/C ratio, which occurs when the rebate pays the full incremental cost.

DOE used the se B/C ratios , along with the penetration curves such as those shown in Figures 17.3.3 and 17.3.4 to estimate the percentage of consumers who would purchase room air

conditioners that meet the target efficiency level both with and without a rebate incentive. The

curve calculated by DOE to represent the market behavior for product class 1 (Group 1) product and class 3 (Group 2) was closest to the extremely high barriers curve.

Figure 17.3.3 Market Penetration Curve for Room Air Conditioners, Less than 6,000 Btu/h, with Louvers 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Penetration Rate

Benefit

- Cost Ratio

High Estimated xHigh No Rebate With Rebate17

- 15 Figure 17.3.4 Market Penetration Curve for Room Air Conditioners, 28,000-13,999 Btu/h, with Louvers

For each product class, DOE next estimated the percent increase represented by the change in penetration rate shown on the penetration curve. It then added that percent increase to the market share of units that meet the target level in the base case to obtain the market share of

units that meet the ta rget level in the rebate case. Table 17.3.4 summarizes market shares of

target

- level room air conditioners estimated for 2014. DOE used the resulting increased market shares attributable to the rebate policy as inputs to the NIA-RIA model. Appendix 17- A, s ection 17-A.4, shows the annual market share increases due to this policy. Section 17.4 presents the resulting efficiency trends for the policy case of consumer rebates for room air conditioners. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 10 20 30 40 50 60 70 80 90 100Penetration Rate

Benefit

- Cost Ratio

High Estimated xHigh No Rebate With Rebate17

- 16 Table 17.3.4 Market Penetration in 2014 Without and W ith Rebates for Roo m Air

Conditioners

PC 1 ( Group 1 ) PC 3 (Group 2)

% %

Base

- Case Market Share of Units that Meet Target Levels 1.2 2.2

Market Share of Units that Meet Target Levels With Rebate s 2.6 3.4

Increased Market Share of Units that Meet Target Level With Rebate s 1.4 1.217

- 17 Table 17.3.5

17.3.3 Consumer Tax Credits

DOE estimated the effects of tax credits on consumer purchases based on its previous analysis of consumer participation in tax credits. DOE supported its approach using data from Oregon State’s tax credit program for energy efficient appliances. DOE also incorporated previous research that disaggregated the effe ct of rebates and tax credits into a direct price effect

, which deriv es from the savings in purchase price

, and an announcement effect , which is independent of the amount of the incentive. 11 , 1 2 The announcement effect derives from the credibility that a technology receives from being included in an incentive progr am, as well as changes in product marketing and modifications in markup and pricing. DOE assumed that the rebate and consumer tax credit policies would encompass both dire ct price effect s and

announcement effect s, and that half the increase in market penet ration associated with either policy would be due to the direct price effect and half to the announcement effect.

In estimat ing the effects of a tax credit on purchases of consumer products that meet new efficiency standards, DOE assumed the amount of the tax credits for each product class would be

the same as the corresponding rebate amounts discussed above.

DOE estimated that fewer consumers would participate in a tax credit program than would take advantage of a rebate. Research has shown that the delay required for a consumer to receive a tax credit, plus the added time and cost in preparing the tax return, make a tax credit incentive less effective than a rebate received at the time of purchase. Based on previous analyses, DOE assumed that only 60 percent of the consumers who would take advantage of a rebate would take advantage of a tax credit. 13

In preparing its assumptions, DOE also reviewed other tax credit programs that have been offered at both the Federal and State levels for energy efficient appliances.

The Energy Policy Act of 2005 (EPACT 2005) included Federal tax c redits for consumers who purchase energy efficient equipment, including water heaters, furnaces, and

furnace fans for new or existing homes. 14 Those tax credits were in effect in 2006 and 2007, expired in 2008, and were reinstated for 2009–2010 by ARRA. 1 , 15 DOE reviewed Internal

Revenue Service data on the numbers of taxpayers who claimed the tax credits during tax years

2006 and 2007. DOE also reviewed data from an earlier Federal energy conservation tax credit

pro gram in place in the 1980s. However, DOE did not find data specific enough to refrigerators to warrant adjusting its analysis method for the Consumer Tax Credits policy case. Appendix 17- A, section 17- A.6 .1, contains more information on Federal consumer tax credits.

DOE also reviewed its previous analysis on Oregon’s tax credits for clothes washers to provide support for its assumptions. 16 In the previous an alysis, DOE compared the market shares

of ultra -high efficiency (UHE) residential clothes washers in Oregon, which offered both State tax credits and utility rebates, with those in Washington State, which offered only utility rebates during the same period. Based on this analysis, DOE estimated that in Oregon the impact of tax17

- 18 credits was 62 percent of the impact of rebates for UHE clothes washers having equivalent efficiency. This finding supports its original assumption that participation in a tax credit program would be about 60 percent of participation in a rebate program. Additional discussion of State

tax credits for Oregon and other states is in Appendix 17-A, section 17- A.6 .3.

DOE applied the assumed 60 percent participation described above to the penetration rates estimated for the rebate policy to estimate penetration rates attributable to consumer tax credits. In doing so, DOE incorporated the assumptions for consumer response to financial incentives from the penetration curves selected for each product class.

Table s 17.3.5 and 17.3.6 summarize DOE’s assumptions for clothes dryers and room air

conditioners r egarding the market penetration of units in 2014 tha t meet target efficiency levels given a consumer tax credit.17

- 19 Table 17.3.6 Market Penetrations in 2014 Attributable to Consumer Tax Credits for Clothes Dryers

Vented

Electric

Standard

% Vented Gas

%

Base

- Case Market Share of Units that Meet Target Levels 25 41 Market Share of Units that Meet Target

Levels With Consumer Tax Credits 56 72

Increased Market Share of Units that Meet Target Level With Consumer Tax Credits 30 3117

- 20 Table 17.3.7 Market Penetrations in 2014 Attributable to Consumer Tax Credits for

Room Air Conditioners

PC 1 ( Group 1 )

% PC 3 ( Group 2 )

%

Base

- Case Market Share of Units that Meet Target Levels 1.2 2.2 Market Share of Units that Meet Target

Levels With Consumer Tax Credits 2.0 2.9

Increased Market Share of Units that Meet Target Level With Consumer Tax Credits 0.8 0.7

DOE assumed that this policy would transform the market permanently, so that the

increase in market share seen in the first year of the program for room air conditioners would be maintained throughout the forecast period. The increased market shares attributable to consumer tax credit s shown in Table s 17.3.5 and 17.3.6 were used as inputs to the NIA

- RIA model. Appendix 17-A, section 17-A.4, shows the annual market share increases due to this policy.

Section 17.4 presents the resulting efficiency trends for the policy case of consumer tax credits

for clothes dryers and room air conditioners that meet target efficiency levels

.

17.3.4 Manufacturer Tax Credits

To analyze the potential effects of a policy that offers tax credits to manufacturers that produce refrigeration products that meet target efficiency levels, DOE assumed that a manufacturer tax credit would lower the consumer’s purchase cost by an amount equivalent to that provided by the consumer rebates or tax credits described above. DOE further assumed that

manufacturers would pass on some of their reduced costs to consumers, causing a direct price effect. DOE assumed that no announcement effect would occur, because the program would not

be visible to consumers. g Because the direct price effect is approximately equivalent to the

announcement effect

, 11 DOE estimated that a manufacturer tax credit would induce half the number of consumers assumed to take advantage of a consumer tax credit to purchase more efficient products. This assumed participation rate is equal to 30 percent of the number of consumers who would participate in a rebate program.

DOE attempted to in vestigate manufacturer response to the Energy Efficient Appliance Credits for manufacturers mandated by EPACT 2005. 17 Those manufacturer tax credits were in

ef

fect for models produced in 2006 and 2007 and reinstated for 2009 and 2010. DOE was unable to locate data from the Internal Revenue Service or other sources on manufacturer response to the Federal credits. Appendix 17-A, section 17- A.6 .2, presents details on Federal manufacturer

tax credits.

g Note that this is a conservative assumption, since it is possible that manufacturers or utility/agency efficiency programs might promote the models for which manufacturers increase production due to the tax credits, which in turn might induce some announcement effect. However, DOE found no data on such programs on which to base an estimate of the magnitude of this possible announcement effect on consumer behavior.17

- 21 DOE applied the assumption of 30 percent participation to the penetration rates predicted for the rebate policy to estimate the effects of a manufacturer tax credit policy. In doing so, the Department incorporated the assumptions for consumer response to financial incentives from the penetration curves selected for each product class.

Table s 17.3.7 and 17.3.8 summarize DOE’s assumptions for clothes dryers an d room air

conditioners regarding the market penetration of units in 2014 meeting target efficiency levels given a manufacturer tax credit.17

- 22 Table 17.3.8 Market Penetrations in 2014 Attributable to Manufacturer Tax Credits for Clothes Dryers

Vented

Electric

Standard % Vented Gas %

Base

- Case Market Share of Units that Meet Target Levels 25 41 Market Share of Units that Meet Target

Levels With Manufacturer Tax Credits 40 56

Increased Market Share of Units that Meet Target Level With Manufacturer Tax Credits 1 5 1517

- 23 Table 17.3.9 Market Penetrations in 2014 Attributable to Manufacturer Tax Credits

for Room Air Conditioners

PC 1 ( Group 1 )

% PC 3 ( Group 2 )

%

Base

- Case Market Share of Units that Meet Target Levels 1.2 2.2 Market Share of Units that Meet Target

Levels With Manufacturer Tax Credits 1.6 2.6

Increased Market Share of Units that Meet Target Level With Manufacturer Tax

Credits 0.4 0.4

DOE assumed that this policy would transform the market permanently, so that the increase in market share seen in the first year of the program for clothes drye rs or room air conditioners would be maintained throughout the forecast period. The increased market shares

attributab le to a manufacturer tax credit shown in Tables 17.3.7 and 17.3.8 were used as inputs to

the NIA

- RIA model. Appendix 17-A, section 17-A.4, shows the annual market share increases due to this policy. Section 17.4 presents the resulting efficiency trends for the policy case of

manufacturer tax credits for clothes dryers and room air conditioners.

17.3.5 Voluntary Energy Efficiency Targets

For each product, DOE assumed that voluntary energy efficiency targets would be achieved as manufacturers gradually stopped producing units that operated below the target efficiency levels. DOE assumed that the impetus for phasing out production of low- efficiency units would be a program similar to the ENERGY STAR labeling program conducted by the Environmental Protection Agency (EPA) and DOE. The ENERGY STAR program specifie s the minimum energy efficienc ies that various products, including room air conditioners, must have

to receive the ENERGY STAR label . ENERGY STAR encourages consumers to purchase efficient products via marketing that promotes consumer label recognition, various inc entive programs that adopt the ENERGY STAR specifications, and manufacturers’ promotion of their qualifying appliances. ENERGY STAR projects market penetration of compliant appliances and estimates the percentage of sales of compliant appliances that are a ttributable to the ENERGY STAR program.

Researchers have analyzed the ENERGY STAR program’s effects on sales of several consumer products. Program efforts generally involve a combination of information dissemination and utility or agency rebates. The a nalyses have been based on State

- specific data

on percentages of shipments of various appliances that meet ENERGY STAR specifications. The analyses generally have concluded that the market penetration of ENERGY STAR

- qualifying appliances is higher in regions or States where ancillary promotional programs have been

active. 18

, 19

, 2017

- 24 17.3.5.1 Clothes Dryers

Since there is no ENERGY STAR program for clothes dryers, DOE instead based its estimates of market penetration for clothes dryers on the ENERGY STAR projections for

residential clothes washers as an analogous product. DOE estimated the percentage of market shares attributable to the existing ENERGY STAR program for clothes washers for 1996 –

2025. 21 DOE then assumed that an ENERGY STAR program for clothes dryers would pro duce the same pattern s of annual increases in ma rket penetration beginning in 2014. From this forecast

DOE calculated the annual percent increases in market share for units represented by the shipments attributed to ENERGY STAR

. DOE added those percent increases to the market

share s of clothes dryers that me t the target level s in the RIA base case , starting in 2014, to obtain

the annual market share s of units meeting the target efficiency level in the voluntary efficiency

targets case

.

DOE estimated that the programs developed in support of the voluntary efficiency targets policy would increase market shares of ef ficient units . Appendix 17-A, section 17-A.4, shows the annual market share increases due to this policy. Section 17.4 present s the resulting efficiency trends for the policy case of voluntary energy efficiency targets for clothes dryers that meet target efficiency levels.

17.3.5.2 Room Air Conditioners

To model the effe cts of a voluntary energy efficiency policy for room air conditioners,

DOE assumed that such a program would be an expansion of existing ENERGY STAR efforts for this product. The ENERGY STAR program developed projections for 1996–2025 of increased market penetration attributable to its program for room air conditioners. 21 DOE estimated that an expanded ENERGY STAR program would increase the annual market share of efficient units by 50 percent more than the increase that was attributable to the existing ENERGY STAR program for room air conditioners, which began in 1996. Using ENERGY

STAR’s forecast for 1996 – 2025, DOE first performed interpolation to smooth out fluctuations due to periodic program specification updates. From this adjusted for ecast, DOE calculated the annual percent increases in market share for room air conditioners represented by an additional 50 percent market share that would result from an enhanced program. DOE added those percent

increases to the market share s of room air conditioners that meet the target level in the RIA base

case
, h

h The base case projections for refrigeration products incorporate assumptions on the percentage of qualifying shipments under the current ENERGY STAR program. starting in 2014, to obtain the annual market shares of units meeting the target efficiency level in the voluntary efficiency targets policy case. DOE assumed that the programs resulting

from th e expanded voluntary efficiency targets policy would produce projected increases in

market share . Appendix 17-A, section 17-A.4, shows the annual market share increases due to this policy. Section 17.4 presents the resulting efficiency trends for the policy case of voluntary energy efficiency targets for room air conditioners.17

- 25 17.3.6 Early Replacement

The non- regulatory policy of early replacement refers to a program to replace res idential appliances before the ends of their useful lives. The purpose of such a policy is to replace old, inefficient units with higher efficiency units. The economic feasibility of early replacement depends on the vintage of the unit being replaced, the installed cost of the new unit, and the energy cost savings.

DOE reviewed analysis of the Connecticut Retirement Program (ARP) , which was conducted June through December 2004 by Nexus Market Research, Inc., and RLW Analytics, Inc., for Northeast Utilit ies –Connecticut Light and Power and the United Illuminating Company’s State programs. 25 The purpose of the ARP was to he lp Connecticut utility customers overcome barriers to recycling room air conditioners (RACs), secondary refrigerators, and freezers. The program picked up used appliances at customers’ homes or at turn-in events, paid participants to retire their units, an d educated customers about the costs of operating older appliances. In addition, the program provided consumers with financial incentives to replace

inefficient RACs with ENERGY STAR -qualified units. DOE considered the RAC program to most closely resemble the early replacement policy scenario for clothes dryers considered herein. Nexus/RLW used program data and surveys to estimate the number of RACs retired by ARP participants, the percentage of retired units that were replaced with an ENERGY STAR model,

an d the number of RACs replaced by non-participants during the program. According to the Nexus/RLW analysis, about 7 percent of all RACs retired during the program were retired through the ARP, and 63 percent of those were replaced with ENERGY STAR models. Thus the program resulted directly in about 4 percent of total eligible RAC consumers deciding on early replacement of inefficient units.

In 2006, GDS Associates, Inc performed a study of the potentials for electric energy efficiency for the State of Vermont. 26 The report estimated the potentials for reducing electricity

use and peak demand through energy efficiency and fuel conversion measures. The study took an aggressive, multi-program approach, one aspect of which was early replacement of appliance s. GDS considered that under the program residential appliances, including RACs, would be replaced during four years ( 2006–2009). GDS estimated a chievable market penetrations assuming that consumers would receive a financial incentive equal to 50 percent o f

the incremental cost of each measure. GDS assumed an 80 percent penetration limit. For early replacement of RACs, GDS estimated a maximum achievable participation of 5 percent of eligible single

- family or multi -family homes in the year before the program began (2005).

DOE also reviewed an earlier study it conducted in the 1990s, under Energy Policy Act of 1992 (EPACT 1992), which analyzed the feasibility of a Federal program to promote early replacement of appliances. 27 Th e study identified policy options for early replacement that included a direct national program; replacement of Federally -owned appl iances; and promotion17

- 26 through equipment manufacturers, consumer incentives, incentives to utilities, and building regulations. i

While the SEEARP rebate program has been an early replacement program, the program was still in process during the preparation of this TSD. The amount of money available for rebates for each State, apportioned between several appliances per State, may not have been adequate to demonstrate the full market potential of an early replacement program targeted at one appliance.

For this RIA analysis, DOE analyzed a program that would target installed units having efficiency levels that are lower than target level s and encourage their early replacement with products that perform at target level s. For each product, DOE modeled th e effects of the early replacement policy by increasing by a certain percent age per year the retirement rate of units that

were in the stock in the first year of the analysis period (2014). For clothes dryers and room air

conditioners DOE used the 4 percent rate from the Connecticut ARP program report, because it

dealt with room air conditioners.

DOE assumed that the early replacement program would continue until it had facilitated the replacement of all eligible clothes dryers and room air conditioners in the stock in the year the program began (2014 ). Shipments of new units in 2014 and beyond were not affected by the program, but remained at base

- case efficiency levels. After the stock of inefficient units was completely replaced, the policy would produce no additional impacts.

An early replacement policy would create a fairly immediate jump in shipments of products that meet targ et efficiency levels relative to the base case, as shown in Figures 17.3.5

and 17.3.6 . High -efficiency units would be brought quickly into the stock, leading to an immediate gain in the market share of efficient units compared to the base case. As opposed to the policy cases discussed previously, however, an early replacement policy results in market shares of efficient units returning to base- case percentages as the eligible market is depleted. In addition, as the figures illustrate, because units removed early from the stock would have been replaced later (at the ends of their useful lives) without the program, the number of shipments in later years drops slightly below the base

- case shipments forecast for a period of years . The shipments shown in Figures 17.3.5 and 17.3.6 represent units that replace existing units (replacement shipments). Appendix 17-A, section 17-A.4, shows the annual market share increases due to this policy. Section 17.4 presents the resulting efficiency trends for the policy case of early replacement for clothes dryers and room air conditioners.

i The analysis concluded that, although cost

- effective opportunities for early replacement exist, a widespread Federal

program was not justified economically. Because early retirement means that a unit may be replaced by an appliance less efficient than the eventual replacement would have been, energy savings would be less than anticipated. Early replacement programs also could increase long

- term sales volatility by encouraging a temporary increase in production

, followed by a lull in demand. Early replacement could be economical in localities subject to high energy costs or environmental constraints ; when replacement appliances are much more efficient than existing

stock ; or when a major technology breakthrough has occurred, creating the need for a ready market.17

- 27 Figure 17.3.5 Estimated Replacement Shipments of Clothes Dryers

W ith and Without an Early Replacement Program 0.000 2.000 4.000 6.000 8.000 10.000 12.000201020122014201620182020202220242026202820302032203420362038204020422044

Base Case Early Replacement17

- 28 Figure 17.3.6 Estimated Replacement Shipments of Room Air

Conditioners With and Without an Early Replacement Program

17.3.7 Bulk Government Purchases

DOE assumed that a policy requiring bulk government purchases would lead to Federal, State, and local governments purchasing products that meet target efficiency le vels. Combining

the market demands of multiple public sectors also would provide a market signal to manufacturers and vendors that some of their largest customers seek products that meet an efficiency target at favorable prices. Such a program also could i nduce “market pull,” whereby manufacturers and vendors would achieve economies of scale for high-efficiency products.

Most of the previous bulk government purchase (procurement) initiatives at the Federal, State, and municipal levels have not tracked data on number of purchases or degree of compliance with procurement specifications. In many cases, procurement programs are decentralized, being part of larger State or regional initiatives. DOE based its assumptions regarding the effects of a policy calli ng for bulk government purchases on studies the Federal Energy Management Program (FEMP) performed regarding the savings potential of its procurement specifications for appliances and other equipment. FEMP, however, does not track 

### 0.000 2.000 4.000 6.000 8.000 10.000 12.00020102012201420162018202020222024202620282030203220342036203820402042



### Base Case Early Replacement17

- 29 purchasing data, because of the range of complex the purchasing systems, number of vendors, etc. States, counties, and municipalities have demonstrated increasing interest and activity in “green purchasing." Although many of the programs target office equipment, the growing

infras tructure for developing and applying efficient purchasing specifications indicates that bulk government purchase programs are feasible. 28

, 29

DOE assumed that government agencies, such as the Department of Housing and Urban Development, would administer a bulk purchasing program for refrigeration products. The bulk purchasing pol icy also could be incorporated at the Federal level into the FEMP program, which has established procurement guidelines. Federal construction requirements include the FEMP guidelines for installing or replacing equipment. The FEMP program currently has procurement guidelines in place for room air conditioners. 30

DOE also reviewed its own previous research on the potential for market transformation through bulk government purchases. Its major study analyzed several scenarios based on the assumption that 20 percent of Federal equipment purchas es in the year 2000 already incorporated energy efficiency requirements based on FEMP guidelines. One scenario in the DOE report showed energy effic ient Federal purchasing ram ping up during 10 years from 20 percent to 80 percent of all Federal purchases. 31

17.3.7.1 Clothes Dryers

Based on its study described above, DOE estimated that a bulk government purchase program instituted within a 10 -year period would result in at least 80 percent of governmentpurchased clothes dryers meeting target efficiency levels.

DOE assumed that bulk government purchases would affect a subset of housing unit s for which government agencies purchased or influenced the purchase of clothes dryers. This subset

would consist primari ly of public housing and housing on military bases. DOE defined this subset based on publicly owned hous ing identified in the American Housing Survey (AHS) for
2009, which was 1.8 million households, or about 1.4 percent of all U.S. households. 32 (T he

AHS reports 130.0 million U.S. households. 33 ) According to the 2005 Residential Energy Consumption Survey ( RECS 2 005), 20.8 percent of publicly owned households had electric clothes dryers and 23.4 percent had gas dryers

. 34 DOE therefore estimated that 0.3 percent of U.S. housing units represent publicly owned households using electric clothes dryers and 0.3 percent using gas clothes dryers; these constitute the populations to which this policy would apply.

DOE estimated that each year of a bulk government purchase policy (2014 ) an increasing percent of shipments of government-purchased clothes dryer s beyond t he base case would meet target efficiency levels. DOE estimated that by 2024 bulk government purchasing programs would result in 80 percent of the clothes dryer market for publicly owned housing meeting target17

- 30 levels. j

17.3.7.2 Room Air Conditioners DOE modeled the bulk government purchase program a ssuming that the market share for each product achieved in 2024 would be maintained throughout the rest of the forecast period.

Section 17.4 presents the resulting efficiency trends for the policy case of bulk government purchase of clothes dryers.

DOE analyzed the market for room air conditioners and determined that compact refrigerators are sold to the residential and commercial sectors. However, DOE did not analyze the potential impacts of bulk government purchases on commercial s ector room air conditioners

because it assumed that the penetration of this product in publicly owned buildings was very small. DOE lacked data to estimate their percentages in publicly owned commercial buildings.

Based on its study described above, DOE estimated that a bulk government purchase program instituted within a 10 -year period eventually would result in at least 80 percent of

government- purchased room air conditioners meeting target efficiency levels.

For the residential sector, DOE assumed that bulk government purchases would affect a subset of housing units for which government agencies purcha se d or influenced the purchase of

compact refrigerators . DOE defined this subset based on publicly owned housing identified in the American Housing Survey (AHS) for 2009, which was 1.8 million households, or about 1.4 percent of all U.S. households. 32 (T he AHS reports 130.0 million U.S. households. 33 ) According

to the 2005 Residential Energy Consumption Survey (RECS 2005), 38.4 percent of publicly

owned households used room air conditioners. 34 DOE therefore estimated that 0.5 percent of U.S. housing units represent publicly owned households using room air conditioners, to which this policy would apply.

DOE estimated that by 2024 bulk government purchasing programs would result in 80 -

100 percent of the room air conditioner market for publicly owned buildings meeting target levels. DOE modeled the bulk government purchase program assuming that the market share for each product achieved in 2024 would be maintained throughout the rest of the forecast period.

Section 17.4 presents the resulting efficiency trends for the policy case of bulk government purchase of room air conditioners.

17.4 IMPACT S OF NON

- REGULATORY ALTERNATI VE S

This section presents graphs of the projected annual market shares of units meeting the target levels that result from the non -regulatory policies for each product class of for clothes dryers and room air conditioners analyzed in the RIA- NI A integrated model. It also presents the

tables of the national energy savings and net present value (NPV) for each of the six nonregulatory polic ies analyzed.

j For some product classes where the market share in the base case was already above 80%, the estimated 10

- year market penetration was set at 90% or 100%.17

- 31 17.4.1 Clothes Dryers

Figure s 17.4.1 through 17.4.6 show the effects of each non -regulatory policy on market penetration for clothes dryers. Note that the market share of products that meet the target level is

forecasted to remain constant in the base case (i.e., the case with neither standards nor nonregulatory policies ). Note that for product classes whose base case market shares are 100 percent, the non-regulatory policies have no impact and therefore their projections are identical to the base case. For the other product classes whose base case market shares are less than 100 percent, relative to the base case, the policy cases increase the market share of room air conditioners that meet the target level. Consumer rebates are most effective in increasing the market share of clothes dryer s that meet the target level, while bulk government purch ases are least effective in increasing market share

. Recall that the standards (not shown in the figures) would result in a 100 percent market penetration of products that meet target efficiency levels.

Figure 17.4.1 Market Penetration of Vented Electric Standard Clothes Dryers Meeting Target Level in Policy Cases 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 32 Figure 17.4.2 Market Penetration of Vented Electric Compact 120V Clothes Dryers Meeting Target Level in Policy

Cases

Figure 17.4.3 Market Penetration of Vented Electric Compact

240 V Clothes Dryers Meeting Target Level in Policy

Cases 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 33 Figure 17.4.4 Market Penetration of Vented Gas Clothes Dryers Meeting Target Level in Policy Cases

Figure 17.4.5 Market Penetration of Vent

- less Electric C ompact 240V Clothes Dryers Meeting Target Level in Policy

Cases 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 34 Figure 17.4.6 Market Penetration of Vent

- less Electric Combination Washer/Dryer Meeting Target Level in Policy Cases

Tables 17.4.1 through 17.4.6 show the national energy savings and net present value (NPV) for each of the six non-regulatory polic ies analyzed in detail for clothes dryers, where the target level for each policy equal s the efficiency level in the corresponding proposed standard.

The cases in which no regulatory action is taken with regard to clothes dryers constitute

the base case s (or "No New Regulatory Action" scenarios ), in which energy savings and NPV zero by definition. For comparison, the tables include the impacts of the proposed standards. Energy savings are given in quadrillion British thermal units (quads). The NPV s shown in Tables 17.4.1 through 17.4.12 are based on two discount rates, 7 percent and 3 percent

. Negative NPVs are shown in parentheses. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 35 Table 17.4.1 Impacts of Non- Regulatory Alternatives for Vented Electric Standard Dryers t hat Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 200 9 $

3% discount

rate

Consumer Rebates 0.287 0.320 1.426

Consumer Tax Credits 0.173 0.193 0.859

Manufacturer Tax Credits 0.087 0.097 0.431
Voluntary Energy Efficiency Targets 0.050 0.161 0.442
Early Replacement 0.004 0.014 0.026

Bulk Government Purchases 0.001 0.002 0.006
Proposed Standards 0.347 1.017 2.779

* For products shipped in 2014 ─ 204317

- 36 Table 17.4.2 Impacts of Non- Regulatory Alternatives for Vented Electric Compact

120V Dryers that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 200 9 $

3% discount

rate

Consumer Rebates 0.000 0.000 0.000

Consumer Tax Credits 0.000 0.000 0.000

Manufacturer Tax Credits 0.000 0.000 0.000
Voluntary Energy Efficiency Targets 0.000 0.000 0.001
Early Replacement 0.000 0.000 0.000

Bulk Government Purchases 0.000 0.000 0.000
Proposed Standards 0.000 0.002 0.005

* For products shipped in 2014 ─ 204317

- 37 Table 17.4.3 Impacts of Non- Regulatory Alternatives for Vented Electric Compact

240V Dryers that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

Quads 7% discount

rate billion 200 9 $

3% discount

rate

Consumer Rebates 0.001 (0.002) 0.001

Consumer Tax Credits 0.001 (0.001) 0.001

Manufacturer Tax Credits 0.000 (0.001) 0.000
Voluntary Energy Efficiency Targets 0.000 0.001 0.003
Early Replacement 0.000 0.000 0.000

Bulk Government Purchases 0.000 0.000 0.000
Proposed Standards 0.001 0.006 0.014

* For products shipped in 2014 ─ 204317

- 38 Table 17.4.4 Impacts of Non- Regulatory Alternatives for Vented Gas Dryers that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 200 9 $

3% discount

rate

Consumer Rebates 0.040 (0.126) (0.074)

Consumer Tax Credits 0.024 (0.076) (0.045)

Manufacturer Tax Credits 0.012 (0.038) (0.022)
Voluntary Energy Efficiency Targets 0.007 0.014 0.049
Early Replacement 0.000 0.003 0.005

Bulk Government Purchases 0.000 0.000 0.001
Proposed Standards 0.038 0.051 0.215

* For products shipped in 2014 ─ 204317

- 39 Table 17.4.5 Impacts of Non- Regulatory Alternatives for Vent

- less Electric Compact

240V Dryers that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 200 9 $

3% discount

rate

Consumer Rebates 0.000 0.000 0.000

Consumer Tax Credits 0.000 0.000 0.000

Manufacturer Tax Credits 0.000 0.000 0.000
Voluntary Energy Efficiency Targets 0.000 0.000 0.000
Early Replacement 0.000 0.000 0.000

Bulk Government Purchases 0.000 0.000 0.000
Proposed Standards 0.000 0.000 0.000

* For products shipped in 2014 ─ 204317

- 40 Table 17.4.6 Impacts of Non- Regulatory Alternatives for Vent

- less Electric Combination Washer/Dryer Dryers that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 200 9 $

3% discount

rate

Consumer Rebates 0.000 0.000 0.000

Consumer Tax Credits 0.000 0.000 0.000

Manufacturer Tax Credits 0.000 0.000 0.000
Voluntary Energy Efficiency Targets 0.000 0.000 0.000
Early Replacement 0.000 0.000 0.000

Bulk Government Purchases 0.000 0.000 0.000
Proposed Standards 0.000 0.000 0.000

* For products shipped in 2014 ─ 2043

17.4.2 Room Air Conditioners

Figure s 17.4.7 through 17.4.12 show the effects of each non -regulatory policy on market penetration for residential sector room air conditioners ; these results do not include room air

conditioners used in the commercial secto r. The market share of products that meet the target

level in the base case is forecasted to be constant for some product classes and to increase over

time for some product classes. Note that for product classes whose base case market shares are 100 percent, the non-regulatory policies have no impact and their projections are identical to the base case. For the other product classes whose base case market shares are less than 100 percent,

r elative to the base case, the policy cases increase the market share of room air conditioners that meet the target level. Of those policy cases, c onsumer rebates produce the greatest market share

increases and bulk government purchases result in the least market share increases

. Recall that

the proposed standards (not shown in the figures ) would result in a 100 percent market penetration of products that meet the target efficiency level.17

- 41 Figure 17.4.7 Market Penetration of Room Air Conditioners Less than 6,000 Btu/h, with Louvers

, Meeting Target

Level in Policy Cases

Figure 17.4.8 Market Penetration of Room Air Conditioners 8,000- 13,999 Btu/h, with Louvers, Meeting Target Level in Policy Cases 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 42 Figure 17.4.9 Market Penetration of Room Air Conditioners 20,000-24,999 Btu/h, with Louvers

, Meeting Target

Level in Policy Cases

Figure 17.4.10 Market Penetration of Room Air Conditioners 25,000 Btu/h or more, with Louvers, Meeting Target Level in Policy Cases 75.0% 80.0% 85.0% 90.0% 95.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case

80.0% 82.0% 84.0% 86.0% 88.0% 90.0% 92.0% 94.0% 96.0% 98.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 43 Figure 17.4.11 Market Penetration of Room Air Conditioners 8,000- 10,999 Btu/h, without Louvers Meeting Target L evel in Policy Cases

Figure 17.4.12 Market Penetration of Room Air Conditioners 11,000-13,999 Btu/h, without Louvers Meeting Target Level in Policy Cases

Tables 17.4.7 through 17.4.12 show the national energy savings and net present value (NPV) for each of the six non-regulatory polic ies analyzed in detail for room air conditioners, 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043 Consumer Rebate

Consumer Tax Credit

Manufacturer Tax Credit

Voluntary Efficiency Targets

Early Replacement

Bulk Purchasing

Base Case17

- 44 where the target level for each policy equal s the efficiency level in the corresponding proposed

standar d. The results shown in Tables 17.4.7 through 17.4.12 represent savings and NPV for room air conditioners used in the residential sector only.

The cases in which no regulatory action is taken with regard to room air conditioners

constitute the base case s (or "No New Regulatory Action" scenarios), in which energy savings and NPV zero by definition. For comparison, the tables include the impacts of the proposed

standard s. Energy savings are given in quadrillion British thermal units (quads). The NPV s shown in Tables 17.4.7 through 17.4.12 are based on two discount rates, 7 percent and 3 percent. Negative NPVs are shown in parentheses.17

- 45 Table 17.4.7 Impacts of Non -Regulatory Alternatives for Room Air Conditioners Group 1 - Less than 6,000 Btu/h, with Louvers, t hat Meet the Proposed

Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 2009$

3% discount

rate

Consumer Rebates 0.055 ( 0.064 ) 1.000

Consumer Tax Credits 0.033 ( 0.038 ) 0.001

Manufacturer Tax Credits 0.017 ( 0.019 ) 0.001

Voluntary Energy Efficiency Targets 0.016 ( 0.019 ) 0.000

Early Replacement 0.002 ( 0.002 ) 0.000

Bulk Government Purchases 0.000 0.000 0.000

Proposed Standards 0.133 ( 0.203 ) ( 0.104 )

* For products shipped in 2014 ─ 204317

- 46 Table 17.4.8 Impacts of Non -Regulatory Alternatives for Room Air Conditioners in Group 2 - based on 8,000-13,999 Btu/h, with Louvers, t hat Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

Q uads 7% discount

rate billion 2009$

3% discount

rate

Consumer Rebates 0.078 ( 0.142 ) ( 0.054 )

Consumer Tax Credits 0.046 ( 0.086 ) ( 0.034 )

Manufacturer Tax Credits 0.023 ( 0.043 ) ( 0.018 )

Voluntary Energy Efficiency Targets 0.014 0.044 0.088

Early Replacement 0.002 0.007 0.012

Bulk Government Purchases 0.000 0.001 0.002

Proposed Standards 0.153 0.365 0.808

* For products shipped in 2014 ─ 204317

- 47 Table 17.4.9 Impacts of Non -Regulatory Alternatives for Room Air Conditioners in Group 3 - based on 20,000-24,999 Btu/h, with Louvers , t hat Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 2009$

3% discount

rate

Consumer Rebates 0.000 ( 0.142 ) 0.000

Consumer Tax Credits 0.000 ( 0.086 ) 0.000

Manufacturer Tax Credits 0.000 ( 0.043 ) 0.000

Voluntary Energy Efficiency Targets 0.000 0.044 0.001

Early Replacement 0.000 0.007 0.000

Bulk Government Purchases 0.000 0.001 0.000

Proposed Standards 0.001 0.365 ( 0.009 )

* For products shipped in 2014 ─ 204317

- 48 Table 17.4.10 Impacts of Non -Regulatory Alternatives for Room Air Conditioners in

Gro up 4 - based on 25,000 Btu/h or more Btu /h, with Louvers , t hat Meet

the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 2009$

3% discount

rate

Consumer Rebates 0.000 0.000 0.000

Consumer Tax Credits 0.000 0.000 0.000

Manufacturer Tax Credits 0.000 0.000 0.000

Voluntary Energy Efficiency Targets 0.000 0.000 0.000

Early Replacement 0.000 0.001 0.001

Bulk Government Purchases 0.000 0.000 0.000

Proposed Standards 0.000 ( 0.002 ) ( 0.003 )

* For products shipped in 2014 ─ 204317

- 49 Table 17.4.11 Impacts of Non -Regulatory Alternatives for Room Air Conditioners in

Gro up 5 - based on 8,000-10,999 Btu/h, without Louvers, that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 2009$

3% discount

rate

Consumer Rebates 0.002 0.001 0.005

Consumer Tax Credits 0.001 0.001 0.003

Manufacturer Tax Credits 0.000 0.000 0.001

Voluntary Energy Efficiency Targets 0.001 0.003 0.005

Early Replacement 0.000 0.000 0.001

Bulk Government Purchases 0.000 0.000 0.000

Proposed Standards 0.006 0.020 0.039

* For products shipped in 2014 ─ 204317

- 50 Table 17.4.12 Impacts of Non -Regulatory Alternatives for Room Air Conditioners in Group 6 - based on 11,000-13,999 Btu/h, without Louvers, that Meet the Proposed Standard (TSL 4)

Policy Alternative Primary Energy Savings Net Present Value*

quads 7% discount

rate billion 2009$

3% discount

rate

Consumer Rebates 0.002 0.005 0.009

Consumer Tax Credits 0.001 0.003 0.005

Manufacturer Tax Credits 0.000 0.001 0.002

Voluntary Energy Efficiency Targets 0.000 0.002 0.003

Early Replacement 0.000 0.000 0.000

Bulk Government Purchases 0.000 0.000 0.000

Proposed Standards 0.004 0.009 0.017

* For products shipped in 2014 ─ 2043

17.5 SUPER

- EFFICIENT VOLUNTARY TARGETS

Besides the above policy alternatives, DOE evaluated a policy where a new voluntary efficiency target program was implemented in addition to the proposed standards. This superefficient voluntary efficiency targets (SEVT) program would feature “super

- efficient” products at one efficiency level ( designated Super- Maxtech) above the current max

- tech levels. The

p olicy would target consumers willi ng to purchase highly efficient equipment, typically located in the highest electricity price regions of the country. For the purpose of evaluating the p olicy

, all product classes were considered. In the case of clothes dryers, the electric Super

- Maxtech models would employ a CO 2 heat pump and the gas models would use full modulating heat . For

room air conditioners, all Super-Maxtech models would use a compressor with 10.4 EER and models from Groups 2 and 3 would have the ir unit size increased. Table s 17.5.1 and 17.5.2 show the targeted efficiency levels and parameters fr om the life

- cycle cost analysis for the SuperMaxtech models for clothes dryers and room air conditioner s. Tables 17.5.3 through 17.5.5

present the consumer benefit/cost ratio s (in 2014) f or such models for each of the nine Census

Divisions. k

k Benefits and costs are estimated for equipment purchased in 2014 and used during their corresponding unit average lifetime (8 years for clothes d ryers and 4 years for room air conditioners)

.17

- 51 Table 17.5.1 Super

- efficient Voluntary Targets Program Parameters for Clothes Dryers

Product ClassElec StandElec Comp120vElec Comp240vGasElec CompVentlessElecWash/Dryer

Efficiency level (lb/kWh) 5.60 5.58 5.05 3.83 4.16 3.81

LCC Parameters

Annual electricity consumption (kWh) 461.6 190.6 214.6 24.9 200.6 215.0

Annual gas consumption (MMBtu)

- - - 2.12

- - Total installed cost (2009$) $1,119 $1,174 $1,174 $809 $1,964 $2,514

Annual maintenance cost (2009$) $0.36 $0.37 $0.37 $0.34 $0.55 $0.6817

- 52 Table 17.5.2 Super

- efficient Voluntary Targets Program Parameters for Room Air

Conditioners

Product ClassGroup 1Group 2Group 3Group 4Group 5Group 6

Efficiency level (CEER) 11.10 10.90 9.40 9.00 9.60 9.50

LCC Parameters

Annual electricity consumption (kWh)

**•** Residential 312.3 493.5 400.0 479.1 405.7 622.5

**•** Commercial 468.6 846.3 2505.9 2580.0 975.2 1200.5

Total installed cost (2009$)

**•** Residential $515.86 $658.36 $1278.85 $1358.37 $660.72 $747.50

**•** Commercial $515.59 $657.22 $1277.70 $1357.17 $659.49 $746.16

Annual maintenance cost (2009$) $0.11 $0.28 $1.26 $1.18 $0.28 $0.2817

- 53 Table 17.5.3 Super

- efficient Voluntary Targets Program Benefit/Cost Ratio s for Clothes Dryers by Census Division

Product ClassElec StandElec Comp120vElec Comp240vGasElec CompVentlessElecWash/Dryer

New England 0.52 0.24 0.27 0.31 0.28 0.38

Middle Atlantic 0.46 0.22 0.24 0.28 0.25 0.33

East North Central 0.32 0.15 0.16 0.22 0.17 0.23

West North Central 0.30 0.14 0.15 0.21 0.16 0.21

South Atlantic 0.34 0.16 0.17 0.27 0.18 0.25

East South Central 0.30 0.14 0.15 0.24 0.16 0.21

West South Central 0.35 0.17 0.18 0.23 0.19 0.26

Mountain 0.32 0.15 0.17 0.22 0.17 0.24

Pacific 0.37 0.17 0.19 0.24 0.20 0.2717

- 54 Table 17.5.4 Super

- efficient Voluntary Targets Program Benefit/Cost Ratio s for Room

Air Conditioners by Census Division (R esidential S ector)

Product ClassGroup 1Group 2Group 3Group 4Group 5Group 6

New England 0.40 0.58 0.16 0.19 0.52 0.69

Middle Atlantic 0.34 0.51 0.14 0.16 0.45 0.60

East North Central 0.24 0.35 0.09 0.11 0.31 0.42

West North Central 0.22 0.33 0.09 0.10 0.29 0.39

South Atlantic 0.26 0.38 0.10 0.12 0.34 0.45

East South Central 0.22 0.33 0.09 0.10 0.29 0.39

West South Central 0.26 0.39 0.11 0.12 0.35 0.46

Mountain 0.24 0.36 0.10 0.11 0.32 0.42

Pacific 0.28 0.41 0.11 0.13 0.37 0.4917

- 55 Table 17.5.5 Super

- efficient Voluntary Targets Program Benefit/Cost Ratio s for Room

Air Conditioners by Census Division (Commercial S ector)

Product ClassGroup 1Group 2Group 3Group 4Group 5Group 6

New England 0.43 0.73 0.75 0.75 0.91 0.98

Middle Atlantic 0.41 0.70 0.72 0.72 0.87 0.93

East North Central 0.30 0.51 0.53 0.52 0.64 0.69

West North Central 0.27 0.46 0.47 0.47 0.57 0.62

South Atlantic 0.32 0.55 0.56 0.56 0.68 0.73

East South Central 0.28 0.48 0.50 0.49 0.60 0.64

West South Central 0.29 0.49 0.51 0.51 0.61 0.66

Mountain 0.29 0.49 0.51 0.50 0.61 0.66

Pacific 0.39 0.66 0.68 0.68 0.82 0.88

The benefit/cost analysis indicates that for all Super

- Maxtech models evaluated, despite

the energy savings they can provide, costs outweigh benefits for consumers in all Census Divisions. Nevertheless, DOE assumed that consumers willing to buy highly efficient equipmen t w ould move toward such models and therefore Super -Maxtech equipment would have some market penetration. Further, DOE considered that the market penetration of those

models would increase with time as their price decrease d.

Because the products modeled u nder this SEVT program rely on advanced technology, DOE adopted a learning model approach to estimate their market penetration. In such an approach, while the cost of mature technology (“low-tech”) components remains constant over time, the cost of advance d technology (“high

- tech”) components decreases as a function of cumulative production of those products . DOE calculated the dynamic cost of Super

- Maxtech models from the following equations:

C

total (t) = C high

- tech (t) + C low

- tech

C

high

- tech (t) = C high

- tech (0) × ( Q / Q 0 ) b

b = ln( PR ) / ln(2)

where:

C total (t) = (dynamic) total cost

C

high

- tech (t) = (dynamic) cost of high -tech components17

- 56 C

low

- tech = (constant) cost of low-tech components

C

high

- tech (0) = cost of high-tech components in 2014 Q = cumulative production of Super-Maxtech model since 2014 Q 0 = production of Super-Maxtech model in 2014

b = learning rate coefficient

PR = progress ratio.

DOE estimated the costs of the Super- Maxtech models by breaking down their costs into

two parts. For each Super- Maxtech model, t he high-tech components cost (in 2014) is the

incremental cost in relation to the cost projected for the “ max

- tech ” model for that product

class

. l T he low-tech components cost is the cost projected for the max

- tech model for that prod uct class. Table s 17.5.6 through 17.5.8 show the resulting total installed cost s of SuperMaxtech product s in selected model years.

l “Max

- tech” model refers to the model in the life

- cycle cost analysis with the highest efficiency level as reported in Chapter 8.17

- 57 Table 17.5.6 Super -efficient Voluntary Targets Program Total Installed Cost of Clothes Dryers (2009$)

Product Class

Elec Stand Elec Comp

120v Elec Comp

240v Gas Elec Comp

V entless Elec Wash/Dryer

2014 $629.93 $663.85 $663.85 $234.36 $783.01 $841.97

2020 $568.04 $579.24 $582.69 $219.29 $634.98 $695.35

2025 $551.13 $555.82 $561.01 $215.16 $593.06 $654.15

2030 $541.42 $542.45 $548.75 $212.68 $569.53 $630.93

2035 $534.67 $533.21 $540.36 $210.93 $553.53 $615.09

2040 $529.59 $526.28 $534.06 $209.58 $541.67 $603.33

2043 $527.05 $522.83 $530.93 $208.91 $535.83 $597.5217

- 58 Table 17.5.7 Super

- efficient Voluntary Targets Program T otal Installed Cost of Room

Air Conditioners (Residential S ector) (2009$)

Product Class

Group 1 Group 2 Group 3 Group 4 Group 5 Group 6

2014 $143.43 $155.83 $402.91 $359.10 $144.53 $144.27

2020 $139.37 $149.19 $378.03 $356.13 $142.90 $141.99

2025 $138.31 $147.45 $371.50 $355.37 $142.48 $141.39

2030 $137.72 $146.48 $367.90 $354.95 $142.24 $141.06

2035 $137.31 $145.80 $365.42 $354.66 $142.08 $140.83

2040 $137.01 $145.30 $363.59 $354.45 $141.96 $140.66

2043 $136.86 $145.05 $362.70 $354.35 $141.90 $140.5817

- 59 Table 17.5.8 Super

- efficient Voluntary Targets Program T otal Installed Cost of Room Air Conditioners (Commercial Sector ) (2009$)

Product Class

Group 1 Group 2 Group 3 Group 4 Group 5 Group 6

2014 $143.34 $155.52 $402.48 $358.72 $144.22 $143.96

2020 $139.26 $148.88 $377.45 $355.76 $142.58 $141.67

2025 $138.17 $147.10 $370.77 $355.00 $142.16 $141.07

2030 $137.56 $146.11 $367.06 $354.58 $141.92 $140.73

2035 $137.12 $145.40 $364.45 $354.30 $141.75 $140.49

2040 $136.79 $144.87 $362.51 $354.09 $141.62 $140.31

2043 $136.63 $144.61 $361.55 $353.99 $141.56 $140.22

DOE used the Super- Maxtech models ’ time

- varying costs to estimate their dynamic

benefit/cost ratios and market penetrations. For the estimation of the dynamic benefit/cost ratios, DOE used forecasted energy prices at the level of Census Divisions to calculate the energy cost savings for co nsum ers in each region . T o estimate the dynamic market penetration s, DOE followed a similar approach as described in Section 17.3.2 , where an implementation rate

is calculated from a benefit/cost ratio and the implied market barrier level . In the SEVT case
, since there is no market share information for the Super- Maxtech models, DOE assumed that

for each Census Division the market barrier level for those models is the same as the market barrier level of the highest efficiency level with non -zero shipments in 2014. Tables 17.5.9 through 17.5 .11 present the estimated market penetration s for all Super- Maxtech models in selected years

.17

- 60 Table 17.5.9 Super

- efficient Voluntary Targets Program Market Penetration of Clothes Dryers

Product Class

Elec Stand Elec Comp

120v Elec Comp

240v Gas Elec Comp

V entless Elec Wash/Dryer

2014 0.2% 0.02% 8.3% 0.2% 0.03% 0.1%

2020 0.2% 0.03% 9.9% 0.2% 0.05% 0.1%

2025 0.2% 0.04% 10.7% 0.3% 0.07% 0.1%

2030 0.3% 0.04% 11.5% 0.3% 0.08% 0.2%

2035 0.3% 0.05% 12.1% 0.4% 0.10% 0.2%

2040 0.3% 0.05% 12.6% 0.4% 0.11% 0.2%

2043 0.3% 0.06% 13.0% 0.5% 0.12% 0.2%17

- 61 Table 17.5.10 Super

- efficient Voluntary Targets Program Market Penetration of Room

Air Conditioners (Residential S ector)

Product Class

Group 1 Group 2 Group 3 Group 4 Group 5 Group 6

2014 0.1% 0.6% 2.0% 7.8% 3.5% 3.2%

2020 0.1% 0.7% 2.4% 8.2% 3.8% 3.5%

2025 0.1% 0.7% 2.5% 8.3% 3.9% 3.6%

2030 0.1% 0.8% 2.8% 8.8% 4.3% 4.0%

2035 0.1% 0.9% 3.0% 9.2% 4.6% 4.3%

2040 0.1% 0.9% 3.2% 9.5% 4.8% 4.5%

2043 0.1% 1.0% 3.3% 9.7% 5.0% 4.7%17

- 62 Table 17.5.11 Super

- efficient Voluntary Targets Program Market Penetration of Room Air Conditioners (Commercial Sector)

Product Class

Group 1 Group 2 Group 3 Group 4 Group 5 Group 6

2014 0.1% 0.6% 2.2% 31.7% 3.7% 3.1%

2020 0.1% 0.7% 2.8% 32.7% 4.0% 3.5%

2025 0.1% 0.8% 3.0% 33.3% 4.2% 3.7%

2030 0.1% 0.9% 3.5% 34.7% 4.7% 4.1%

2035 0.1% 1.0% 3.9% 35.9% 5.2% 4.6%

2040 0.1% 1.1% 4.3% 36.9% 5.6% 4.9%

2043 0.2% 1.2% 4.5% 37.5% 5.9% 5.2%

All Super- Maxtech models for clothes dryers and room air conditioners provide higher

energy savings th an do the proposed standards (TSL 4). Room air conditioner Super- Maxtech

models also offer higher NPVs to consumers when compared to the proposed standards (TSL 4). Tables 17.5.12 and 17.5.13 summarize the change in NES and NPV values from the SEVT

program (at three levels of progress

- ratio) in relation to the NES and NPV results from the proposed standards. Negative NPVs are shown in parentheses.17

- 63 Table 17.5.12 Super

- efficient Voluntary Targets Program Outputs for Clothes Dryers Policy Outputs

PR = 0.80 PR = 0.85 PR = 0.90

NES (quads)

Elec Stand ard 0.015 0.013 0.012 Elec Comp 120v 0.000 0.000 0.000 Elec Comp 240v 0.002 0.002 0.002

Gas 0.001 0.001 0.001 Elec Comp V entless 0.000 0.000 0.000

Elec Wash/Dryer 0.000 0.000 0.000

Total 0.018 0.017 0.016 NPV (7% dr) (2009$ bi l )

Elec Stand ard ( 0.056 ) ( 0.052 ) ( 0.048 ) Elec Comp 120v 0.000 0.000 0.000 Elec Comp 240v ( 0.037 ) ( 0.035 ) ( 0.034 )

Gas ( 0.010 ) ( 0.010 ) ( 0.009 ) Elec Comp V entless 0.000 0.000 0.000

Elec Wash/Dryer 0.000 0.000 0.000

Total ( 0.103 ) ( 0.097 ) ( 0.092 ) NPV (3% dr) (2009$ bi l )

Elec Stand ard ( 0.065 ) ( 0.060 ) ( 0.055 ) Elec Comp 120v 0.000 0.000 0.000 Elec Comp 240v ( 0.061 ) ( 0.058 ) ( 0.055 )

Gas ( 0.014 ) ( 0.014 ) ( 0.013 ) Elec Comp V entless 0.000 0.000 0.000

Elec Wash/Dryer 0.000 0.000 0.000

Total ( 0.140 ) ( 0.132 ) ( 0.124 )17

- 64 Table 17.5.13 Super

- efficient Voluntary Targe ts Program Outputs for Room Air

Conditioners Policy Outputs

PR = 0.80 PR = 0.85 PR = 0.90

NES (quads)

Group 1 0.001 0.001 0.001 Group 2 0.035 0.033 0.032 Group 3 0.005 0.005 0.005 Group 4 0.025 0.025 0.025 Group 5 0.014 0.014 0.014 Group 6 0.017 0.016 0.016

Total 0.096 0.095 0.093 NPV (7% dr) (2009$ bi l )

Group 1 0.017 0.017 0.017 Group 2 0.395 0.385 0.373 Group 3 0.086 0.083 0.080 Group 4 0.322 0.321 0.320 Group 5 0.175 0.174 0.173 Group 6 0.177 0.176 0.174

Total 1.172 1.155 1.137 NPV (3% dr) (2009$ bi l )

Group 1 0.033 0.033 0.032 Group 2 0.771 0.748 0.722 Group 3 0.164 0.158 0.152 Group 4 0.616 0.614 0.613 Group 5 0.333 0.331 0.328 Group 6 0.345 0.342 0.338

Total 2.262 2.226 2.18517

- 65 REFERENCES

1. American Recovery and Reinvestment Act of 2009. ( Last accessed March, 2011 .)

< http ://frwebgate.access.gpo.gov/cgi

bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf>

2. U.S. Department of Energy. “Approved Energy Efficient Appliance Rebate Programs.” (Last accessed March, 2011 .) < http://www.energysavers.gov/financial/70022.html >

3. Rufo, M. and Fred Coito., California's Secret Energy Surplus: The Potential for Energy Efficiency. , 2002. XENERGY Inc. Oakland, CA. Prepared for The Energy Foundation

and The Hewlett Foundation. (Last accessed March, 2011.)

< http://www.ef.org/documents/Secret_Surplus.pdf >

4. ICF International, Arizona Public Service Energy Efficient Market Potential Study , 2007. ICF International. Fairfax, VA.

5. Mosenthal, P., Personal communication. Telephone conversation with Barbara Atkinson,
LBNL, January 2008. Optimal Energy. Bristol, VT.

6. A. Lee, Personal Communication. Telephone conversation with Barbara Atkinson,
LBNL, January 2008. Quantec, LLC. Portland, OR.

7. Rufo, M., Personal communication. Telephone conversations with Barbara Atkinson,

LBNL . Itron, Inc. Oakland, CA. January 2008 and March 2009.

8. Itron Inc. and KEMA Inc., California Energy Efficiency Potential Study, 2008. Submitted to Pacific Gas and Electric Co. by Itron, Inc.: San Diego, CA, and KEMA, Inc.: Oakland, CA. CALMAC Study ID: PGE0264.01. (Last accessed March, 2011.)

< http://calmac.org/publications/PGE0264_Final_Report.pdf >

9. Global Energy Partners

, AmerenUE Demand Side Management (D SM ) Market Potential Study, Volume 2: Market Research

, 2010

. Global Energy Partners,

LLC: Walnut Creek , CA

. Report Number 1287

- 2. ( Last Accessed March, 2011

. )

< http://oa .mo.gov/purch/bids/b3z10177att2

- 2.pdf >

10. Coito, F. Personal communication. E-mail to Barbara Atkinson , LBNL

. KEMA, Inc. Oakland, CA. June 2010.

11. Lawrence Berkeley National Laboratory, Energy End -Use Forecasting: Analysis of Tax Credits for Efficient Equipment, 1998. LBNL End -Use Forecasting Group. (Last accessed March, 2011 .) < http://enduse.lbl.gov/Projects/TaxCredits.html >17

- 66 12. Train, K., Customer Decision Study: Analysis of Residential Customer Equipment

Purchase Decisions , 1994. Prepared for Southern California Edison by Cambridge Systematics, Pacific Consulting Services, The Technology Applications Group, and

California Su rvey Research Services.

13. U.S. Department of Energy-Office of Codes and Standards, Technical Support Document: Energy Efficiency Standards for Consumer Products: Refrigerators, Refrigerator-Freezers, and Freezers, including Environmental Assessment and Regulatory Impact Analysis, November, 1995. Washington, DC. Report No. DOE/EE0064.

14. Energy Policy Act of 2005, 119 STAT. 594 Public Law 109–58. Section 1333, 26 USC
25C note, November 8, 2005. (Last accessed March, 2011 .)

< http://frwebgate3.access.gpo.gov/cgibin/getdoc.cgi?dbname=109_cong_public_laws&docid=f:publ058.109.pdf >

15. Tax Incentives Assistance Project, General Information: Legislative Language & Pending Updates , 2009. (Last accessed March, 2011 .)

< http://energytaxincentives.org/general/legislative.php >

16. U.S. Department of Ener gy - Energy Efficiency & Renewable Energy, Technical Support Document: Energy Efficiency Program for Consumer Products and Commercial and Industrial Equipment, Residential Dishwashers, Dehumidifiers, and Cooking Products,

and Commercial Clothes Washers , 2008. Washington, DC.

17 Tax Incentives Assistance Project, Manufacturer Incentives, (Last accessed March,

2011 .) < http://energytaxincentives.org/builders/appliances.php >

18. Feldman S. L. Hoegfen L.Wilson-Wright and A. Li, Modeling the effects of U.S. ENERGY STAR® appliance programs. In Energy Saving s: What Works and Who

Delivers? 2005 ECEEE Summer Study Proceedings. Mandelieu La Napoule, France, May 30 -June 4.

19. Rosenberg, M., The Impact of Regional Programs on the Market Share of Energy Star® Appliances, November 20 -22, 2003. In 2003 International Energy Program Evaluation Conference Proceedings. Seattle, WA.

20. Titus E. and S. Fledman, Tracking the Effectiveness of Energy

- Efficient Appliance Programs in the U.S., November 20-22, 2003. In 2003 International Energy Program Evaluation Conference Proceedings. Seattle, WA.

21. Homan, G., M. Sanchez M. C. Webber R. Brown and G. Homan, Calendar Year 2009 Program Benefits for ENERGY STAR Labeled Products . November 15, 2010. Lawrence Berkeley Na tional Laboratory. Berkeley, CA

. LBNL -4284E.17

- 67 22. Reed, J., C. Bailey, J. Riggert, M. Morrisey. 2010. Final Report: Process and Market

Evaluation of Southern California Edison’s Appliance Recycling Program , 2006 – 2008. Report Number SCE0281.01. Innovologie, Rockville, MD. March 2010. (Last accessed March, 2011.) < http://calmac.org/publications/scearpfinal041410.pdf >

23. KEMA 2004. 2003 EM&V RARP Study: Verification, Degradation & Market Potential Analysis. Prepared for Southern California Edison, Rosemead, California. Prepared by KEMA Inc., Madison, WI. CALMAC S tudy ID SC E0205. December 23, 2004. (Last

accessed March, 2011.) <http://www.nwcouncil.org/energy/rtf/meetings/2005/06/2003_RARP_Evaluation3.pdf>

24. ADM et al, 2008. Evaluation Study of the 2004- 05 Statewide Residential Appliance Recycling Program: 2004-2005 Programs: #1114, #1157, #1232 And #1348. ADM Associates, Inc., Athens Research, Hiner & Partners, Inn ovologie LLC. April 2008. (Last

accessed March, 2011.) < http://www.calmac.org/publications/EM&V_Study_for_2004- 2005_Statewide_RARP_-_Final_Report.pdf >

25. Nexus and RLW Analytics, Impact, Process, and Market Study of the Connecticut Appliance Retirement Program: Overall Report, Final. , 2005. Su bmitted to Northeast

Utilities –Connecticut Light and Power and the United Illuminating Company. Nexus Market Research, Inc., and RLW Analytics, Inc. Cambridge, MA. (Last accessed March,

2011 .) < http://www.ctsavesenergy.org/files/Appliance%20Retirement%2012 -05.pdf >

26. GDS Associates Inc, Vermont Electric Energy Efficiency Potential Study: Final Report.

, 2007. Prepared for the Vermont Department of Public Service. Marietta, GA. (Last

accessed March, 2011 .)

< http://publicservice.vermont.gov/energy/vteefinalreportjan07v3andappendices.pdf >

27. McMahon J.E. and J.P. Harris, Early Replacement of Appliances. Unpublished report for U.S. Department of Energy , 1994. Lawrence Berkeley National Laboratory. Berkeley,

CA.

28. Smith, N., Personal communication. Telephone conversation with Barbara Atkinson,
LBNL., April 2008. National Association o f State Procurement Officials, Lexington, KY.

29. Responsible Purchasing Network, (Last accessed March, 2011 .)

< www.responsiblepurchasing.o rg/ >

30. Federal Energy Management Program, FEMP D esignated Prod uct: Room Air Conditioners, March 2006. (Last accessed March, 2011

. )

< http://www1.eere.energy.gov/femp/pdfs/pseep_rmairconditioners.pdf >

31. Harris J. and F. Johnson, Potential Energy, Cost, and CO2 Savings from Energy- Efficient 38 Purchase. In ACEEE 2000 Summer Study on Energy Efficiency in Buildings. 2000,17

- 68 November 20-25. American Council for an Energy-Efficient Economy. Asilomar, CA. Report No. Lawrence Berkeley National Laboratory Report No. LBNL-45439.

32. U.S. Department of Housing and Urban Development, A Pictu re of Subsidized
Households–2008, (Last accessed Marc h, 2011 .)

< http://www.huduser.org/picture2008/index.html/ >

33. U.S. Census Bureau. Housing and Household Economic Statistics Division, 2009 AHS

National Data

. (Last accessed March , 2011 .)

< http://www.huduser.org/portal/datasets/ahs/ahsdata09.html >

34. U.S. Department of Energy - Energy Information Administration, Residential Energy Consumption Survey: 2005 Public Use Data Files, 2009. (Last accessed March, 2011 .)

< http://www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.html >