2

- i C HAPTER 2. ANALYTICAL FRAMEWORK , COMMENTS FROM INTERE STED PARTIES , AND D EPARTMENT O F E NERGY RESPONSES

TABLE OF CONTENTS

2.1 INTRODUCTION

................................ ................................ ................................ ........... 2

- 1 2.2 BACKGROUND

................................ ................................ ................................ ............. 2

- 3 2.3 MARKET AND TECHNOLOGY ASSES SMENT

................................ ........................ 2

- 4 2.3.1 Scope of Coverage

................................ ................................ ................................ ........... 2

- 5 2.3.2 Market Assessment

................................ ................................ ................................ ........ 2

- 10 2.3.3 Equipment Classes

................................ ................................ ................................ ......... 2

- 10 2.3.4 Technology Assessment

................................ ................................ ................................ . 2

- 12 2.4 SCREENING ANALYSIS

................................ ................................ ............................ 2

- 14 2.5 ENGINEERING ANALYSIS

................................ ................................ ........................ 2

- 16 2. 6 MARKUPS ANALYSIS

................................ ................................ ............................... 2

- 18 2.7 ENERGY USE ANALYSIS

................................ ................................ .......................... 2

- 20 2.8 LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

................................ ... 2

- 24 2.8.1 Inputs to Total Installed Cost

................................ ................................ ......................... 2

- 25 2.8.2 Inputs to Operating Cost

................................ ................................ ................................ 2

- 26 2.9 SHIPMENTS ANALYSIS

................................ ................................ ............................ 2

- 30 2.10 NATIONAL IMPACT ANAL YSIS

................................ ................................ .............. 2

- 30 2.10.1 National Energy Savings Analysis

................................ ................................ ................. 2

- 31 2.10.2 Net Present Value Analysis

................................ ................................ ........................... 2

- 32 2.11 CONSUMER SUBGROUP AN ALYSIS

................................ ................................ ...... 2

- 32 2.12 MANUFACTURER IMPACT ANALYSIS

................................ ................................ .. 2

- 32 2.12.1 Sources of Information for the Manufacturer Impact Analysis

................................ ..... 2

- 33 2.12.2 Industry Cash

- Flow Analysis

................................ ................................ ......................... 2

- 33 2.12.3 Direct Employment Impact Analysis

................................ ................................ ............. 2

- 34 2.12.4 Manufacturer Subgroup Analysis

................................ ................................ .................. 2

- 34 2.12.5 Competitive Impacts Assessment

................................ ................................ .................. 2

- 34 2.12.6 Cumulative Regulatory Burden

................................ ................................ ..................... 2

- 35 2.12.7 Preliminary Results for the Manufacturer Impact Analysis

................................ .......... 2

- 35 2.13 EMISSIONS ANALYSIS

................................ ................................ .............................. 2

- 37 2.14 MONETIZATION OF EMIS SIONS REDUCTIONS BEN EFITS

............................... 2

- 39 2.15 UTILITY IMPACT ANALY SIS

................................ ................................ ................... 2

- 40 2.16 EMPLOYMENT IMPACT AN ALYSIS

................................ ................................ ....... 2

- 41 2.17 REGULATORY IMPACT AN ALYSIS

................................ ................................ ....... 2

- 41

LIST OF TABLES

Table 2.3.1. Equipment Classes Considered for Preliminary Analysis

................................ .... 2

- 112

- 1 CHAPTER 2. ANALYTICAL FRAMEWORK , COMMENTS FROM INTERE STED PARTIES, AND DEPARTM ENT OF ENERGY RESPON SES

2.1 INTRODUCTION
The U.S. Department of Energy (DOE) Appliances and Equipment Standards Program, within the Office of Energy Efficiency and Renewable Energy’s Building Technologies Office, develops and promulgates e nergy conservation standards for certain consumer appliances and commercial and industrial equipment. The process for developing standards involves analysis, public notice and comment, and consultation with interested parties. Interested parties include manufacturers, trade associations, consumers/users, energy conservation and environmental advocates, State and Federal agencies, and any other groups or individuals with an interest in these standards. The DOE Appliance Standards Program Report to Congres s, initially submitted on January 31, 2006 and updated twice a year since first publication, identifies the numerous rulemakings for a variety of products and equipment that DOE has scheduled for completion and explains many of the techniques DOE will appl y during the rulemaking process to meet this schedule. 1

Title III , Part C
, 2 of the Energy Policy and Conservation Act of 1975 (EPCA), Pub. L. 94

- 163 (42 U.S.C. 6311

- 6317, as codified), added by Pub. L. 95

- 619, Title IV, §441(a), sets forth a variety of provisions designed to improve energy efficiency , and it established the "Energy Conservation Program for Certain Industrial Equipment

, " a program covering certain commercial and industrial equipment (hereafter referred to as "cove red equipment") , Covered equipment includes the commercial packaged boilers (hereafter r eferred to as "CPB " or “boilers’ ) that are the subject of this rulemaking. 3 Part A

- 1 includes definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 63 13), test procedures (42 U.S.C. 6314), labeling provisions (42 U.S.C. 6315), and the authority to require compliance information and certification reports from manufacturers of covered equipment (42 U.S.C. 6316). This program authorizes DOE to establish t echnologically feasible, economically justified energy conservation regulations for certain products and equipment that would be likely to result in substantial national energy savings.

This chapter provides a description of the analytical framework that DOE is using to evaluate potential amended energy conservation standards for commercial packaged boilers. Th is chapter sets forth the methodology, analytical tools, and relationships among the various analyses that are part of this rulemaking. The analy ses performed as part of the preliminary

1 U.S. Department of Energy. Energy Conservation Standards Activities; Submitted pursuant to Section 141 of the Energy Policy Act of 2005 (EPACT 2005), Pub. L. 109

- 58, and in response to section 305 of the Energy Independence and Security Act of 2007 (EISA 2007), Pub. L. 110

- 140; U.S. Department of Energy (Available at: http://energy.gov/node/773531/reports_and_publications.html Error! Hyperlink reference not valid. ). Error! Hyperlink reference not valid.

. 2 For editorial reasons, upon codification in the United States Code (U.S.C.), Part C was red esignated Part A

- 1.
3 All references to EPCA in this document refer to the statute as amended through the American Energy Manufacturing Technical Corrections Act, Pub. L. 112

- 210 (Dec. 18, 2012)

.2

- 2 analysis stage and reported in this preliminary technical support document (TSD) are listed below

.

• A market and technology assessment to characterize relevant equipment , their markets

, and technology options for improving their energy efficiency, including prototype designs.

• A screening analysis to review each technology option and to determine if it is technologically feasible; is practica b l e to manufacture, install, and service; would adversely affect equipment utility or availability; or would have adverse impacts on health and safety.

• An engineering analysis to develop relationships that show the price of achieving increased efficiency.

• A m arkups analysis to develop distribution channel markups that relate the manufacturer production cost (MPC) to the cost to the commercial consumer.

• An energy use analysis to determine the annual energy use of the considered equipment in a representative set of users

.

• A life

- cycle cost ( LCC ) and payback period (PBP) analysi s to calculate savings in operating costs at the consumer level throughout the life of covered equipment compared with any increase in installed cost for the equipment likely to result dire ctly from adoption of a standard.

• A shipments analysis to forecast equipment shipments, which are then used to calculate the national impacts of standards on energy, net present value (NPV), and future manufacturer cash flows.

• A national impact analysis (N IA) to assess the aggregate impacts at the national level of potential energy conservation standards for the considered equipment , as measured by the NPV of total commercial consumer economic impacts and the national energy savings (NES).

• A preliminary manufacturer impact analysis (MIA) to assess the potential impacts of energy conservation standards on manufacturers’ capital conversion expenditures, marketing costs, shipments, and research and development costs

. In the subsequent n otice of p roposed r ulemaking (NOPR), DOE will present the tentative results of the above analyses, incorporating any revisions to the analyses in light of comments and new information received

. DOE will also present tentative results of the following additional ana lyses in the NOPR:

• A consumer subgroup analysis to evaluate variations in commercial consumer characteristics that might cause a standard to affect particular commercial consumer sub

populations (such as small businesses ) differently than the overall popul ation.

• A n MIA to estimate the financial impact of potential standards on manufacturers and to calculate impacts on competition, employment, and manufacturing capacity.2

- 3 • An employment impact analysis to assess the aggregate impacts of the considered standard s on national employment.

• A utility impact analysis to estimate effects of the considered standards on electric utilities ’ power generation capacity

.

• An emissions analysis to assess the effects of the considered standards on emissions of carbon dioxide (CO 2 )

, nitrogen oxides (NO X ), mercury (Hg) , and other airborne emissions

.

• An e missions m onetization that estimates the economic value of reductions in CO 2 and NO X emissions from the considered standards.

• A regulatory impact analysis (RIA) to evaluate non

- regulatory alternatives to amended energy conservation standards in order to assess whether such alternatives could achieve substantially the same goal at a lower cost.

2.2 BACKGROUND
The Energy Policy Act of 1992 (EPACT 1992), Public Law 102−486, amended EPCA to add commercial packaged boilers as a type of covered equipment. EPACT 1992 also amended EPCA with respect to packaged boilers by providing a definition, as well as provisions setting forth applicable requirements for energy conservation standards, test procedures, labeling, and compliance certification. (42 U.S.C. 6311(11)(B); 6313(a)(4); 6314(a)(4); 6315(e); 6316(a)

- (b)) Most recently, DOE amended its energy conservation sta ndards for commercial packaged boilers through a final rule published in the Federal Register (FR) on July 22, 2009 (hereafter referred to as the “July 2009 final rule”)

. 74 FR 36312. More specifically, the July 2009 final rule updated the energy conserv ation standards for commercial packaged boilers to correspond to the levels in the 2007 revision of ASHRAE Standard 90.1

, Energy Standard for Buildings Except Low

- Rise Residential Buildings

, ( i.e. , ASHRAE Standard 90.1

- 2007). Id . at 36355

- 56. Compliance with the amended standards was required beginning on March 2, 2012

. 4

DOE initiat ed this rulemaking pursuant to 42 U.S.C. 6 313 ( a )( 6 )( C ) , which requires that
every six years , DOE must publish either a notice of determination that standards for the equipment do not need to be amended or a NOPR including new proposed energy conservation standards. As noted above, DOE’s last final rule for commercial packaged boilers was publishe d on July 22, 200 9 (74 FR 36312) , s o as a result, DOE is required to act by July 22, 2015

. 5 Once complete, t his rulemaking will satisfy this statutory obligation. 6

4 DOE notes that for small and large gas

- fired steam commer cial packaged boilers, ASHRAE adopted a second tier of standards with compliance required on and after March 2, 2022. Pursuant to 42 U.S.C. 6313(a)(6)(A)(ii), DOE adopted those standards into DOE’s regulations as well.
5 If DOE determines that amended st andards are warranted, it must publish a final rule containing such standards no later than two years after the NOPR is published. (42 U.S.C. 6313(a)(6)(C)(iii)(I))
6 DOE notes that since its last final rule in 2009, ASHRAE has not acted to amend its sta ndards for commercial packaged boilers, as would trigger DOE rulemaking action under 42 U.S.C. 6313(a)(6)(A).2

- 4 DOE developed this analytical framework and documented i t s findings in the Rulemaking Frame work Document for Commercial Packaged Boilers (August 28, 2013). On that same day (August 28, 2013), DOE issued the Notice of Public Meeting and Availability of the Framework Document for commercial packaged boilers, which was published in the Federal Reg ister on September 3, 2013. 78 FR 54197. In conjunction, DOE posted the Framework D ocument to the DOE website. 7

In response to the publication of the Framework Document and the Framework public meeting, DOE received comments from interested parties regar ding DOE’s analytical approach. This chapter (chapter 2) summarizes the comments DOE received from interested parties and presents DOE’s responses to those comments. In addition, in subsequent sections of this chapter, DOE has summarized any significant changes in analytical approach made since publishing the Framework Document that DOE used in its preliminary analyses. Lastly, in the Executive Summary to this preliminary TSD, DOE identified a number of issues on which it seeks public comment. DOE has e xplained each of those issues in the relevant analytical sections below

.

2.3 MARKET AND TECHNOLOG Y ASSESSMENT

When DOE commences an energy conservation standards rulemaking, it develops information that provides an overall snapshot of the market for the equip ment considered, including the nature of the equipment , market characteristics, and industry structure

. This activity consists of both quantitative and qualitative efforts based primarily on publicly

- available information

. The market assessment examined manufacturers

, trade associations , and the quantities and types of equipment offered for sale.

DOE recognizes that there may be limited public information on national shipments, manufacturing costs, channels of distribution, and manufacturer market shares of CPBs

. Such data are an important input for analyses t o determine whether potential energy conservation standards are economically justified and will result in significant energy savings

. Therefore, DOE encourages interested parties to submit any data that will improve DOE’s understanding of the market

. These data may be provided under a confidentiality agreement with DOE’s contractor responsible for this part of the rulemaking analysis : Navigant Consulting, Inc. (NCI)

. In other rulemakings, NCI has w ork ed with confidential data provided by manufacturers and other organizations in preparing aggregated results for DOE’s analysis

. These aggregated results do not divulge the sensitive, individual raw data, but enable other interested parties to comment

o n the aggregated dataset.

Alternatively, interested parties may submit confidential data to DOE, indicating in writing which data should remain confidential

. Interested parties must submit confidential information to DOE according to the procedures outlin ed in Title 10 of the Code of Federal Regulations ( CFR ) section 1004.11

. Pursuant to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure

7 The August 28, 2013 commercial packaged boilers Framework Document is available at the following link: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/79

.2

- 5 should submit two copies

. One copy of the document shall include all the information believed to be confidential, and the other copy shall have the information believed to be confidential deleted

. DOE will make its own determination about the confidential status of the information and trea t it accordingly. 8

DOE reviewed relevant literature and interviewed manufacturers to develop an overall snapshot of the commercial packaged boiler industry in the United States

. Industry publications and trade journals, government agencies, and trade associations provided the bulk of the information for the market and technology assessment. DOE gathered information from manufacturer websites and public databases 9 on 2
, 354 boiler models , which was used to inform the market and technology analysis and t he downstream analys e s

. The data gathered on each boiler model inclu ded important information for all boiler models such as input capacity , fuel type , heating medium, draft type, material and other properties (condensing or modulating). The analyse s deve loped as part of the market and technology assessment are described in chapter 3 of this preliminary TSD

.

2.3.1 Scope of Coverage

EPCA authorizes DOE to regulate certain commercial and industrial equipment , such as packaged boilers . EPCA defines the term “packaged boiler” as “a boiler that is shipped complete with heating equipment, mechanical draft equipment, and automatic controls; usually shipped in one or more sections.” (42 U.S.C. 6311(11)(B)) DOE’s regulations provide further clarification of this term, as well as other s addressing different subsets of boilers. T o understand the types of boilers which DOE is authorized to regulate under EPCA and the scope of coverage for the present rulemaking

, terms related to commercial packaged boilers are defin ed below.

In its regulations , DOE clarifies the term “packaged boiler” to exclude a boiler that is

“ custom designed and field constructed

, ” and it further provides that if the boiler is shipped in more than one section, the sections may be produced by more than one manufacturer, and may be originated or shipped at different times and from more than one location. 10 CFR 431.82.

DOE’s regulations define the term “commercial packaged boiler” as “ a type of packaged low pressure boiler that is industrial equipm ent with a capacity, (rated maximum input) of 300,000 Btu per hour ( B tu /h ) or more which, to any significant extent, is distributed in

8 Factors that DOE considers when evaluating requests to treat submitted information as confidential include: ( 1) a description of the items; (2) whether and why such items are customarily treated as confidential within the industry; (3) whether the information is generally known by or available from other public sources; (4) whether the information has previously been made available to others without obligation concerning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) a date after which such information might lose its confide ntial character; and (7) why disclosure of the information would be contrary to the public interest.
9 The primary source of information was the Air

- Conditioning Heating and Refrigeration Institute’s directory of certified commercial boilers, which provides an extensive list of boiler models that are manufactured by AHRI’s members. This database can be acc essed at: https://www.ahridirectory.org/ahridirectory/pages/cblr/defaultSearch.aspx .(Last accessed in November 2013).2

- 6 commerce: (1) For heating or space conditioning applications in buildings; or (2) For service water heating in buildings but does not meet the definition of ‘hot water supply boiler’ in [ 10 CFR part 431]. ” 10 CFR 431.82.

In addition, DOE’s regulations define the term “p ackaged l ow p ressure b oiler ” as “a packaged boiler that is: (1) A steam boiler designed to operate at or below a steam pressure of 15 psig [pounds per square inch gauge] ; or (2) A hot water boiler designed to operate at or below a water pressure of 160 psig and a temperature of 250 °F; or (3) A boiler that is designed to be capable of supplying either steam o r hot water, and designed to operate under the conditions in paragraphs (1) and (2) of this definition. ” 10 CFR 431.82

.
The current energy conservation standards in DOE’s regulations for commercial packaged boilers are divided into 10 equipment classes wi th corresponding energy efficiency levels for each

. 10 10 CFR 431.87. These equipment classes are based on : (1) size (input capacity) ; (2) heating media (hot water or steam); and (3) type of fuel used (oil or gas). 11 The
gas

- fired steam commercial boilers a re further classified according to draft type (thereby creating two additional equipment classes).

On August 13
, 2013, DOE published in the Federal Register a notice of proposed determination (NOPD) regarding coverage of natural dra ft commercial packaged boilers (August 2013 NOPD)

. 78 FR 49202

. Under DOE’s interpretation of the relevant statutory provisions, natural draft commercial packaged boilers are currently included as covered equipment with standards at 10 CFR 43 1 .87

. However, DOE is performing a coverage determination to explicitly clarify its statutory authority under EPCA to cover natural draft commercial packaged boilers, because explicit coverage of this equipment is necessary to carry out the purposes of part A

- 1 of EPCA. Coverage will pro mote conservation of energy and provide a more level playing field to the variety of commercial packaged boilers on the market, thereby discouraging potential substitution effects

. Id. at 78 FR 4920 4. If the outcome of the coverage determination is posit ive

, DOE will c ategorize boiler models further into natural draft and mechanical draft equipment classes

. Although the outcome of th is coverage determination is pending, DOE tentatively plans to consider natural draft boilers as part of this rulemaking an d , accordingly, has analyzed a total of 16 commercial packaged boiler equipment classes for this preliminary TSD

.

DOE considered several issues in determining the scope of coverage for this rulemaking

, as discussed earlier in the August 2013 Framework D ocument . DOE sought comment from interested parties on each of the issues at that time

. The first issue pertains to the size of commercial packaged boilers. Large commercial packaged boilers are , in part, defined as having an input capacity greater than 2,500 kBtu / h. However , t here is no upper limit requirement on th e input capacity of a covered CPB

. In the Framework Document (Item 2

- 4 at page 12)

, DOE

10 These standard levels were adopted in the Ju ly 2009 final rule. 74 FR 36312 (July 22, 2009).
11 Under subpart E of 10 CFR part 431, commercial packaged boilers are divided into equipment classes based on input capacity ( i.e. , size category). Throughout this document, DOE refers to units with an inp ut capacity of ≥ 300,000 Btu/h and ≤ 2,500,000 Btu/h as “small” and units with an input capacity > 2,500,000 Btu/h as “large.” See 10 CFR 431.87.2

- 7 sought comments from interested parties about whether any size

- related issues may render
energy conser vation standards i nfeasible for very large CPB s

.
The second and third issues address consideration of electric commercial packaged boilers and standby mode / off mode energy consumption , respectively

. DOE did not consider electric commercial packaged boilers in this rulemaking , because DOE estimate s that such boilers account for only 1

, 500

- 2 ,1 00 units shipped annually and that their efficiencies approach 100 percent

. Thus

, DOE has tentatively concluded that there i s little room for improvement in effi ciency as would result in significant energy savings

. Because many commercial packaged boilers do not operate continuously, DOE did not consider standby mode and off mode energy

cons umption for this preliminary analysis . DOE did seek comments on both iss ues in the Framework D ocument ( Items 2

- 2 and 2

- 3 at page 12) and invites further comment here

.

Last ly

, DOE sought comment in the Framework D ocument about whether any other type of boiler should or should not be included as p art of the rulemaking process (Item 2

- 1 at page 12)

. In response to the questions raised in the Framework Document, DOE received a number of comments from interested parties related to the scope of this rulemaking. These comments and DOE’s responses are discussed immediately below.

S ize

First

, regarding whether size would make energy conservation standards i nfeasible for very large CPB s , the Air

- conditioning, Heating and Refrigeration Institute ( AHRI ) stated that the scope of rulemaking is too broad in terms of input rating

. I t recom mended limiting the scope of the test procedure and energy conservation standards rulemakings to a maximum input capacity of 5,000 k B tu /h. (AHRI, No. 17 at p p

. 1

- 2) The American Boiler Manufacturers Association ( ABMA ) suggested capping the input rating of covered large boilers at 2,500 k B tu /h and not requiring repeat testing of already

- tested models of the same boiler equipment line. ABMA argued that there were several issues related to testing large boilers which made this limitation reasonable and necessary, including: (1) cost of testing; (2) inapplicability of BTS

- 2000 test procedure pressure conditions to large steam boilers (with the possibility of high strain fatigue in some parts of the boiler); and (3) the necessary coordination of production and testing schedules, the high degree of control by testing agenc ies in the form of inspection, testing considerations and other checks

, and the high degree of product control involved. (ABMA, No. 14 at p p

. 2

- 3 )

Cleaver

- Brooks suggested capping covered boiler capacity to 2

, 500 kBtu/h for cost and practicality reasons. Cleaver

- Brooks stated that for large boilers

, the time required for

m anufacturing can be as long as several months

, and the cost of manufactur ing and testing a larger boiler can approach a million dollars. As a result, compliance and certification testing of large boilers is financially burdensome and impractical

. (Cleave r

- Brooks, No. 12 at p. 1) A similar view was expressed by Burnham, which commented on the difficulty of testing large boilers in terms of capabilities of different testing centers and the cost of o 4 utfitting test facilities to accommodate such boilers

. ( Burnham, No. 15 at p. 2 ) Burnham suggested limit ing certification and compliance testing to boilers having input ratings 2,500 kBtu/h

, or to accept the2

- 8 test carried out on single unit of a boiler series as sufficient to certify the entire equipment line

, with out a requirement for retesting each year.

Heat Transfer Products (HTP) recommended delineating boilers further on the basis of input rating

. Specifically, HTP recommended three commercial boiler classifications : “small” with input ratings ≥300 k B tu / h to <2,500 k B tu /h; “medium” with input ratings ≥ 2,500 k B tu /h and <5,000 k B tu /h; and “large” with input ratings ≥5,000 k B tu /h. HTP stated that the cost of fuel, installation, testing

, and operation all increase proportional ly to the size of the boiler

, wh ile the accuracy of testing decreases as the size of boiler being tested increases. As a consequence
, HTP recommended adopting different standards and test procedures for boilers having input rating s greater than 5,000 k Btu/h. HTP argued that the benefit s of delineating commercial boilers in this manner are as follows: (1) very few test centers are capable of testing boilers having input rating greater than 5,000 k B tu /h; (2) due to difficulties involved in testing such large boilers, a separate test procedure may be warranted ; and (3) this would provide DOE the opportunity to use combustion efficiency as an efficiency metric for boilers greater than 5,000 k B tu /h and to adopt a different metric for boilers with lower input ratings. (HTP

, No. 18 at pp. 1

- 2)

DOE considered the comments submitted by interested parties about a limit to the maximum input rating for covered commercial packaged boiler. While DOE acknowledges the difficulty of testing very large CPB s , it has tentatively determined that limiting the scope to exclude very large CPB s ( e.g. , CPB s with input ratings above 5 ,000 k Btu/h) could violate EPCA’s anti

- backsliding provision

. The current energy conservation standards under 10 CFR 431.87 cover CPB s without de fining an upper limit above which standards would not apply. DOE has determined that e stablishing such a limit would , in effect

, eliminat e existing standards for any very large boilers. DOE is also condu cting a test procedure rulemaking, and will consider comments related to the practicality of testing of very large CPBs in that proceeding.

Electric boilers

DOE received several comments about whether to consider and potentially set standards for electric CPB s

. Energy efficiency advocacy groups

– the American Council for an Energy

Efficient Economy (ACEEE)

, the Appliance Standards Awareness Project (ASAP)

, and the Natural Resources Defense Council (NRDC)

– submitted a joint comment (the “Joint Ad vocates Comment”) which recommend ed including such boilers in the scope and suggested that DOE consider a requirement for the boiler’s jacket insulation to mee t a high performance level

. (Joint Advocates, No. 16 at p. 2) Likewise, HTP recommended includi ng electric boilers in this rulemaking

, stat ing that the greatest impact would be expected by addressing the standby mode and off mode power consumption of th i s equipment

. ( HTP, No. 18 at p. 2 ) However
, AHRI and ABMA oppose d including electric CPB s in the scope of this rulemaking. ( AHRI, No. 17 at p. 3 ; ABMA, No. 14 at p. 1 )

DOE notes that none of the information about electric CPBs provided by interested parties offers sufficient support to justify changing its earlier conclusion that the small nu mber of annual electric CPB shipments

, with efficiencies approaching 100 percent , means there would be very limited potential for significant energy savings from standards. Consequently , DOE did not consider electric CPBs in preparing its preliminary anal ysis , nor does it plan to prospectively2

- 9 include such equipment in its rulemaking analysis

. As discussed immediately below, DOE is not considering standby mode and off mode energy consumption for CPB, including electric CPB.

Standby mode and off mode

AHRI and ABMA asserted that DOE should not develop standby mode and off mode energy conservation standards for commercial package boilers. AHRI argued that DOE may not have the authority to specify multiple efficiency standards for commercial boilers. AHRI also stated that any reduction in standby mode or off mode power consumption will have an insignificant impact on overall energy use. ( AHRI, No. 17 at p. 3 ) ABMA stated that adopting standby mode or off mode standards could present safety issues dur ing testing. C urrent standby mode or off mode test procedure s require 100

- percent shut

- off of the stack damper on a down cycle. T his “has the potential to increase the likelihood of a combustion explosion should gas valves start leaking. This could be p articularly severe on natural draft fired boilers, in which the open sides will allow the gas to enter the space around the boiler, whereas with an open stack the gas would normally vent to atmosphere.” Instead, the commenter argued that consideration sho uld be given to an 80 to 90 percent shutoff. For forced

- draft

- fired boilers “the use of 100 percent shutoff at the combustion air intake damper will provide a safer approach than a stack damper.” (ABMA, No. 0014 at pp. 1

- 2) In light of the ABMA comment, DOE understands that there may be safety issues associated with stand b y mode or off mode testing and that testing may be considered at 80

- percent to 90

- percent shut

- off of the stack damper or, in the case of forced draft systems, 100

- percent shut

- off of the intake air damper

. On the other hand, HTP encouraged DOE to adopt the same requirements as are in place for residential b oiler products , which require testing according to I nternational E lectrotechnical C ommission (IEC) 62301

– “ Household electrical a ppliances

- Measurement of standby power

. ” HTP stated that establishing energy conservation standards for CPB standby mode and off mode would reduce standby mode or off mode power consumption of this equipment

. (HTP, No. 18 at p. 2) The Joint Advocate s stated that adopting standby mode and off mode energy conservation standards may provide a n opportunity to save energy ; h owever, power consumption during standby mode and off mode is a very small fraction of the total energy consumed by the boiler. The Joint Advocates state d that adding standby mode or off mode standards should not hinder innovative boiler control strategies and safety features which may present a greater opportunity for energy savings

. ( Joint Advocates, No. 16 at p. 2 ) ACEEE requested that DOE provide information on the fraction of annual savings that would be possible by adopting standby m ode and off mode standards. ( ACEEE, No. 13 at p. 27 )

After considering the comments related to this issue, DOE initially notes regarding its autho rity that through EISA 2007, Congress amended EPCA to make clear that DOE should consider energy savings opportunities related to standby mode and off mode energy consumption. Accordingly, DOE has estimated the standby mode and off mode annual energy

use for mechanical draft commercial packaged boilers , which is about 0.02 percent of the total boiler annual energy use

. DOE is seeking further comment regarding commercial packaged boilers ’ standby mode and off mode energy consumption , and in particular, data on the magnitude of energy consumed in the different operational modes.

Lastly, DOE received comments about the proposed coverage determination for natural draft CPB s

. AHRI disagree d with the definition of a “ natural draft commercial packaged boiler ”2

- 10 proposed in the August 2013 NOPD

, arguing that it is unnecessarily complex and includes mention of dampers, which is irrelevant in defining a natural draft boiler

. AHRI also state d that DOE should include the words “as required” after “mechanical draft” in the definition of

“ packaged boiler ” and that this would make the requirement of a separate definition for “ natural draft commercial packaged boiler ” unnecessary

. (AHRI, No.7 p.1

- 2) Both Laclede Gas Company (Laclede) and American Public Gas Associatio n (APGA) support ed DOE's proposed differentiation of natural draft equipment class es and suggest ed that DOE should promulgate the definition of “ natural d raft commercial packaged boiler .” The commenters also stated that DOE's concerns relating to potential substitution effects from a lack of explicit coverage of natural draft commercial packaged boilers are justified

. ( APGA, No. 6 at p. 2 ; Laclede, No. 8 at p. 2 )

DOE will consider the above comments about natural draft commercial packaged boilers when making its final determination about coverage of and the definition f or “natural draft commercial packaged boiler

, ” as proposed in the August 2013 NOPD. DOE would note at this juncture that it is not at liberty to mo dify or expand the definition of “packaged boiler,” which is defined by statute.

2.3.2 Market Assessment

As part of the market and technology assessment, DOE gathered information for an overall picture of the market for commercial packaged boiler equipment , including the nature of the equipment , market characteristics, and industry structure. DOE collected quantitative and qualitative information, primarily from publicly

- available sources. The market assessment examined manufacturers, trade associations, and the quantities and types of equipment sold and offered for sale. DOE reviewed relevant literature and interviewed manufacturers to develop an overall picture of the commercial boiler industry in the United States. Industry publications and trade jour nals, government agencies, and trade organizations provided much of the information, including: (1) manufacturers and their market shares; (2) shipments by equipment type; (3) equipment information; and (4) industry trends. Through surveying manufacturer literature and online equipment listings from manufacturer trade associations , such as AHRI, DOE compiled a database of 2
, 354 boiler models and their characteristics

. This information , along with other
sources, was used to carry out the market analysis an d inform the downstream analyses. DOE also interviewed manufacturers to further understand market conditions. The analyses for the market assessment are described in chapter 3.

2.3.3 Equipment Classes

When evaluating and establishing energy conservation stand ards, DOE generally divides covered equipment into classes by the type of energy used, capacity, or other performance

related features that affect efficiency

. Different energy conservation standards may apply to different equipment classes

. DOE then cond ucts its analysis and considers establishing standards to provide separate standard levels for each equipment class.

In the F ramework D ocument, DOE sought comment on the appropriateness of the equipment classes which were established for commercial packaged boilers and considered for the analysis. DOE received only one comment from AHRI, which agreed with the equipment2

- 11 classes created by DOE in the Framework Document, including the current 10 equipment classes. (AHRI, No. 17 at p. 5)

For the preliminary analysis, DOE considered 16 equipment classes initially divided by draft type (natural draft vs mechanical draft). For the sake of analysis, DOE assumed that the outcome of the August 2013 NOPD for natural draft commercial packaged boilers will be positive and analyzed those equipment classes for this preliminary analysis. ( If the determination is ultimately negative, DOE w ould not adopt standards for the natural draft equipment classes , as that equipment would not be cove red

. ) The equipment classes were further divided based on fuel type (gas or oil), heating medium (steam or hot water), and size (small (300 kBtu/h

– 2,500 kBtu/h) or large (> 2,500 kBtu/h)). Accordingly, for this preliminary analysis, DOE has analyze d th e 16 equipment classes in Table 2.3.1, and address es the se analyses in Chapter 3

. DOE requests comments from interested parties about the 16 equipment classes in Table 2.3

. 1

.

Table 2.3

. 1

. Equipment Classes Considered f or Preliminary Analysis
Draft Type Size Category Fuel Type Heating Medium Full Name

Natural

Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Gas

- fired Hot Water Small Gas

- fired Natural Draft Hot Water CPB Natural

Draft Large (>2,500,000 Btu/h) Gas

- fired Hot Water Large Gas

- fired Natural Draft Hot Water CPB Natural

Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Oil

- fired Hot Water Small Oil

- fired Natural Draft Hot Water CPB Natural

Draft Large (>2,500,000 Btu/h) Oil

- fired Hot Water Large Oil

- fired Natural Draft Hot Water CPB Natural

Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Gas

- fired Steam Small Gas

- fired Natural Draft Steam CPB Natural

Draft Large (>2,500,000 Btu/h) Gas

- fired Steam Large Gas

- fired Natural Draft Steam CPB Natural

Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Oil

- fired Steam Small Oil

- fired Natural Draft Steam CPB Natural

Draft Large (>2,500,000 Btu/h) Oil

- fired Steam Large Oil

- fired Natural Draft Steam CPB
Mechanical Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Gas

- fired Hot Water Small Gas

- fired Mechanical Draft Hot Water CPB

Mechanical Draft Large (> 2,500,000 Btu/h) Gas

- fired Hot Water Large Gas

- fired Mechanical Draft Hot Water CPB

Mechanical Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Oil

- fired Hot Water Small Oil

- fired Mechanical Draft Hot Water CPB

Mechanical Draft Large (>2,500,000 Btu/h) Oil

- fired Hot Water Large Oil

- fired Mechanical Draft Hot Water CPB

Mechanical Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Gas

- fired Steam Small Gas

- fired Mechanical Draft Steam CPB

Mechanical Draft Large (>2,500,000 Btu/h) Gas

- fired Steam Large Gas

- fired Mechanical Draft Steam CPB2

- 12 Mechanical Draft Small (≥300,000 Btu/h and ≤2,500,000 Btu/h) Oil

- fired Steam Small Oil

- fired Mechanical Draft Steam CPB

Mechanical Draft Large (>2,500,000 Btu/h) Oil

- fired Steam Large Oil

- fired Mechanical Draft Steam CPB

2.3.4 Technology Assessment

DOE typically uses information relating to existing and past technology options and prototype designs as inputs to determine what technologies manufacturers use to attain higher performance levels. In consultation with interest ed parties , DOE develops a list of technologies for consideration. Initially, these technologies encompass all those DOE believes are technologica lly feasible.

Based on the information obtained through market analysis, DOE conducted a review of existing b oiler technologies and upcoming technologies which can potentially improve boiler performance. DOE developed its list of technologically feasible design options for the considered equipment through consultation with manufacturers of components and systems , and from trade publications and technical papers. Since many options for improving efficiency are available in existing units, product literature examination provided additional information. An initial list of technologies was presented in the Framewor k D ocument , upon which DOE sought
comment. 12 These technology options broadly include:

(1) Technology options to improve combustion and/or thermal efficiency

a. Jacket insulation b. Heat exchanger improvements (including condensing heat exchanger and external and internal tube surface enhancement)

c. Burner derating d. Improved burner technology

e. Combustion air preheaters f. Economizers
g. Integrated, high

- efficiency steam boilers h. Blowdown waste heat recovery

(2) Technology options to reduce seasonal boiler energy consumption

a. Mod ulating burners b. Electronic ignition

c. Dampers d. Temperature reset controls

e. Thermal post

- purge controls

12 As noted in section 2.3.1, DOE has tentatively decided not to include standby mode and off mode energy conservation standards in the scope of the current energy conservation standards rulemaking. As a result, although DOE listed technology options that re duce standby mode and off mode energy consumption in the Framework Document, these options were not considered further in the preliminary analysis phase.2

- 13 f. Delayed

- action oil pump solenoid valve

DOE requested comment from interested parties on appropriateness of the listed technology options and if any new opti ons could be added to the list.

DOE received s everal comments from interested parties about the technology assessment. AHRI stated that the actual list of technology options available to improve efficiency would be much smaller than that reported in the Framework Document

. ( AHRI, No. 17 at p. 5 ) According to AHRI

, options such as improving jacket insulation and burner derating have already been explored by most manufacturers

, and there is no possibility for further efficiency improvement by implementing these options. ( AHRI, No. 1 7 at p. 5 ) AHRI also stated that combustion air pre

- heaters w ould provide only minor improvement in efficiency but at great cost in terms of implement ation

, and that improving burner technology would in itself not increase eff iciency. AHRI stated that using economizers for large commercial boilers would result in improved efficiency. Further, AHRI stated that none of the technology options aimed at reducing standby mode or off mode energy consumption should be considered ; a cc ording to AHRI, the potential energy savings from these techniques is negligible

, as compared to the overall energy consumption of the boiler

. (AHRI, No. 17 at p. 6).

HTP stated that derating burners would not be beneficial

, as derating is equivalent to oversizing the heat exchanger. HTP also stated that adopting pulse combustion is difficult in the field. HTP suggested the use of pre

- mix combustion systems

, as they have the potential to increase efficiency and at the same time significantly reduce emissions. HTP also suggested additional technology options, especially for modulating boilers

, which can improve air

- fuel mixing

, such as venturies, swirl plates

, and servo

- driven orifices. ( HTP, No. 18 at p. 6)

The Joint Advocates suggested internationally adopted technologies in the European and Asian markets

. (Joint Advocates, No. 16 at p. 3 ) ACEEE also comment ed that derating competes with (or is similar to) using a part

- load measure

, and so if a part

- load measure is adopted (as in the case of a modulating burner) , the user automatically gets the benefit of an oversized heat exchanger for 90

- percent of the bin hours

. ( ACEEE, Public Meeting Transcript No. 13 at p p . 55

- 56 ) Burnham suggested using electronically

- commutated motors (ECMs) for pumps as a technology that should be analyzed

. ( Burnham, No. 15 at p. 2 )

NW Natural suggest ed that opportunities to advance technolog ical approaches for higher

efficiency natural draft boilers need to be investigated

. ( NW Natural, No. 5 at p p. 1

- 2 ) ABMA stated that safety aspects should be analyzed as part of the overall evaluation of technologies

, particularly the combustion pre

- heater technology

. ( ABMA, Publ ic Meeting Transcript No. 13 at
p p . 50

- 51 ) Lochinvar note d that none of the technology options suggested by DOE have the potential to create hu ge improvements in efficiency and stated that DOE should not expect a vast increase in minimum efficiency levels

. ( Lochinvar, Public Meeting Transcript No. 13 at p. 52 )

DOE considered the comments received from the interested parties in performing the technology assessment and screening analysis

. DOE notes that the technology assessment is an effort to identify any and all technologies that could possibly be used to reduce energy consumption for CPB s , and DOE later removes technologies that have already been i mplemented, that would not improve the efficiency as rated (and thus, is unlikely to be2

- 14 implemented as a res ult of amended energy con servation standards), or that are screened out based on the screening criteria (see section 2.4). DOE has considered a number of technologies in chapter 3 of this TSD, M arket and T echnology A ssessment, and has also caref ully evalu ated these comments when deciding which technologies to should be considered downstream. Specifically, DOE agrees that derating is not a viable design option, and has screened it out

, as it would reduce utility by reducing the heat output of the CPB. DOE also agree s with HTP’s
comments on improving burner combustion performance and has considered those technologies accordingly

. DOE has included premix burners , low

- pressure air

- atomized burner and pulse combustion as potential technology options that impr ove efficiency

. As suggested, DOE has explored all avenues for identifying potential technology options, including exploring international markets. Further details are provided in chapter 3 of this preliminary TSD.

In light of these comments, DOE re

- exam ined its list of technology options and has tentatively concluded that the largest gains in energy efficiency can be achieved through modification of the heat exchanger. Any improvement in the effectiveness or overall heat transfer coefficient of the heat exchanger would significantly enhance boiler efficiency. Therefore, most of the technology option s identified by DOE in TSD Chapter 3

, Market and Technology Assessment

, are aimed at improving heat exchanger performance. This includes but is not limited to : (1) a ddition of a secondary heat exchanger ; (2) improving tube design ; (3) incorporating turbulators ; and (4) introduction of baffles. DOE notes that air or flue

- gas side performance is usually the limiting factor for a typical gas

- liquid heat exchanger. Therefore, DOE has provided an assessment of fin designs to improve air

- side performance. Some of these options would also address concerns regarding investigating ef ficiency improvement technologies for natural draft commercial packaged boilers. The market and technology assessment (Chapter 3 of th is preliminary TSD) lists all the technology options that were considered for the screening analysis. DOE notes that the s creening analysis (chapter 4 of the preliminary TSD) will eliminate some of the technologies identified in the technology
assessment. In addition, in the engineering analysis, DOE only considers technologies which have a significant impact on the efficien cy, as rated by the DOE test method, which could be implemented as the result of an amended energy conservation standard.

2.4 SCREENING ANALYSIS

The purpose of the screening analysis is to evaluate the energy

- saving technologies identified in the technology as sessment to determine which ones to consider further and which

ones to screen out

. DOE consulted with industry and other interested parties in developing a list of feasible technologies for the technology assessment

. DOE then applied screening criteria to determine which technologies are not suitable for further consideration in this rulemaking

. Chapter 4 of th is pr e liminary TSD, S creening A nalysis, contains details about DOE’s screening criteria.

As detailed below, t h e screening analysis examines whether various technologies : (1) are technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an adverse impact on equipment utility or availability; and (4) have adverse impacts on health and safety

. If the technology option does not meet the first two criteria or if the technology option does meet the last two criteria, DOE will not consider that technology option further. In addition, DOE notes that the four screening criteria do not di rectly address the proprietary status2

- 15 of design options. DOE only considers efficiency levels achieved through the use of proprietary designs in the engineering analysis if they are not part of a unique pathway to achieve that efficiency level ( i.e. , if t here are other non

- proprietary technologies capable of achieving the same efficiency). DOE reviewed the list of commercial package boiler technologies according to these criteria

. In the engineering analysis, DOE further considers the efficiency

- enhancem ent technologies that it did not eliminate in the screening analysis.

1. Technological feasibility. DOE screen s out technologies that are not incorporated in commercially

- available equipment or working prototypes.

2. Practicability to manufacture, install, and service

. If DOE determines that mass production of a technology in commercial equipment and reliable installation and servicing of the technology could not be achieved on the scale necessary to serve the relevant market by the time of the compliance date of the standard, it will not further consider that technology.

3. Adverse impacts on equipment utility or availability. If DOE determines a technology has a significant adverse impact on the utility of the equipment for significant consumer subgroups or res ults in the unavailability of any covered equipment type with performance characteristics (including reliability), features, size, capacities, and volumes that are substantially the same as equipment generally available in the United States at the time, it will not further consider that technology.

4. Adverse impacts on health or safety. If DOE determines that a technology will have significant adverse impacts on health or safety, it will not further consider that technology.

HTP commented on the screening analysis for different technology options. HTP stated that the choice of materials which can be used to construct condensing boilers is limited

, and unless significant innovation occurs in this field, no alternative material choice would be an

o ption. HTP also stated that derating the combustion system is equivalent to oversizing the heat exchanger and only has a limited application. Lastly, HTP identified several technology options which have had reliability issues: (1) pulse combustion; (2) a ir pre

- heaters and economizers; (3) hot surface igniters ; and (4) cast iron heat exchangers

. (HTP, No. 18 at p. 6)

DOE considered these comments when performing the screening analysis. DOE notes that the screening analysis only removes technologies for t he four reasons listed above ( i.e.
, technological feasibility; practicability to manufacture, install, and service; adverse impacts on equipment utility or availability; and adverse impacts on health and safety). Technologies which were screened out based on the four criteria and the justification for the screening are contained in chapter 4 , Screening Analysis, of this preliminary TSD.

Out of the list of technology options that passed the screening test, few options were removed because they have a negl igible improvement in combustion or thermal efficiency when tested using DOE’s test procedure

. These options and the reasons behind their removal from further consideration; are contained in chapter 4 Screening Analysis, of this preliminary TSD.2

- 16 The remain ing technology options which passed the screening analysis and which will be further considered by DOE include:

1. Addition of condensing or secondary heat exchanger ; 2. Increased primary heat exchanger surface area ; 3. Incorporation of heat exchanger surface features (such as dimples) and internal features (such as turbulators, corrugation, or rifling) with the purpose of inducing turbulent flow on either the flue

- gas or water side of the heat exchanger ; 4. Introduction of baffles which increase effective flow le ngth (or surface area) and residence time of fluid inside the heat exchanger ; 5. Introduction of micro

- fin tubes to enhance water

- side boiling performance ; 6. Replacing flat straight fins with wavy or louvered fins to improve flue

- gas side heat transfer perfor mance. Staggering may also improve thermal a s well as hydraulic performance; and 7. Introduction of premix burners, pulse combustion and low pressure

– air atomized oil burners as improved burner technology options.

DOE is requesting comments on the technolo gy options which passed the screening analysis with regard to their technological and economic feasibility

. In particular

, DOE is interested in knowing about technology options which can improve efficiency of natural draft boilers.

2.5 ENGINEERING ANALYSIS

T he engineering analysis (chapter 5 of the TSD) establishes the relationship between manufacturer selling price and increased efficiency for each commercial packaged boiler equipment class. This relationship serves as the basis for cost

- benefit calculation s in terms of modified equipment designs intended to improve energy efficiency for individual commercial

consumers , manufacturers, and the N ation

. Chapter 5 discusses the equipment classes analyzed, representative baseline units, incremental efficiency le vels, the methodology used to develop price estimates at each efficiency level, price

- efficiency curves, and the impact of efficiency improvements on the considered equipment

. To determine the cost to commercial consumers of CPBs at higher efficiency leve ls, DOE estimated manufacturer selling prices at various efficiency levels, and markups in the distribution chain. Contractors and manufacturers provided price lists for different commercial packaged boiler models, which were aggregated to determine

an av erage price for each efficiency level. Thermal and combustion efficiency levels of the boiler models were verified using the AHRI database and boiler catalogues.

DOE sought comment about several aspects of the engineering analysis in the Framework Docume nt

. In particular, DOE requested comment on the range of efficiency levels and key efficiency levels for the analysis, the appropriate max

- tech levels, representative characteristics, and any characteristics which would require multiple representative equipment types within an equipment class.2

- 17 Regarding the efficiency levels, AHRI commented that vent categorization is important, and that combustion efficiency of 83 percent is generally a line of demarcation between models that are not designed to conden se in the vent and those models that are. AHRI stated that models with efficiency ratings above 83 percent combustion efficiency require vent systems that are different from the common Type B vent systems used in many existing installations. (AHRI, No. 1 7 at p. 6) HTP recommended that DOE review AHRI’s historical updates to identify the kind of efficiency levels associated with new products being released. ( HTP, No. 18 at p. 7).

AHRI commented that the “max

- tech” for the purposes of this analysis should only consider models which are commercially available and for which there is significant field experience in North America. AHRI argued that market forces are already driving manufacturers to develop higher

- efficiency equipment in this class

, and it is t herefore unlikely that DOE will identify a technology not already in commercial use that is safe, reliable, and cost effective. (AHRI, No. 17 at p. 6) AHRI also commented that max

- tech hot water boilers currently employ condensing technology, and that sl ight differences in the ratings near the max

tech level may be due to variability in the test procedure, or slight differences in input rating, factors for which DOE should account. (AHRI, No. 17 at pp. 6

- 7) AHRI stated that for gas and oil steam boilers , there are often situations where no practical alternatives to natural draft venting exist, and

, therefore, the practical “max

- tech” level for these classes should be limited to an efficiency appropriate for traditional natural draft venting systems. (AH RI, No. 17 at p. 7) HTP stated that it is currently developing a max

- tech prototype CPB using currently

- available components, and the commenter pointed out that there are several types of equipment listed with efficiencies at or above 98

- percent thermal efficiency.

In response to these comments, DOE reviewed the market, including manufacturer literature and public equipment databases, to identify the most common efficiency levels of equipment being offered in the U.S. market. DOE selected max

- te ch efficiency levels for each equipment class based on the maximum available efficiency in that class. DOE selected intermediate efficiency levels based primarily on the most common efficiency levels offered, but also on whether that level represented a s ignificant change in technology ( e.g. , condensing). DOE notes AHRI’s concern regarding max

- tech efficiency ratings , and, as suggested, DOE has identified max

- tech levels based on products currently on the market

. DOE considered whether slight differences i n the input rating impact the max

- tech level, but found that models currently on the market generally show little trend between input rating and efficiency (see chapter 3 of this preliminary TSD). Regarding variations in ratings due to issues related to th e test procedure

, DOE assumes that all manufacturers have conducted adequate testing to determine an efficiency rating that is representative of performance of their equipment under the DOE test procedure, and that the result is repeatable. If there is a specific issue concerning repeatability of the test procedure, DOE seeks comment on that issue within the context of it s test procedure rulemaking for commercial packaged boilers. 13 In response to AHRI’s other comment on limiting max

- tech efficiency levels of natural draft boilers, DOE reiterate s that the max

- tech efficiency levels are

13 DOE is conducting a separate rulemaking to address the test procedures for commercial packaged boile rs (Docket Number EERE

- 2014

- BT

- TP

- 0006 ). For more information see: http://www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=87

.2

- 18 chosen based on efficiency rating of equipment that is available in the market , and are chosen individually for each equipment class. Additional details about the selection o f efficiency levels are included in chapter 5 , Engineering Analysis, of the preliminary TSD.

Regarding the representative characteristics, AHRI stated that there is no single set of characteristics or representative capacity that can be used as a baseline model for CPBs

. AHRI recommended that DOE consider the following characteristics for each equipment class when conducting its analysis: (1) h eat exchanger materials (stainless steel, steel, copper, aluminum, cast iron) ; (2) heat exchanger construction (si ngle

- pieced, sectional, water tube, fire

- tube) ; and (3) burner type (atmospheric, induced, premix, power). ( AHRI, No. 17 at p. 7 ) HTP commented that a wide range of CPB efficiencies is possible , which is not tied to the size ( input rate ) of the boiler, and a review of AHRI data indicates that equipment with a thermal efficiency of 98 percent is available from the smaller sizes of boilers up through boilers operating at more than 4 ,000 k B tu /h. HTP further stated that there is a significant cost d ifference between a 501 kBtu/h boiler and a 999 kBtu/h boiler

, and as a result, HTP recommended that DOE not use a representative capacity within this range. (HTP, No. 18 at p. 8)

DOE considered these comments when selecting boiler models for analysis. T o simplify the analysis, DOE selected a representative capacity for each equipment class, with the

re presentative capacity being 800 kBtu/h for the “sma ll” equipment classes and 3,000 k Btu/h for the “large” equipment classes. Although DOE recognizes the s ignificant variation in price attributable to size differences, DOE has determined that these input ratings are adequate to represent the other boiler models in the equipment classes, on average. DOE also considered various features, such as heat exchange r material, while conducting the analysis. Additionally, only the boiler models that are commercially available and have verifiable efficiency le vels listed in the AHRI database were considered for the analysis. Additional details of the engineering anal ysis a re contained in chapter 5 of this preliminary TSD. DOE welcomes comments from interested parties on the methodology adopted and incremental price results obtained from this engineering analysis. DOE would also welcome any price

- related information

, especially on natural draft CPB s which would improve DOE’s future analyses for this current rulemaking.

2.6 MARKUPS ANALYSIS

DOE uses distribution channel markups to convert the manufacturer selling price estimates from the engineering analysis to commercial consumer prices, which are then used in the LCC and PBP analysis and in the manufacturer impact analysis

. Retail prices are necessary for the baseline efficiency level and all other efficiency levels under consideration

. Before developing markups, DOE define s key market participants and identif ies distribution channels

. In the Framework Document, DOE described several distribution channels that included three market participants: (1) wholesaler s ; (2) mechanical contractors (including dealers and instal lers); and (3) general contractors (including builders)

. DOE used three types of distribution channels to describe how most commercial packaged boilers pass from the manufacturer to the consumer : ( 1) replacement market; ( 2) new construction, and ( 3 ) natio nal
accounts

. The national accounts channel is an exception to the usual distribution channel ; it is only applicable when manufacturers sell large

, custom

- built commercial packaged boilers directly to the commercial consumer

.2

- 19 In the Framework Document, DOE requested comment about the distribution channels for commercial packaged boilers

. ABMA stated that the wholesaler is not a part of the distribution chain for large boilers

. (ABMA, No

. 0014 at p. 5) ACEEE, ASAP, and NRDC stated that the role of the “manufacturer’s representative” is critical in many sectors . ACEEE, ASAP, and NRDC believe that the se actors generally do not actually buy and hold equipment, in contrast to wholesalers

. (ACEEE, ASAP

, NRDC , No. 0016 at p. 3) AHRI, ACEEE, and ABMA agree that f or larger boilers, the manufacturer’s representative sells to a mechanical contractor. ( AHRI, No. 0017 at p. 7 ; ACEEE, No. 0013 at pl. 77; ABMA, No. 0013 at p. 78 )

For the preliminary analysis , DOE included the manufacturer’ s representative instead of a wholesaler in the distribution channels for large commercial packaged boilers. DOE agrees that the manufacturer’s representative generally sell s the equipment but does not actually buy and hold it , which could result in lower markup than wholesalers who usually stock inventories. However, there is not enough information to differentiate markups between manufacturer’s representatives and wholesalers. Therefore, DOE applied the same markup for both entities. DOE requests data on markups related to manufacturer’s representatives and wholesalers

, as well as data on the relative difference between them

. AHRI stated that DOE should assign appropriate distribution channels by input capacity. (AHRI, No. 0013 at p. 80) For the preliminary analysis , DOE defined separate distribution channels for small (≥300,000 Btu/h and ≤2,500,000 Btu/h) and large (>2,500,000 Btu/h) commercial packaged boilers. AHRI also stated that DOE should recognize that the distribution channels most often used for built

- to

- stock commercial packaged boilers will be different from those for built

- to

- order commercial packaged boilers

. (AHRI, No. 0017 at p. 7) DOE applied
t he national accounts channel to a fraction of large (custom

- built) boilers that manufa cturers sell directly to the commercial consumer

.

A fter defining the distribution channels, DOE develops markups to transform the manufacturer selling price into a commercial consumer purchase price

. DOE uses baseline markups to determine the sales price of baseline models

. Incremental markups are coefficients that DOE applies to the incremental cost of higher

- efficiency models

. Because companies mark up the price at each point in the distribution channel, both baseline and incremental markups are depen dent on the particular distribution channel.

In the Framework Document, DOE stated its intention to use data from the Heating, Air

conditioning & Refrigeration Distributors International (HARDI), 14 the Air Conditioning Contractors of America (ACCA), 15 the 2 007 Economic Census, 16 the Commercial Building

14 H eating, Air Conditioning & Refrigeration Distributors International 2013 Profit Report, (Available at: http://www.hardinet.org/Profit

- Report ) (Last accessed May 2014).
15 A ir Conditioning Contractors of America (ACCA), Financial Analysis for the HVACR Contracting Industry: 2005 (2005) (Available at: https://portal.acca.org/onlinestorefront/BrowseMerchandise.aspx ) (Last accesse d March 2014).
16 U.S. Census Bureau, 2007 Economic Census (Last accessed March 2014) (Available at: http://www.census.gov/econ/census/ )2

- 20 Energy Consumption Survey 2003 (CBECS 2003), 17 the Residential Energy Consumption Survey 2009 (RECS 2009), 18 and the Sales Tax Clearinghouse 19 to determine markups and retail prices.

AHRI stated that the markups approach to develop estimates of commercial packaged boiler retail prices may be valid, but given the complexities of the commercial boiler market, it is unlikely to provide a reasonable estimate of price . It added that t he markup s that occur at various stages include additional components for the heating system or additional services, making it difficult to discern the price increase that can be actually attribute d to increase d efficiency

. (AHRI, No. 0017 at p. 8)

DOE acknowledges that ther e are complexities in the commercial packaged boiler market

, but it believes that the markups approach is reasonable for the purposes of DOE’s analysis, which is primarily concerned with incremental price differences between efficiency levels rather than a bsolute price levels. DOE’s markups do not include additional components or services. Commenters provided no recommended alternative approach.

See chapter 6 , Markup Analysis, of this preliminary TSD for additional details.

2.7 ENERG Y USE A NALYSIS
The purpo se of the energy use analysis is to determine the annual energy consumption of commercial packaged boiler s in representative U.S. buildings and to assess the energy savings potential of increased boiler efficiency

. DOE estimate d the annual energy consumpt ion of commercial packaged boiler s at specified energy efficiency levels across a range of climate

zones

. The annual energy consumption include s the fuel use (oil or natural gas) by the boiler for space heating and water heating (if applicable), as well a s the electricity use of auxiliary components, including blower fan, igniter, and pumps. The annual energy consumption of commercial packaged boiler s is used in subsequent analyses, including the LCC and PBP analysis and the national impact analysis.

DOE primarily used CBECS 2003 energy data and weather data from the National Oceanic and Atmospheric Administration ( NOAA ) to estimate weather

- normalized energy use of commercial packaged boilers. 20 CBECS is a national sample survey of commercial building units that collects statistical information on the consumption of and expenditures for energy in commercial building units along with data on energy

- related characteristics of the commercial

17 U.S. Department of Energy: Energy Information Administration, Commercial Buildings Energy Consumption Survey (2003) (Available at: http://www.eia.gov/consumption/commer cial/data/2003/index.cfm?view=microdata ) (Last accessed November 2013).
18 U.S. Department of Energy: Energy Information Administration, Residential Energy Consumption Survey: 2009 RECS Survey Data (2013) (Available at: http://www.eia.gov/consumption/residential/data/2009/ ) (Last accessed March 2014).
19 Sales Tax Clearinghouse Inc., State Sales Tax Rates Along with Combined Average City and County Rates (2014) (Available at: http://thestc.com/STrates.stm ) (Last accessed May 27, 2014).
20 National Oceanic and Atmospheric Administration, NNDC Climate Data Online (Available at: http://www7.ncdc.noaa.gov/CDO/CDODivisionalSelect.jsp) (Last accessed March 15, 2013).2

- 21 buildi ng units and occupants ( e.g. , vintage of the building, square footage, fuels used, heating energy use) . For commercial packaged boilers used in residential applications, DOE used the RECS 2009 building sample, which provides similar information as CBECS.

Commenting on the Framework Document, AH R I stated that the analysis should not consider any energy used by the commercial packaged boiler other than the f uel supplied to fire the boiler

. (AHRI, No. 0017 at p. 8) DOE recognizes that the primary energy use is from the fuel supplied to fire the boiler and that the energy use from auxiliary electrical components is small. However, these components have been included in the analysis to be comprehensive and because the electrical energy use varies by effici ency level.

In the Framework Document, DOE requested input on the fraction of commercial packaged boilers used in residential applications. AHRI stated that the multi

- family residential application market is large enough for DOE to take into account. AHRI also stated that it does not make a difference whether commercial packaged boilers are used in residential or commercial applications, as the boilers will be meeting a commercial

- sized load regardless of the application. (AHRI, No. 0013 at pp. 100, 1 03)

DOE agrees with AHRI, and considers a commercial packaged boiler in any residential or commercial building with a commercial

- sized load (≥300,000 Btu/h). Based on data from CBECS 2003 and RECS 2009, DOE estimated that 84 percent of commercial package d boilers are installed in commercial buildings and 16 percent are in residential buildings.

In the Framework Document, DOE sought input on the planned approach for determining the energy consumption of commercial packaged boilers in commercial buildings

. HTP stated that the intended approach is reasonable, but note d that the origin of the data presented in the cited references should also be considered

. For example, although the ASHRAE handbooks were recently updated, the hot water usage data presented in their sizing methods may not have been updated within the last ten or more years, depending upon which table is considered . HTP further stated that the da ta presented in the tables have often been collected from small sample sizes and do not necessaril y accurately account for a cross

- section of the entire country

. (HTP, No. 0018 at p. 8)

To estimate the annual energy consumption of commercial packaged boilers, DOE calculated the building heating load based on the CBECS and RECS estimates of the annual energy consumption of the boiler for each building. DOE then use d the building heating load to determine the burner operating hours, which are needed to calculate the fuel consumption and electricity consumption

. To calculate the electricity consumption of the pump and other auxiliary components , DOE utilized data from manufacturer equipment literature

. In response to HTP, DOE considered the origin of the data for all cited sources. Hot water energy use is based on the reported hot water usage data from CBECS 2003 and RECS 2009, not the ASHRAE handbooks.

HTP stated that s ignificant changes to all aspects of building construction have occurred in the past several decades. (HTP, No. 0018 at pp. 10

- 11 ) DOE accounted for changes in building characteri stics by incorporating the building shell efficiency index from the Energy2

- 22 Information Administration’s (EIA) Annual Energy Outlook ( AEO ) 2013

. 21 The index represents the change in heating load based on the change in physical size and shell attributes for buildings in the future (which takes into account efficiency gains from better insulation and windows)

. Regarding the method for determining energy use of commercial packaged boilers

, ACEEE, ASAP, and NRDC stated that thermal efficiency by itself may not be well

- correlated with annual energy use because it measures only peak load

. ACEEE, ASAP, and NRDC stated that because loads vary seasonally and since most boilers are said to be oversized, it is likely that few boilers (except in boiler trains) ever ope rate at full load for significant periods of time

. ACEEE, ASAP, and NRDC suggest ed that DOE adapt the “prototype buildings” simulation approach used to support ASHRAE 90.1 analyses, running representative build ings through hourly simulations. ( ACEEE, ASAP, NRDC , No. 0016 at p. 3)

In the preliminary analysis, DOE did not use whole building simulation data. Instead, DOE used an approach that adjusted the rated thermal efficiency to account for differences in efficiency related to part

- load operation, return water temperature, and cycling losses. The adjustments are based on weather data and information published in manufacturer literature. DOE believes that the proposed approach adequately represents annual energy use.

Regarding the efficiency metr ics used by DOE, HTP stated that f or equipment wit h inputs above approximately five m illion Btu /h, the domina n t metric reported is c ombustion

e fficiency, with little data about the thermal efficiency of the equipment

. As the thermal efficiency should be l ower than the combustion efficiency, HTP expect s a statistical relationship between the two parameters to exist at higher inputs

. HTP note d that due to uncertainty in measurements and the effects of condensation, the c ombustion e fficiency is sometimes mea sured to be lower than the thermal efficiency for higher

- efficiency products

. (HTP, No. 0018 at p. 9)

DOE determined a relationship between combustion efficiency and thermal efficiency by equipment class for the models in the AHRI database, which lists b oth efficiencies. For the energy use analysis, DOE used this relationship between the two efficiency metrics to determine the thermal efficiency for the equipment classes that use the combustion efficiency metric. DOE recognizes the impact of the measure ment uncertainty that may cause the combustion efficiency measurement to be lower than the thermal efficiency measurement, but it used the efficiency values as reported in the AHRI database, as these are the only available data.

In the Framework Document, DOE requested comment about whether the rated thermal efficiencies for all commercial packaged boiler s should be adjusted to reflect return

- water conditions , which was previously done for condensing boilers

. HTP encourage d DOE to adjust the rated thermal efficiency for all commercial packaged boiler equipment to reflect return

- water temperature conditions

, because all products are occasionally installed in conditions that do not allow the equipment to operate at the highest possible efficiencies. (HTP, N o. 0018 at p. 9) On

21 U.S. Department of Energy

- Energy Information Administration, Annual Energy Outlook 2013 (Available at: http://www.eia.gov/forecasts/aeo/pdf/0383%282013%29.pdf ) (Las t accessed March 15, 2014).2

- 23 the other hand, AHRI stated that DOE should not attempt to adjust rated thermal efficiencies to reflect return

- water conditions. AHRI stated that, a s DOE does not have the data needed to determine what typical return water t emperature s are in the field, any adjustment would be an unsupported estimate . AHRI further stated that many installations today employ an outdoor
reset , which adjusts the boiler operation based on the heating load . AHRI stated that w ith the use of this control, t he typical return water temperature becomes more difficult to characterize. (AHRI, No. 0017 at p. 9)

DOE recognizes that boiler efficiency is dependent upon boiler design and operating conditions, particularly the return water temperature. DOE understan ds that it is difficult to characterize average return water temperatures, as they vary with installations. However, DOE believes that the return water temperature used during efficiency testing could be lower than that used in most installations, and som e adjustment should be made to account for this . Similarly, boiler control strategies vary with installations. DOE determined average return water temperatures for each U.S. climate zone and boiler type (condensing vs. non

- condensing), including the impa ct of outdoor temperature reset controls. See chapter 7 , Energy Use Analysis, of this preliminary TSD for details on the assumptions and methodology used to adjust boiler efficiency to account for these factors.

Burnham stated that not all boilers share the same design, so some will perform better or worse than others at higher or lower water temperatures

. (Burnham, No. 0015 at p. 2) Burnham also stated that when highly

- efficient boilers are installed in systems that operate at high return
water tempera tures, their efficiencies are very similar to non

- condensing technologies

. (Burnham, No. 0015 at p. 1 )

DOE accounted for a fraction of condensing boilers installed in systems with high return water temperatures. In such cases, DOE assumed that the boiler will not operate in condensing mode, thus resulting in reduced overall efficiency for those condensing boiler installations.

AHRI , ABMA, and HTP stated that DOE’s analysis needs to consider the increased use of multiple

- boiler s ystems that are controlled to operate sequentially as the heating demand increases

. The total input of the boilers is sized to meet the design heating load

, but each individual boiler has a lower input rate

. Other installations use a combination of one or more high

- efficiency boilers and a standard

- efficiency boiler

, where the high

- efficiency boilers operate the majority of time when the heating load is less than the designed maximum heating load

, and
t he standard

- efficiency boiler only operat es on the coldest days to meet the heating load

. (AHRI, No. 0017 at p. 11 ; AMBA, No. 0013 at p. 91; HTP, No. 0013 at pp. 106

- 107 )

DOE acknowledges that some commercial packaged boiler installations may have multiple smaller boilers instead of one large boiler. In the preliminary an alysis, DOE assumed that for buildings equipped with boiler equipment over 600 kBtu/h, 50 percent of buildi ngs use a single boiler, while the remaining 50 percent use two identical boilers that operate sequentially depending on the heating load. DOE assumed that for buildings equipped with boiler e quipment under 600 kBtu/h , the buildings are served by a single boiler.2

- 24 AHRI , ABMA, and HTP stated that the installation of two

- stage and modulating commercial boilers has been common in the past several years, resulting in increased efficiency because boilers with these control types can operate at reduced input in response to the heating load. (AHRI, No. 0017 at p. 11 ; AMBA, No. 0013 at p. 91; HTP, No. 0013 at pp. 106

- 107 ) DOE’s analysis accounts for the operation at reduced input for two

- stage and modulating commercial packaged boilers.

Chapter 7 , Energy Use Analysis, of this preliminary TSD describes the details of the energy use analysis methodology.

2.8 LIFE

- CYCLE COST AND PAYBACK PER IOD AN ALYSI S

In determining whether an energy conservation standard is economically justified, DOE considers the economic impact of potential standards on consumers. The effect of new or amended standards on individual consumer s usually includes a reduction in operating cost and an increase in purchase cost

. DOE use s the following two metrics to measure consumer impact s :

• LCC (lif e

- cycle cost) is the total consumer cost of an appliance product or piece of equipment , generally over the life of the product or equipment. The LCC calculation includes total installed cost (equipment manufacturer selling price, distribution chain markup s, sales tax, and installation costs), operating costs (energy, repair, and maintenance costs), equipment lifetime, and discount rate

. Future operating costs are discounted to the time of purchase and summed over the lifetime of the product or equipment

.

• PBP (payback period) measures the amount of time it takes commercial consumer s to recover the assumed higher purchase price of more energy

- efficient equipment through reduced operating costs.

DOE analyze d the net effect of potential amended commercial pac kaged boiler standards

on commercial consumer s by calculating the LCC and PBP using the engineering performance data, the energy

- use data, and the markups

. Inputs to the LCC calculation include the total installed cost to the commercial consumer (purchase price plus installation cost), operating expenses (energy expenses, and, if applicable, repair costs and maintenance costs), the lifetime of the equipment or other defined period of analysis, and a discount rate

. Inputs to the payback period ca lculation include the installed cost to the commercial consumer and first

- year operating
costs.

DOE generated LCC and PBP results as probability distributions using a simulation approach based on Monte Carlo analysis methods, in which certain key inputs t o the analysis consist of probability distributions rather than single

- point values

. Therefore, the Monte Carlo analysis produces a range of LCC and PBP results which allows DOE to identify the fraction of customers achieving LCC savings or incurring net cost at the considered efficiency levels.

DOE is also required to perform a PBP analysis to determine whether the rebuttable presumption of economic justification applies (where the higher installed cost of more energy

efficient equipment is less than thr ee times the value of the energy savings in the first year of the2

- 25 energy conservation standard). However, DOE routinely conducts a full economic analysis that considers the full range of impacts, including those to the consumer, manufacturer, Nation, and environment. The results of this analysis serve as the basis for DOE to definitively evaluate the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification ).

2.8.1 Inputs to Total Installed Cost

Purchase Price

To calculate the purchase price paid by commercial packaged boiler purchasers, DOE multiplied the manufacturing product costs (MPCs) developed from the engineering analysis by the industry markups to derive the manufacturer selling prices (MSPs). The MSPs in turn are multiplied by supply chain markups (along with sales taxes) to estimate the initial cost to the commercial consumer. DOE used the supply chain markups that include se parate markups on the baseline MSP and the incremental cost of each higher efficiency level considered

.

Installation Cost s

DOE estimated the installation costs associated with placing a boiler in a new building unit or as a replacement for an existing boiler using RS Means d ata, manufacturer literature, and information from expert consultants. 22
, 23
, 24 Th e analysis include s costs, such as venting and piping modifications , which would be required to install equipment in various installation cas es. For higher

- efficiency boilers, DOE also incorporated additional considerations , such as stainless steel venting and condensate removal requirements. The installation cost of both condensing and

non

- condensing boilers vary significantly with vent leng th, which is independent of boiler efficiency.

Commenting on the Framework Document, AHRI noted that the proposed analysis does not consider possible changes that may be required for the heating system radiators to achieve the lower return water tempera tures that are specified for condensing commercial boilers

. (AHRI, No. 0017 at p. 10) DOE did not consider changes that may be made to heating systems to accommodate conditions specific for condensing boilers. Instead, DOE assumed that a fraction of con densing boilers operate in high temperature systems where they will always operate in non

- condensing mode when the return temperature conditions are higher than required for condensing operation.

22 RS Means Company Inc., RS Means Facilities Construction Cost Data . 26th Annual Edition ed. (2011) ( Available at : http://rsmeans.reedconstructiondata.com/default.aspx )

. 23 RS Means Company Inc

. , RS Means Mechanical Cost Data

. 36st Annual Edition ed. (2013) (Available at: http://rsmeans.reedconstructi ondata.com/default.aspx ).
24 RS Means Company Inc., RS Means Plumbing Cost Data , 36 th Annual Edition ed. (2013) (Available at: http://rsmeans.reedconstructiondata.com/default.aspx ).2

- 26 ACEEE, ASAP, and NRDC stated that condensing and non

- condensing equipment may differ in terms of installation costs, but possibly in counterintuitive ways

. For example, for a fraction of commercial packaged boiler replacements, substituting a condensing boiler may reduce installatio n costs if the efficiency upgrade allow s abandoning a masonry chimney that otherwise requires repointing and annual inspection

. ( ACEEE, ASAP, NRDC , No. 0016 at p. 4) In contrast, Burnham stated that any proposed standard that changes the use of chimneys will add
costs

. (Burnham, No. 0015 at p. 2)

In DOE’s analysis, the installation cost depends on various building and boiler characteristics and are not solely determined by whether the boiler is condensing or non

condensing. Regarding masonry chimneys , DOE assumes that a fraction of installations that have chimneys will be relined when the boiler is replaced. See appendix 8

- D of the preliminary TSD for more details on the installation cost methodology.

2.8.2 Inputs to Operating Cost

Energy Use (described i n section 2.7 )

In the Framework Document, DOE sought comment on the rebound effect th at may be associated with more

- efficient commercial packaged boilers

. A rebound effect occurs when a piece of equipment that is made more efficient is used more intensively, so that the expected energy savings from the efficiency improvement may not fully materialize. AHRI and Lochinvar stated that the rebound effect is not a significant factor in commercial boiler installations

. (AHRI, No. 0017 at p. 9 ; AHRI , No. 0013 at p. 10 5, Lochinvar, No. 0013 at p. 104 ) Lochinvar stated that the building occupants do n o t even know if they have high

- efficiency equipment

, and AHRI

con firmed that the recipients of space heating are not necessarily the ones controlling the boiler operation

. Similarly, HTP stated that it is not aware of such a rebound e ffect in this market segment

. (HTP, No. 0018 at p. 10) DOE agrees with the stakeholde rs that it is unlikely that commercial consumers of commercial packaged boilers would use more

- efficient equipment more intensively because maintaining proper comfort is essential in commercial buildings and it is not impacted by the equipment efficiency. C onsequently DOE did not include a rebound effect in the analysis.

Energy Prices

DOE derived average monthly natural gas, oil, and electricity prices for the nine C ensus D ivisions in CBECS 2003 and 30 geographic areas in RECS 2009 using the latest data from EIA. 25
, 26
, 27 DOE assigned an appropriate energy price to each building in the sample, depending

25 U.S. Department of Energy

- Energy Information Administration, Form EIA

- 826 Database Monthly Electric Utility Sales and Revenue Data ( 2013) (Available at : http://www.eia.doe.gov/cneaf/electricity/page/eia826.html ).
26 U.S. Department of Energy

- Energy Information Administration, Natural Gas Navigator (2013) (Available at: http://tonto.ei a.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm ).2

- 27 on its location

. For future prices, DOE used the projected annual changes in average energy prices in AEO 2014

. Maintenance and Repair Costs

DOE used the m ost recent RS Means Facilities Maintenance & Repair Cost Data to develop appropriate repair and maintenance costs for baseline units. 28 DOE included increased repair and maintenance costs for higher

- efficiency and condensing equipment , accounting for regular replacement of condensate neutralizer and more expensive heat exchanger repair compared to lower

- efficiency boilers. 29

In the Framework Document, DOE requested comment on frequency and cost of maintenance, major repair issues, repair frequency, and repair costs for commercial packaged boilers at different efficiency levels. ACEEE, ASAP, and NRDC found i n informal analyses based on earlier data that the distribution of maintenance cost frequencies was very asymmetric

, and

, therefore

, suggest ed cauti on in the distributions assumed in the Monte Carlo analysis

. ( ACEEE, ASAP, NRDC , No. 0016 at p

. 4) ACEEE stated that a number of New England S tates have announced schedules for requirements of ultra

- low sulfur fuel (15 ppm or less). (ACEEE, No. 0013 at p. 115) AHRI stated that there is a significant Environmental Protection Agency (EPA) rulemaking addressing emissions from boilers that includes an annual tune

- up requirement to maintain emission levels. (AHRI, No. 0013 at p. 114)

For the preliminary an alysis, DOE determined the frequency of maintenance using CBECS and data from RS Means rather than a probability distribution. DOE assumed that annual maintenance is required for all commercial packaged boilers. The only exception is that for gas

- fired h ot water commercial packaged boilers that reported non

- regular maintenance in CBECS (6 percent of these boilers) DOE assumed that maintenance is conducted every 3 years.

DOE accounted for the impact of low

- sulfur fuel requirements in various States on

ma intenance frequency and costs. The EPA tune

- up requirement is assumed to be included in regular maintenance costs. See appendix 8

- E of the preliminary TSD for details on the maintenance and repair cost methodology.

Equipment Lifetime

27 U .S. Department of Energy

- Energy Information Administration, 2012 State Energy Consumption, Price, and Expenditure Estimates (SEDS) (2013) (Available at: http://www.eia.doe.gov/emeu/states/_seds.html ).
28 RS Means
, 2013 Facilities Maintenance & Repair Cost Data ( Available at : http://rsmeans.reedconstructiondata.com/60303.aspx ) (Last ac cessed April 10, 2013).
29 “Replacement Cartridge for Condensate Neutralizing Kit,” The Home Depot (Available at: http://www.homedepot.com/p/Unbranded

- Replacement

- Cartridge

- for

- Condensation

- Neutralizing

- Kit

- JM

- 2

- R/202809241?cm_mmc=shopping

-

_ - googleads

-

_ - pla

-

_ - 202809241&skwcid& kwd=&ci_sku=202809241&ci_kw=&ci_gpa=pla&ci_src=17588969 ) (Last accessed June 27, 2014).2

- 28 DOE modeled commercial packaged boiler lifetimes using data from the ASHRAE Service Life Database and a literature review of research studies and field data reports. 30
, 31 The data allowed DOE to develop a distribution of boiler lifetime s . DOE applied the same lifeti me distribution for all boilers included in the analysis. See appendix 8

- F for details on the methodology used to determine boiler lifetime.

HTP questioned the accuracy of using the ASHRAE database for developing lifetime estimates due to insufficient an d possibly inaccurate data. (HTP, No. 0018 at pp. 10

- 11) For the development of boiler lifetimes, DOE used the ASHRAE database but also relied on the literature review conducted by DOE and warranty information.

AHRI stated that DOE should address the estimated lifetime of non

- condensing and condensing gas boilers separately

. According to AHRI, t he greater part of the installed base of commercial packaged boiler s is non

- condensing models , which have a long history of use that allows for an acceptable e stimate of product lifetime

. Condensing gas commercial packaged boiler s , which are relatively new to the market

, have a comparatively short history of field use from which to try to estimate a product lifetime , and

, thus

, t he lifetime for these models mus t be determined differently

. (AHRI, No. 0017 at p. 10) Burnham stated that high

- efficiency boilers

are not easily repaired ; if there is any issue with a heat exchanger, it needs to be p ulled and sent back to the manufacturer for repair or, more likely, to be discarded

. Steel, cast iron, and copper heat exchangers , which are typical for non

- condensing boilers, can be repaired in the field and

, thus

, boost the expected lifetime of equipment. (Burnham, No. 0015 at pp. 1

- 2)

DOE did n o t find sufficient in formation to justify different lifetimes for condensing and

non

- condensing boilers and

, therefore

, assumed that the lifetimes of non

- condensing and condensing boilers are essentially the same. DOE requests data and other information regarding any equipmen t lifetime differential between condensing and non

- condensing commercial packaged boilers. For the NOPR, DOE may conduct sensitivity analysis using alternate lifetime assumptions.

Discount Rates

The discount rate is the rate at which future operating co sts are discounted to establish their present value in the LCC analysis. The discount rate value is applied to future year energy costs and non

- energy operations and maintenance costs to calculate the estimated net life

- cycle cost of equipment of various efficiency levels and life

- cycle cost savings as compared to the baseline for a representative sample of commercial end users. DOE’s method views the purchase of a higher

- efficiency appliance as an investment that yields a stream of energy cost savings. For commercial applications, DOE derived the discount rates for the LCC analysis by estimating the weighted average cost of capital of equity and debt financing for companies that purchase commercial packaged boilers . For residential applications, DOE use d publicly

- available

30 Available at http://xp20.ashrae.org/publicdatabase/

. 31 See appendix 8

- F of the preliminary TSD for a list of the sources used in the literature review.2

- 29 data (the Federal Reserve Board’s Survey of Consumer Finance s ) to estimate a consumer’s opportunity cost of funds related to appliance energy cost savings and maintenance costs. 32

Base

- Case Efficiency Distribution

To estimate the share of commercial consumer s expected to be affected by a n energy conservation standard at a particular efficiency level, DOE’s LCC and PBP analysis consider s the projected distribution ( i.e. , market shares) of equipment efficiencies in th e compliance year under the base case ( i.e. , the case without new or amended energy conservation standards).

In the Framework Document, DOE requested comment on the base

- case efficiency distribution, including the likelihood and degree of improvement in e fficiency of commercial packaged boilers in the next five years as a result of market forces or industry trends (in the absence of amended energy conservation standards)

.

AHRI stated that a review of the listings in AHRI’s Directory of Commercial Packag ed Boiler Efficiency Ratings would provide some information on the available mix of commercial packaged boiler efficiencies in the market , but the listing information does not represent the actual mix of efficiencies of commercial packaged boiler being sol d and installed , and th e AHRI directory does not include all models of commercial packaged boiler s o n the market

. In particular, the AHRI di re ctory show few models with input ratings in the 6 to 8 million Btu/h
range , no gas

- fired models with input rates higher than 9.5 million Btu/h

, and no oil

- fired models with input rate s higher than 8.5 million Btu/ h

. (AHRI, No. 0017 at p. 9) DOE recognizes that there are limitations with deriving the base

- case efficiency distribution from the AHRI database, but no o ther data were available , and commenters provided no other suitable alternative

.
AHRI stated that m ost new models of commercial packaged boilers that are being introduced into the U.S. market are high

- efficiency designs

, particularly for models with input ratings of five million Btu/h or less . In addition, AHRI stated that there are incentive programs offered in many locations that promote the installation of high

- efficiency boilers

. The continued existence of these programs will increas e the percentage of higher

- efficiency boilers in the field

. (AHRI, No. 0017 at pp. 10

- 11) On the other hand, HTP believes that in the absence of amended energy conservation standards, further improvements in the efficiency of commercial packaged boilers are uncertain at bes t

. (HTP, No. 0018 at p. 11)

For the preliminary analysis, DOE used the AHRI directory to analyze trends in product classes and efficiency levels from 2007 to 2014 to determine the anticipated base

- case efficiency distribution in 2019
, the assumed compliance year for amended standards . The trends show the market moving towards higher

- efficiency boilers, and DOE accounted for the trend in its base

case projection. See appendix 8

- H of the preliminary TSD for details on how the base

- case efficiency distribution was determined.

32 The Federal Reserve Board, Survey of Consumer Finances 1989, 1992, 1995, 1998, 2001, 2004, 2007, 2010 (Available at: http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html ) (Last accessed April 2014).2

- 30 2.9 SHIPMENTS ANALYSIS

DOE uses forecasts of equipment shipments to calculate the national impacts of standards on energy use, NPV, and future manufacturer cash flows

. DOE develop s shipment forecasts based on an analy sis of key market drivers for each equipment class.

DOE estimated commercial packaged boiler shipments by projecting boiler shipments in three market segments: (1) replacements ; (2) new construction ; and (3) new owners in buildings that did not previously have a commercial packaged boiler.

To forecast commercial packaged boiler replacement shipments, DOE develop ed retirement functions for boilers from the lifetime estimates and appl ied them to the existing equipment in the building stock

. The existing stock of equipment is tracked by vintage and developed from historical shipments data

. To forecast shipments to the new construction market, DOE used AEO 2014 for forecasts of new buildings

. Boiler saturation rates in new buildings are derived from recently constructed buildings in CBECS 2003 and RECS 2009.

In the Framework Document, DOE sought input on the potential impact of amended standards on commercial packaged boiler shipments. HTP does not expect that increas es in minimum efficiencies will significantly impact shipments of commercial packaged boilers

. (HTP, No. 0018 at p. 12) In contrast, AHRI stated that any standard level that significantly increases the installed cost of a commercial packaged boiler would reduce boiler shipments

, because the majority of commercial packaged boiler sales are for replacement installations

. AHRI argued that more so than other commercial equipment , there is a general inclination to repair and replace commercial packaged boiler s parts rather than install a new boiler

. According to AHRI, e fficiency standards that result in products with higher installed costs w ould rei nforce that inclination. (AHRI, No. 0017 at p. 11)

DOE has determined that, consistent with economic theory and its past practice, it is reasonable to expect that standards that result in higher boiler prices will have some dampening effect on sales . Some commercial consumers might choose to repair their existing boiler ra ther than purchase a new one. To estimate the impact of the price increase for the considered efficiency levels

, DOE used a relative price elasticity approach . This approach gives some weight to the operating cost savings from higher

- efficiency equipment

. The impact of higher boiler prices due to higher efficiency is expressed as a percentage drop in market share for each year during the analysis period

.

2.10 NATIONAL IMPACT ANAL YSIS

The NIA assesses the NES and the NPV from a national perspective of total commercial

consumer costs and savings expected to result from new or amended energy conservation standards at specific efficiency levels

. DOE determined the NPV and NES for the standard levels consi dered for the commercial packaged boiler equipment classes analyzed

. To make the analysis more accessible and transparent to all interested parties, DOE prepared a computer spreadsheet that uses typical values (as opposed to probability distributions) as inputs

. To assess2

- 31 the effect of input uncertainty on NES and NPV results, DOE has developed its spreadsheet model to conduct sensitivity analyses by running scenarios on specific input variables

. A key component of DOE’s NIA analysis is the energy effi ciencies forecasted over time for the base case (without new standards) and each of the standards cases

. The forecasted efficiencies represent the annual shipment

- weighted energy efficiency of the equipment under consideration during the forecast period ( i.e. , from the assumed compliance date of a new standard to 30 years after compliance is required)

. To forecast the efficiency trend in the base case ( i.e. , no new standards for commercial packaged boilers), DOE derived a growth rate in the market share o f different equipment classes by extrapolating the trend from 2007 to 201 4 AHRI model data.

To estimate the impact that potential amended standards may have in the year of required compliance, DOE has generally used a “roll

- up” scenario, a “shift” scenario , or both in its standards rulemakings

. Under the “roll

- up” scenario, DOE assumes: (1) equipment efficiencies in the base case that do not meet the standard level under consideration would “roll

- up” to meet the new standard level; and (2) equipment efficiencies above the standard level under consideration would not be affected

. Under the “shift” scenario, DOE retains the pattern of the base

- case efficiency distribution but re

- orients the distribution at and above the new minimum
energy co nservation standard

. Commenting on the Framework Document, AHRI stated that DOE should continue to use the roll

- up approach as it has for other rulemakings in the past. (AHRI, No. 0017 at p. 12) For the preliminary analysis, DOE used a roll

- up scenari o to establish the distribution of efficiencies for the year that compliance with the potential amended standards is assumed to be required

.

2.10.1 National Energy Savings Analysis

The inputs for determining the national energy savings for each equipment type a nalyzed are: (1) annual energy consumption per unit; (2) shipments; (3) equipment stock; (4) national energy consumption; and (5) site

- to

- primary energy conversion factors

. DOE calculated the national energy consumption by multiplying the number of units (stock) of equipment (by vintage or age) by the unit energy consumption (also by vintage)

. DOE calculated annual NES based on the difference in national energy consumption for the base case and for each potential standards case

. DOE estimated energy cons umption and savings based on site energy and converted the electricity consumption and savings to primary energy using annual conversion factors derived from the most recent version of the National Energy Modeling System (NEMS ). 33 Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis

.

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

. A useful summary is Nati onal Energy Modeling System: An Overview 200 9
, DOE/EIA

- 0581 ( October 200 9 ) (A vailable at: http://www.eia.gov/oiaf/aeo/overview/ ). Error! Hyperlink reference not valid.2

- 32 DOE has historically presented NES in terms of primary energy savings. In response to the recommendations of a committee on “Point

- of

- Use and Full

- Fuel

- Cycle Measurement Approache s to Energy Efficiency Standards” appointed by the National Academy of Science s , DOE published a final statement of policy in the Federal Register that announced its intention to use full

- fuel

- cycle (FFC) measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (August 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statem ent of amended policy in the Federal Register

, in which DOE explained its determination that NEMS is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (August 17, 2012). The approach used for the p reliminary analysis is described in appendix 10

- C of th is
pr e liminary TSD.

Chapter 10 of this TSD presents both the primary NES and the FFC NES for the considered candidate standard levels.

2.10.2 Net Present Value Analysis

The inputs for determining NPV are: (1) total annual installed cost; (2) total annual savings in operating costs; and (3) a discount factor to calculate the present value of costs and savings

. DOE calculated net savings each year as the difference between the base case and each standards case in terms of total savings in operating costs versus total increases in installed costs

. DOE calculated savings over the life time of equipment shipped in the forecast period. DOE calculated NPV as the difference betw een the present value of operating cost savings and the present value of total installed costs. For future energy prices, DOE used the projected annual changes in average commercial and residential sector energy prices in AEO 2014.

DOE estimates the NP V of commercial consumer benefits using both a 3

- percent and a 7

- percent real discount rate, in accordance with guidance provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis (OMB Circular A

- 4 ( Sept

. 17, 2003), section E, “Identifying and Measuring Benefits and Costs”).

2.11 CONSUMER SUBGROUP AN ALYSIS

At the NOPR stage of this rulemaking, DOE will conduct a consumer subgroup analysis

. A commercial consumer subgroup comprises a subset of the populati on that may be affected disproportionately by new or revised energy conservation standards ( e.g. , small businesses )

. The purpose of a subgroup analysis is to determine the extent of any such disproportional impact s.2

- 33 2.12 MANUFACTURER IMPACT ANALYSIS

The purpose of the MIA is to identify the likely impacts of higher energy conservation standards on manufacturers of commercial packaged boilers

. In conducting this analysis , DOE will seek input from manufacturers and other interested parties and consider fin ancial impacts , as well as a wide range of quantitative and qualitative industry impacts that might occur after the adoption of amended standard s

. For example, a particular standard level could require changes to manufacturing practices of commercial pack aged boilers

. DOE will identify and discuss these potential impacts in interviews with manufacturers and other interested parties during the NOPR stage of the analysis.

DOE conduct s the MIA in three p hases and further tailor s its analytical framework based

o n the comments it receives. In p hase I, DOE creates an industry profile to characterize the industry and to identify important issues that require consideration. In p hase II, DOE prepares an industry cash

- flow model and deter mines what information it will discuss with manufacturers during manufacturer interviews. In p hase III, DOE interviews manufacturers and assesses the impacts of potential standards both quantitatively and qualitatively. DOE calculates industry and subgro up cash flow and industry net present value (INPV) using the Government Regulatory Impact Model (GRIM). DOE then assesses impacts on competition, manufacturing capacity, employment, and regulatory burden based on manufacturer interview feedback.

DOE eval uat es and report s preliminary MIA information in this preliminary analy sis phase. DOE gather s the information for the analysis during manufacturer interviews. S ee chapter 12 of th is preliminary TSD for more detail ed information on the MIA.

2.12.1 Sources of Info rmation for the Manufacturer Impact Analysis

The MIA uses outputs from other upstream analyses, such as the engineering analysis, the NIA, and the markup analysis. These analyses provide important information for the MIA
, including the number of shipment s, the manufacturer production costs, and the markups for each equipment class

. DOE also uses publicly

- available information, such as Securities and Exchange Commission (SEC) 10

- K filings 34 , to gather company financial data within the industry and refines these figures based on feedback during the manufacturer interviews. This helps DOE estimate industry financial parameters, such as the tax rate, the research and development (R&D) rate, the capital expenditure rate, the depreciation rate, and industry dis count rate, all of which are utilized as inputs in the MIA analysis.

The interview process plays an important role in the MIA. DOE conducts detailed interviews with manufacturers to gain insight into the range of potential impacts of standards. Typically , DOE solicits both quantitative and qualitative information during the interviews on the potential impacts of various proposed efficiency levels on sales, direct employment, capital assets, and industry competitiveness. In order to protect manufacturer co nfidentiality, DOE aggregates information obtained in interviews to creat e a combined industry opinion or estimate.

34 SEC filings are available at: http://www.sec.gov/edgar/searchedgar/companysearch.html

.2

- 34 2.12.2 Industry Cash

- Flow Analysis

The industry cash flow analysis relies primarily on the GRIM. DOE uses the GRIM to analyze the financial impacts of more

- stringent energy conservation standards on the industr y

. The GRIM analysis uses several inputs to determine industry annual cash flows with and without amended energy conservation standard s. These inputs include shipments, production cost s, equipment markups, conversion costs for higher efficiency standards, and industry financial parameters

. DOE then compares the industry annual cash flows resulting from base

- case projections and scenarios where more

- stringent energy conservation standar ds are mandated. The financial impact of amended energy conservation standards is the difference between the two sets of discounted industry annual cash flows. Other performance metrics, such as return on invested capital, are also available from the GRI M. See chapter 1 2 of th is preliminary TSD for more information on the industry cash flow analysis.

2.12.3 Direct Employment Impact Analysis

The impact of amended energy conservation standards on employment is an important consideration in the rulemaking process

. Manufacturer interviews play a significant role in assessing how domestic employment patterns might be impacted by amended conservation standards. DOE e xplore s current employment trends in the commercial packaged boiler industry and solicit s feedback f rom manufacturers on changes in employment patterns that may result from more

- stringent standards

. See chapter 12 of this preliminary TSD for more information on the direct employment impact analysis.

2.12.4 Manufacturer Subgroup Analysis

Average i ndustry impa cts may not adequately show differential impacts among subgroups of manufacturers that have different cost structures or operate within different regulatory frameworks

. For example, small and niche manufacturers, or manufacturers whose
cost structure differs significantly from the industry a verage, could experience more negative impact s

. Ideally, DOE would consider the impact on every firm individually; however, because this usually is not possible, DOE typically uses the results of the industry chara cterization to group manufacturers exhibiting similar characteristics. One common subgroup identified is small business manufacturers. DOE will analyze impacts on small business manufacturers consistent with the Regulatory Flexibility Act. (5 U.S.C. 601 et seq .)

During the interview process, DOE discuss es with manufacturers the potential subgroups and subgroup members it has identified for the analysis. DOE will encourage manufacturers to recommend subgroups or characteristics that are appropriate for the subgroup analysis. At the framework public meeting, Burnham suggested that DOE consider subgroups that primarily manufacture their heat exchangers in the U

. S

. , compared to those that primarily import their heat exchangers from abroad. (Burnham, 0015 at p. 1) DOE will investigate this subgroup during the NOPR phase of this rulemaking and alter its analysis where appropriate. See chapter 12 of this preliminary TSD for more detail on the manufacturer subgroup analysis.2

- 35 2.12.5 Competitive Impacts Assessment

EPCA directs DOE to consider any lessening of competition likely to result from the imposition of standards. It further directs the Attorney General to determine

, in writing

, the impacts, if any, of any lessening of competition.

In manufacturer intervi ews , DOE focus es on gathering information that would help in assessing impacts on competition, such as asymmetrical cost increases to some manufacturers, increased proportion of fixed costs potentially escalating business risks, and potential barriers to

m arket entry ( e.g. , proprietary technologies , limited access to resources ). DOE will provide the Attorney General with a copy of any NOPR for consideration in evaluati ng the impact of standards on the lessening of competition. DOE will publish the Attorne y General’s letter and address any related comments in any final rule.

2.12.6 Cumulative Regulatory Burden

Other regulations may apply to the commercial packaged boilers covered under this rulemaking, and to other products and equipment produced by commercial pa ckaged boiler manufacturers. DOE recognizes that multiple regulations could result in a significant cumulative regulatory burden on manufacturers

. DOE’s initial analysis of regulations affecting commercial packaged boilers is located in the market and technology assessment (chapter 3 of th is preliminary TSD). During the NOPR phase of this rulemaking , DOE plans to investigate the regulations manufacturers mentioned in interviews and the public meeting, and will further anal yze and consider the impact of multiple, equipment

- specific regulatory actions on commercial packaged boiler manufacturers. DOE will consider the impacts of any additional regulations these manufacturers could face three years prior to and three years aft er the compliance date of potential amended standards arising from this rulemaking process.

Several interested parties commented about cumulative regulatory burden issues at the framework public meeting. AHRI commented that in addition to the energy cons ervation standards rulemaking, a parallel test procedure rulemaking will contribute to the cumulative regulatory burden. ( AHRI, 0013 at p. 146 ) HTP and Burnham also expressed testing concerns. HTP commented that every product they make is up for review o r update of minimum efficiencies or method of test within the next few years. ( HTP, 0013 at p. 147 ) Burnham commented that manufacturers had all recently gone through annual BTS

- 2000 certification for their equipment. ( Burnham, 0015 at p. 1 ) DOE acknow ledges that testing costs could contribute to the overall regulatory burden for the current commercial packaged boilers rulemaking and will consider any impacts of these costs in the NOPR analysis

.

AHRI also comment ed that DOE should consider the followin g in examining the cumulative regulatory burden for commercial packaged boiler manufacturers : (1) t he increased minimum efficiencies and design requirements implemented for residential boilers in 2012; (2) the c urrent rulemaking to revise test procedures f or residential boilers ; (3) t he testing and certification requirements of the EPA Energy Star program for residential boilers ; (4) t he revised FTC EnergyGuide labels and regulations ; (5) t he pending revised DOE regulations on certification and enforcement of efficiency standards for commercial equipment; and (6) t he EPA emission regulations for boilers t hat are major or area sources. DOE acknowledges that these2

- 36 regulations could contribute to the overall regulatory burden for the current commercial package d boilers rulemaking and will consider any impacts in the NOPR analysis. For more information on the cumulative regulatory burden, please see chapter 12 of this preliminary TSD.

2.12.7 Preliminary Results for the Manufacturer Impact Analysis

One important aspect of the preliminary MIA is the opportunity it creates for DOE to identify key manufacturer issues early in the evaluation of amended energy conservation standards. During preliminary interviews, manufacturers identified four major area s of concern: (1) increased testing burden may be associated with amended standards ; (2) condensing boilers are not appropriate for many commercial applications; (3) not many American companies produce condensing heat exchangers; and ( 4 ) amended standards could reduce equipment durability and reliability.

2.12.7.1 Testing Burden

Several manufacturers expressed concern regarding the testing burden associated with amended energy conservation standards. Manufacturers argu ed that amended standards and an altered test procedure will result in them having to retest all of their equipment, which they pointed out is a costly and logistically challenging process because of the large size of the equipment and the fact that a lot of commercial packaged boilers are customized for particular end users

. Manufacturers stated that retesting all of their models would put a strain on their testing lab oratory resources and would be financially burdensome.

2.12.7.2 Condensing Boilers are Not Appro priate for Many Commercial Applications

Several manufacturers expressed concern that they would only be able to meet certain efficiency levels with condensing technology in gas

- fired hot water equipment and pointed out that condensing mode operation is no t possible in many commercial applications. They argued that condensing boilers will not operate in condensing mode in larger applications and will not realize any efficiency gains when the whole building and heat distribution system is not designed

aroun d condensing technology. Manufacturers noted that it is very difficult to sell condensing boilers in the replacement market (which, according to manufacturers, comprises about 90 percent of commercial packaged boiler sales) because customers would have to make expensive retrofit changes to venting and distribution systems.

Manufacturers also pointed out that condensing boilers may not save energy in commercial applications, even if they were to operate in condensing mode. Several manufacturers argued th at condensing equipment requires higher pump force power and higher horsepower blower motors and

, thus

, more electricity. They noted that even if the boiler were operating in condensing mode, the fuel savings could be at least partially offset by higher electricity use.2

- 37 2.12.7.3 Not Many American Companies Produce Condensing Heat Exchangers

Several manufacturers expressed concern that if DOE were to mandate efficiency levels that could only be achieved with condensing technology for gas

- fired hot water equipment, companies would likely face high conversion costs. While many companies in the United States currently produce condensing equipment, most condensing heat exchangers are sourced from European or Asian companies. American companies would have to decide whe ther to develop their own condensing heat exchanger production capacity, or assemble a baseline product around a condensing heat exchanger. Developing condensing heat exchanger production capacity would require large capital investments in new production lines and new equipment to handle the different metals that are required. Companies that are currently heavily invested in lower

efficiency equipment may not be able to make these investments. The other option would be for companies to drop their noncond ensing equipment and assemble equipment around a sourced heat exchanger. In this scenario, companies would lose a significant piece of the value chain.

2.12.7.4 Reduced Product Durability and Reliability

Several manufacturers commented that higher

- efficiency conde nsing boilers on the market have not demonstrated the same level of durability and reliability as lower

- efficiency equipment. Manufacturers sta ted that condensing equipment require s more upkeep and maintenance and generally do es not last as long as non

- co ndensing equipment . Several manufacturers pointed out that they generally incur large after

- sale costs with their condensing equipment because of additional warranty claims. Maintenance calls for these boilers require more skilled technicians and occur mo re frequently than they do with non

- condensing boilers.

2.13 EMISSIONS ANALYSIS
In the emissions analysis, DOE will estimate the impacts on power sector and site combustion emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide (SO 2 )

, mercury (Hg)

, methane (CH 4 ) and nitrous oxide (N 2 O) from potential amended energy conservation standards for the considered equipment

. In addition, DOE will estimate emissions impacts in production activities (extracting, processing, and transporting fuels) that provide the energy inputs to power plants. These are referred to as “upstream” emissions. Together, these emissions account for the full

- fuel

- cycle (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 5128 1 (Aug ust 18, 2011)), as amended at 7 7 FR 49701 (August 17, 2012), the FFC analysis also includes impacts on emissions of methane and nitrous oxide, both of which are recognized as greenhouse gases.

Because the on

- site operation of commercial packaged boilers requires use of fossil fuels

a nd results in emissions of CO 2 , NO X , and SO 2 at the sites where these appliances are used, DOE will account for the reduction in these site emissions and the associated upstream emissions due to potential amended standards.2

- 38 DOE conducts the emissions analysis using emissions factors that are primarily derived from data in the latest version of EIA’s AEO , supplemented by data from other sources. EIA prepares the AEO using the National Energy Modeling System (NEMS). Each annu al version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. The text below refers to AEO 2014, which generally represents current legislation and environmental regulations, including recent government actions, f or which implementing regulations were available as of October 31, 2013. The NOPR will use emissions factors derived from the most current available AEO data

.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regio nal emissions cap

- and

- trad e programs. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous States and the District of Columbia (D.C.). (42 U.S.C. 7651 et seq. ) SO 2 emissions from 28 eastern States and D.C. were also limited under the Clean Air Interstate Rule (CAIR), which created an allowance

- based trading program that operates along with the Title IV program in those States and D.C. 70 FR 25162 (May 12, 2005). CAIR was remanded to the Environmental P rotection Agency ( EPA ) by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but it remained in effect. 35 I n 2011
, EPA issued a replacement for CAIR, the Cross

- State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). On August 21, 2012, the D.C. Circuit issued a decision to vacate CSAPR. 36 The court ordered EPA to continue administering CAIR. AEO 2014 assumes that CAIR remains a binding regulation through 2040. 37

The attainment of emissions caps is typically flexible amo ng EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing cap

- and

- trade system, but it conc luded that no reductions in power sector emissions would occur for SO 2 as a result of standards.

Beginning in 2016, however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants. 77 FR 9304 (Feb

. 16, 2012)

. In the final MATS

35 See North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008).
36 See EME Homer City Generation, LP v. EPA , 696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted , 81 U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 (2013) (No. 12

- 1182). 37 On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit and reman ded the case for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part that EPA's methodology for quantifying emissions that must be eliminated in certain States due to their impacts in other downwind States was b ased on a permissible, workable, and equitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. See EPA v. EME Homer City Generation , No 12

- 1182, slip op. at 32 (U.S. April 29, 2014). Because DOE is using emissio ns factors based on AEO 201 4 , the analysis assumes that CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of SO 2 emissions.2

- 39 rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP), and also established a standard for SO 2 (a non

- HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and

non

- HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on coal

- fired power plants to comply with the MATS requirements for acid gas. AEO 2014 assumes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 2016. Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MATS, emission s will be far below the cap that would be established by CAIR, so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulated EGU. Therefore, DOE believes that efficiency standards will reduce SO 2 emissions in 2016 and beyond.

CAIR established a cap on NO X emissions in eastern States and the District of Columbia. 38 Energy conservation standards are e xpected to have little or no physical effect on these emissions in those States covered by CAIR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions. However, sta ndards would be expected to reduce NO X emissions in the States not affected by the caps, so DOE estimates NO X emissions reductions from potential standards in the States where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE’s energy conservation standards would likely reduce mercury emissions. DOE will estimate mercury emissions reduction using emissions factors based on AEO 201 4
, which incorporates the MATS.

Power p lants may emit particulates from the smoke stack, which are known as direct particulate matter (PM) emissions. NEMS does not account for direct PM emissions from power plants. DOE is investigating the possibility of using other methods to estimate reduct ion in PM emissions due to standards. The great majority of ambient PM associated with power plants is in the form of secondary sulfates and nitrates, which are produced at a significant distance from power plants by complex atmospheric chemical reactions that often involve the gaseous emissions of power plants, mainly SO 2 and NO X . The monetary benefits that DOE estimates for reductions in SO 2 and NO X emissions resulting from standards are in fact primarily related to the health benefits of reduced ambien t PM.

2.14 MONETIZATION OF EMIS SIONS REDUCTIONS BEN EFITS
DOE plans to consider the estimated monetary benefits likely to result from the reduced emissions of CO 2 and NO X that are expected to accompany each of the potential standard levels considered.

38 CSAPR also applies to NO X , and it would supersede the regulation of NO X under CAIR. As stated previously, the current analysis assumes CAIR, not CSAPR, is the regulation in force. The difference between CAIR and CSAPR with regard to DOE’s analysis of NO X is slight.2

- 40 To e stimate the monetary value of benefits resulting from reduced emissions of CO 2 , DOE plans to use the most current Social Cost of Carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, but not limited to, net agricultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and t o monetize the harms associated with climate change will raise serious questions of science, economics, and ethics. But with full regard for the limits of both quantification and monetization, the SCC can be used to provide estimates of the social benefit s of reductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon released an update of its previous report in 2013. 39 The most recent estimates of the SCC in 2015, expressed in 2013$, are $12.0, $40.5, $62.4, and $119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7

- percent to 23

- percent should be used to adjust the global SCC to calculate domestic effects, although DOE will give preference to consideration of the global benefits of reducing CO 2 emissions.

DOE multiplies the CO 2 emissions reduction estimated for each year by the SCC value for that year in each of the four c ases. To calculate a present value of the stream of monetary values, DOE discounts the values in each of the four cases using the discount rates that had been used to obtain the SCC values in each case.

DOE recognizes that scientific and economic knowle dge continues to evolve rapidly as to the contribution of CO 2 and other GHG to changes in the future global climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also estimates the potential mo netary benefit of reduced NO X emissions resulting from the standard levels it considers. Estimates of monetary value for reducing NO X from stationary sources

, range from $476 to $4,893 per ton in 2013$. 40 DOE calculates monetary benefits using a medium value for NO X emissions of $2,684 per short ton (in 2013$), and real discount rates of 3 percent and 7 percent, in accordance with OMB guidance. 41

DOE is evaluating an appropriate valuation of avoided SO 2 and Hg emissions. Whether monetization of these e missions will occur in this rulemaking is yet to be determined.

39 Interagency Working Group on Social Cost of Carbon, United States Government, Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866

. May 2013; revised November 2013

. http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical

- update

- social

- cost

- of

- carbon

- for

regulator

- impact

- analysis.pdf
40 U.S. Office of Management and Budget (OMB), 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities (2006) (Available at: www.whitehouse.gov/sites/default/files/omb/a ssets/omb/inforeg/2006_cb/2006_cb_final_report.pdf )

. 41 OMB. Circular No. A

- 4, Regulatory Analysis ( 2003).2

- 41 2.15 UTILITY IMPACT ANALY SIS
In the utility impact analysis, DOE analyzes the changes in electric installed capacity and generation that result for each trial standard level (TSL). The utility impact analysis is based on output of the DOE/Energy Information Administration (EIA)’s National Energy Modeling System (NEMS). NEMS is a public domain, multi

- sectored, partial equilibrium model of the U.S. energy sector. Each year, DOE/EIA u ses NEMS to produce an energy forecast for the United States, the Annual Energy Outlook ( AEO )

. The EIA publishes a reference case, which incorporates all existing energy

- related policies at the time of publication, and a variety of side cases which analyz e the impact of different policies, energy price

, and market trends. As of 2014, DOE is using a new methodology based on results published for the AEO 2014 Reference case and a set of side cases that implement a variety of efficiency

- related policies

.

2.16 EM PLOYMENT IMPACT ANAL YSIS
The adoption of energy conservation standards can affect employment both directly and indirectly. Direct employment impacts are changes in the number of plant employees up to the line

- supervisor level who are directly involved in producing and assembling the covered equipment. Workers performing services that are closely associated with production operations, such as material handling with a forklift, are also included as production labor

. DOE will evaluate direct employment imp acts in the MIA.

Indirect employment impacts may result from expenditures shifting between goods (the substitution effect) and changes in income and overall expenditure levels (the income effect) that occur due to standards. DOE defines indirect employme nt impacts from standards as net jobs eliminated or created in the general economy as a result of modified spending driven by increased equipment prices and reduced spending on energy.

The indirect employment impacts will be investigated in the employme nt impact analysis using the Pacific Northwest National Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. 42 The ImSET model was developed for DOE’s Office of Planning, Budget, and Analysis to estimate the employment and income effects of e nergy

- saving technologies in buildings, industry, and transportation. Compared with simple economic multiplier approaches, ImSET allows for more complete and automated analysis of the economic impacts of energy conservation investments.

2.17 REGULATORY IMPACT ANALYSIS

At the NOPR stage, DOE will prepare a regulatory impact analysis (RIA) that evaluates potential non

- regulatory policy alternatives, comparing the costs and benefits of each to those of the proposed standards. DOE recognizes that non

- regulatory policy alternatives can substantially affect energy efficiency or reduce energy consumption. DOE will base its assessment on the

42 Roop, J. M., M. J. Scott, and R. W. Schultz, ‘‘ImSET: Impact of Sector Energy Technologies,’’ PNNL

– 15273. Pacific Northwest National Laboratory (2 005).2

- 42 actual impacts of any such initiatives to date, but also will consider information presented by interested parties regarding t he potential future impacts of current initiatives.