CHAPTER 2. ANALYTICAL FRAMEWORK

TABLE O F CONTENTS

**2.1 I**  **NTRODUCTION**

**........................................................................................................... 2­1** 

**2.2 B**  **ACKGROUND**

**............................................................................................................. 2­4** 

**2.3 M**  **ARKET AND**  **TECHNOLOGY ASSESSMENT** 

**........................................................ 2­4** 

**2.3.1 M**  **arket Assessment** 

**.................................................................................. 2­4** 

**2.3.2 Te**  **chnology Assessment...........................................................................**  **2­5**

**2.3.3 P**  **roduct Classes** 

**........................................................................................ 2­5** 

**2.4 S**  **CREENING ANALYSIS** 

**.............................................................................................. 2­5** 

**2.5 ENG**  **INEERING ANALYSIS..........................................................................................**  **2­5**

**2.5.1 R**  **epresentative Product**  **Classes**

**............................................................... 2­6** 

**2.5.2 S**  **elected Baseline**  **Lamps**

**......................................................................... 2­6** 

**2.5.3 I**  **dentified Lamps**  **and Ballast**  **Designs**

**..................................................... 2­6** 

**2.5.4 D**  **eveloped Efficacy Levels...................................................................... 2­6**

**2.6 ENER**  **GY USE**  **CHARACTERIZATION**

**....................................................................... 2­7** 

**2.7 P**  **RODUCT PRICE**  **DETERMINATION**

**........................................................................ 2­7** 

**2.8 LI**  **FE­CYCLE COST**  **AND PAYBACK**  **PERIOD ANALYSIS** 

**..................................... 2­7** 

**2.9 S**  **HIPMENTS ANALYSIS** 

**.............................................................................................. 2­8** 

**2.9.1 S**  **hipment Scenarios..................................................................................**  **2­8**

**2.10 NA**  **TIONAL IMPACT**  **ANALYSIS**

**................................................................................ 2­9** 

**2.10.1 Na**  **tional Energy**  **Savings Analysis.......................................................**  **2­10**

**2.10.2 Ne**  **t Present**  **Value Analysis** 

**................................................................. 2­10** 

**2.11 LI**  **FE­CYCLE COST**  **SUB­GROUP ANALYSIS......................................................... 2­11** 

**2.12 M**  **ANUFACTURER IMPACT**  **ANALYSIS.................................................................. 2­11** 

**2.13 U**  **TILITY IMPACT**  **ANALYSIS................................................................................... 2­11**

**2.14 ENV**  **IRONMENTAL ASSESSMENT** 

**.......................................................................... 2­12** 

**2.15 EM**  **PLOYMENT IMPACT**  **ANALYSIS....................................................................... 2­13**

**2.16 R**  **EGULATORY IMPACT**  **ANALYSIS**

**....................................................................... 2­13** 

**2.17 D**  **EPARTMENT OF**  **JUSTICE REVIEW** 

**..................................................................... 2­13** 

LIST O F FIGURES

**Figure 2**  **.1.1 Flow**  **Diagram of**  **Analyses for**  **the GSFL**  **and IRL**  **Rulemaking Process...............**  **2­2**

**2­i**CHAPTER 2. ANALYTICAL FRAMEWORK

2.1 I NTRODUCTION

**S ections**  **6 295(o)(2)(A)**  **and (3)**  **of Title**  **42 United**  **States Code**  **(42 U.S.C.** 

**6295(o)(2)(A) and**  **(3)) require**  **that energy**  **conservation standards**  **set by**  **the U.S.**  **Department of** 

**Energy (DOE)**  **be technologically**  **feasible and**  **economically justified,**  **and achieve**  **the maximum** 

**improvement in**  **energy efficiency.**  **This chapter**  **provides a**  **description of**  **the general**  **analytical**

**framework that**  **DOE uses**  **in developing**  **such standards,**  **and in**  **particular, standards**  **for general** 

**service fluorescent**  **lamps (GSFL)**  **and incandescent**  **reflector lamps**  **(IRL). The**  **analytical**

**framework is**  **a description**  **of the**  **methodology, the**  **analytical tools,**  **and relationships**  **among the** 

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

**the statutory**  **requirement for**  **economic justification**  **includes analyses**  **of life­cycle**  **cost (LCC);** 

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

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

**also solicit**  **the views**  **of the**  **Department of**  **Justice (DOJ)**  **on any**  **lessening of**  **competition that**  **is**

**likely to**  **result from**  **the imposition**  **of a**  **proposed standard.** 

**Figure 2**  **.1.1 summarizes**  **the analytical**  **components of**  **the standards­setting**  **process. The** 

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

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

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

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

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

**standards­setting process.**  **Dotted lines**  **connecting analyses**  **show types**  **of information**  **that feed** 

**from one**  **analysis to**  **another. While**  **Figure 2.1.1**  **summarizes the**  **inputs, outputs**  **and analyses**  **of**

**a typical**  **standards rulemaking,**  **individual inputs**  **and outputs**  **may vary**  **by rulemaking.**  **For**

**example, as**  **discussed in**  **Chapter 5**  **and Chapter**  **7, this**  **rulemaking combines**  **the results**  **of the** 

**engineering analysis**  **and the**  **product price**  **determination to**  **derive typical**  **inputs for**  **the LCC**  **and**

**NIA rather**  **than estimating**  **costs in**  **the engineering**  **analysis and**  **marking them**  **up to**  **derive end** 

**user prices.** 

**2­1**Utility Impact

Analysis

Notice of Proposed Rulemaking (NOPR)

Final Rule Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Product Price

Determination Life­Cycle Cost and

Payback Period

Analyses

National Impact

Analysis Energy Use

Revise ANOPR

Analyses

Life­Cycle Cost

Sub­Group Analysis

Manufacturer Impact

Analysis Shipments

Analysis

Employment Impact

Analysis

Revise Analyses • Product Classes

• Technology Options

• Industry Cash Flow

• Sub­Group Cash­Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden • Product Designs

• Life­Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results • Characterize Industry

• Market Segmentation

• Non­Regulatory Programs Framework Document

• Efficiency­Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments • Identify Firms/Products

• Historical Shipments

•Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data Design Options Product Classes

Retail

Prices Design Energy/ Use

Advance Notice of Proposed Rulemaking (ANOPR) • Efficiency/Performance • Commercial Products

Candidate

Standard

Levels • Analysis of Energy Use

Data

Environmental

Assessment

Regulatory Impact

Analysis Technology Options

• Emission Estimates • Utility Load Factors

• National Energy Savings

• Non­Regulatory

Alternatives • NEMS­BT

• ImSET

• NEMS­BT • Design Options

• Energy Price Forecasts

• Site­to­Source Factors • Energy­Efficiency Levels

Direct Employment

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs • Utility Impacts • Analysis of Market Data

• Analysis of Product Data

• Life­Cycle Costs

• Payback Periods • Installation

Costs

• Maint Costs

• Repair Costs • UEC

• Energy Prices Annual Energy Use (UEC)

Preliminary

Manufacturer Impact

Analysis • Manufacturer Prices

• Average Costs • Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values • Trial Standard Levels (TSLs)

TSLs • Product Prototypes

Energy­Efficiency

Levels

• Department of Justice Review Product Designs

Figure 2.1.1 Flow Diagram of Analyses for the GSFL and IRL Rulemaking Process

**2­2 The**  **analyses performed**  **in the**  **Notice of**  **Proposed Rulemaking**  **(NOPR) stage**  **and**

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

**A market**  **a nd**  **technology assessment**  **to characterize**  **the relevant**  **fluorescent and** 

**incandescent lamp**  **markets; to**  **identify technology**  **options that**  **improve efficacy;**  **and to**  **develop**

**product classes.** 

**A screening**  **a nalysis**  **to review**  **each technology**  **option and**  **determine if**  **it is** 

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

**lamp utility**  **or lamp**  **availability; or**  **would have**  **adverse impacts**  **on health**  **and safety.** 

**An e**  **ngineering analysis**  **to study**  **the appropriate**  **lamp and**  **lamp­and­ballast designs**  **used**

**as substitutes**  **for the**  **baseline lamps,**  **to select**  **efficacy levels**  **and to**  **determine lamp­and­ballast** 

**system power**  **ratings.**

**An e**  **nergy use**  **analysis to**  **determine the**  **annual energy**  **consumption of**  **fluorescent and** 

**incandescent reflector**  **lamps.**

**A product**  **p rice**  **determination to**  **develop average**  **end­user prices**  **for the**  **lamp designs** 

**and lamps­and­ballast**  **designs used**  **in the**  **analyses.**

**A life­cycle**  **c ost**  **(LCC) and**  **payback period**  **(PBP) analysis**  **to calculate,**  **at the**  **customer**

**level, the**  **cost­effectiveness of**  **the efficacy**  **levels.**

**A shipments**  **a nalysis**  **to estimate**  **yearly shipments**  **of covered**  **fluorescent and** 

**incandescent reflector**  **lamp products**  **over the**  **analysis period.** 

**A national**  **i mpact**  **analysis (NIA)**  **to assess**  **the aggregate**  **impacts at**  **the national**  **level of** 

**the net**  **present value**  **(NPV) and**  **national energy**  **savings (NES)**  **of the**  **standard levels.** 

**A LCC**  **s ub­group**  **analysis to**  **evaluate variations**  **in residential**  **and commercial**  **building**

**characteristics (e.g.,**  **energy prices,**  **equipment use**  **behavior, installation**  **costs) that**  **might cause**  **a**

**standard to**  **impact particular**  **customer sub­populations,**  **such as**  **specific building**  **owners or**  **other**

**customers that**  **purchase and**  **use the**  **general service**  **fluorescent lamps**  **and incandescent**  **reflector**

**lamps.**

**A manufacturer**  **i mpact**  **analysis (MIA)**  **to calculate**  **the financial**  **impacts of**  **energy**

**conservation standards**  **on lamp**  **manufacturers and**  **to identify**  **impacts on**  **competition,**

**employment at**  **manufacturing plants,**  **and manufacturing**  **capacity.**

**A utility**  **i mpact**  **analysis to**  **estimate the**  **effects of**  **proposed standards**  **on electric**  **utilities.**

**An e**  **nvironmental assessment**  **to provide**  **estimates of**  **changes in**  **emissions of**  **pollutants**

**from electricity**  **generation (i.e.,**  **carbon dioxide**  **(CO 2**  **), oxides**  **of nitrogen**  **(NOx), and**  **sulfur**

**dioxide (SO**  **2 ).** 

**An e**  **mployment impact**  **analysis to**  **assess the**  **aggregate impacts**  **on national**  **employment.**

**2­3 A**  **regulatory impact**  **analysis to**  **present major**  **alternatives to**  **proposed standards**  **that**

**could achieve**  **substantially the**  **same regulatory**  **goal at**  **a lower**  **cost.**

**In r**  **esponse to**  **comments it**  **receives on**  **the NOPR,**  **DOE may**  **revise some**  **of its**  **analyses**

**before publishing**  **the final**  **rule.**

2.2 B ACKGROUND

**A s**  **d escribed**  **in Chapter**  **1 of**  **the TSD,**  **in September**  **1995, the**  **Department announced**  **a**

**formal effort**  **to consider**  **further improvements**  **to the**  **process used**  **to develop**  **appliance**

**efficiency standards.**  **The Department**  **called on**  **energy­efficiency groups,**  **manufacturers, trade** 

**associations, state**  **agencies, utilities,**  **and other**  **interested parties**  **to provide**  **input to**  **this effort.** 

**As a**  **result of**  **this combined**  **effort, the**  **Department published**  Procedures, Interpretations and

Policies for Consideration of New or Revised Energy Conservation Standards for Consumer

Products **(the “Process**  **Rule”), 10**  **CFR 430,**  **Subpart C,**  **Appendix A.**  **The Process**  **Rule outlined** 

**the procedural**  **improvements identified**  **by the**  **interested parties,**  **and included**  **a review**  **of the:**  **1)**

**economic models,**  **2) analytic**  **tools, 3)**  **methodologies, 4)**  **non­regulatory approaches,**  **and 5)** 

**prioritization of**  **future rules.**  **The Process**  **Rule recommended**  **that the**  **Department take**  **into**

**account uncertainty**  **and variability**  **by carrying**  **out scenario**  **or probability**  **analysis.**

**DOE d**  **eveloped this**  **analytical framework**  **for the**  **fluorescent and**  **incandescent reflector** 

**lamps rulemaking**  **under the**  **Process Rule.**  **DOE documented**  **this analytical**  **framework in**  **the**

Rulemaking Framework for General Service Fluorescent Lamps, Incandescent Reflector Lamps,

and General Service Incandescent Lamps **(hereafter, “Framework**  **Document”), and**  **presented**

**the analytical**  **approach to**  **stakeholders during**  **a public**  **meeting held**  **on June**  **15, 2006**  **(hereafter**

**“Public Meeting”).**  **This document**  **is available**  **at**

**http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/lamps_framework.pd**

**f**

**. Th**  **e f**  **ollowing sections**  **provide a**  **general description**  **of the**  **different analytical**  **components of** 

**the rulemaking**  **framework.**

2.3 M ARKET A ND TECHNOLOGY ASSESSMENT

**The m**  **arket and**  **technology assessment**  **characterizes the**  **relevant product**  **markets and** 

**existing technology**  **options, including**  **prototype designs,**  **and outlines**  **product classes.** 

2.3.1 M arket A ssessment

**When i**  **nitiating a**  **standards rulemaking,**  **DOE develops**  **information on**  **the industry** 

**structure and**  **market characteristics**  **of the**  **product(s) concerned.**  **This activity**  **consists of**  **both**

**quantitative and**  **qualitative efforts**  **to assess**  **the industry**  **based on**  **publicly available**  **information.**

**As such,**  **DOE addresses:**  **(1) industry**  **structure and**  **manufacturer market**  **shares, (2)**  **existing**

**regulatory and**  **non­regulatory efficiency**  **improvement initiatives,**  **and (3)**  **trends in**  **product**

**characteristics and**  **retail markets.**  **This information**  **serves as**  **resource material**  **throughout the** 

**rulemaking.**

**2­4 DOE**  **has used**  **and will**  **use the**  **most reliable**  **and accurate**  **data available**  **at the**  **time of** 

**each analysis**  **in this**  **rulemaking. DOE**  **welcomes and**  **will consider**  **any submissions**  **of**

**additional data.** 

2.3.2 T echnology A ssessment

**DOE t**  **ypically uses**  **information relating**  **to existing**  **technology options**  **to develop**  **more**

**efficacious fluorescent**  **and incandescent**  **reflector lamp**  **designs. DOE**  **prepared a**  **list of** 

**technologies for**  **consideration which**  **could improve**  **the efficacy**  **of GSFL**  **and IRL.**  **To develop** 

**this list,**  **DOE reviewed**  **manufacturer catalogs,**  **recent trade**  **publications and**  **technical journals,** 

**and consulted**  **with technical**  **experts.**

2.3.3 P roduct C lasses

**DOE d**  **ivides covered**  **products into**  **classes by:**  **(a) the**  **type of**  **energy used;**  **and (b)** 

**capacity of**  **the product**  **or any**  **other performance­related**  **feature that**  **justifies different**  **standard**

**levels, such**  **as features**  **affecting consumer**  **utility. (42**  **U.S.C. 6295(q))**  **For this**  **rulemaking on** 

**lamps, DOE**  **has analyzed**  **GSFL and**  **IRL separately,**  **where appropriate.**  **In general,**  **DOE**

**defined product**  **classes using**  **information obtained**  **from manufacturers,**  **trade association,**  **and**

**other interested**  **parties.**

2.4 S CREENING A NALYSIS

**The s**  **creening analysis**  **examines the**  **technology options**  **from the**  **technology assessment** 

**as to**  **whether they:**  **(1) are**  **technologically feasible;**  **(2) are**  **practical to**  **manufacture, install,**  **and**

**service; (3)**  **do not**  **have an**  **adverse impact**  **on product**  **utility or**  **availability; and**  **(4) do**  **not have** 

**adverse impacts**  **on health**  **and safety.**  **As described**  **above, DOE**  **develops an**  **initial list**  **of design** 

**options from**  **the technologies**  **identified in**  **the technology**  **assessment. Then**  **DOE, in** 

**consultation with**  **interested parties,**  **reviews the**  **list to**  **determine if**  **these technologies**  **are**

**practicable to**  **manufacture, install,**  **and service,**  **would adversely**  **affect product**  **utility or** 

**availability, or**  **would have**  **adverse impacts**  **on health**  **and safety.**  **In the**  **engineering analysis,** 

**DOE only**  **considers design**  **options that**  **meet all**  **four of**  **the screening**  **criteria.**

2.5 E NGINEERING A NALYSIS

**In t**  **he engineering**  **analysis, DOE**  **selects representative**  **product classes**  **to analyze.** 

**It then**  **selects baseline**  **lamps from**  **these representative**  **product classes,**  **and develops**  **lamp**

**designs that**  **represent more**  **efficacious versions**  **of the**  **baseline lamps.**  **DOE then**  **uses these** 

**lamp designs**  **to develop**  **candidate standard**  **levels (CSLs).**  **While DOE**  **establishes CSLs**  **based**

**on lamp**  **designs, it**  **also is**  **developing lamp­and­ballast**  **designs for**  **the LCC**  **and NIA.**  **DOE is** 

**considering lamp­and­ballast**  **designs for**  **the GSFL**  **LCC and**  **NIA because**  **fluorescent lamps**  **are**

**a component**  **of a**  **system, and**  **their performance**  **is related**  **to the**  **ballast on**  **which it**  **operates. In** 

**addition to**  **selecting lamp­and­ballast**  **systems, the**  **engineering analysis**  **develops system**  **power**

**ratings which**  **DOE uses**  **to develop**  **energy consumption**  **in Chapter**  **6.**

**2­5**2.5.1 Representative P roduct Classes

**DOE r**  **eviewed covered**  **lamps and**  **the associated**  **product classes.**  **In the**  **case where**  **a**

**product had**  **multiple product**  **classes, DOE**  **identified and**  **selected certain**  **product classes**  **as**

**“representative” product**  **classes where**  **DOE would**  **concentrate its**  **analytical effort.**  **DOE chose** 

**these representative**  **product classes**  **primarily because**  **of their**  **high market**  **volumes.**

2.5.2 S elected B aseline Lamps

**DOE s**  **elected baseline**  **lamps from**  **the representative**  **product classes**  **on which**  **it**

**conducted the**  **engineering analysis**  **(and subsequent**  **analyses). These**  **baseline lamps**  **were**

**selected to**  **represent the**  **characteristics of**  **lamps in**  **a given**  **product class.**  **Typically, a**  **baseline**

**lamp is**  **one that**  **just meets**  **existing mandatory**  **energy conservation**  **standards or**  **one that** 

**represents the**  **typical lamp**  **sold. Specific**  **characteristics such**  **as correlated**  **color temperature** 

**(CCT), operating**  **life, and**  **light output**  **were all**  **selected to**  **characterize the**  **most common**  **lamps**

**purchased by**  **consumers today.**  **For all**  **the representative**  **product classes,**  **DOE selected**  **multiple**

**baseline lamps,**  **to ensure**  **consideration of**  **different high­volume**  **lamps and**  **their associated** 

**consumer economics.** 

2.5.3 I dentified L amps and Ballast Designs

**DOE s**  **elected a**  **series of**  **more­efficacious lamps**  **for each**  **of the**  **baseline lamps** 

**considered within**  **each representative**  **product class.**  **DOE only**  **considered technologies**  **that met** 

**all four**  **criteria in**  **the screening**  **analysis. DOE**  **considered these**  **technologies either**  **explicitly as** 

**design options**  **or implicitly**  **as design**  **options incorporated**  **into commercially**  **available lamps**  **at**

**the efficiency**  **levels evaluated.**  **These selections**  **were made**  **such that**  **potential substitutions** 

**maintained light**  **output above**  **a maximum**  **10­percent decrease**  **from the**  **baseline lamp’s**  **light**

**output and**  **that the**  **substitute lamp**  **had performance**  **characteristics similar**  **to those**  **of the** 

**baseline lamp.**  **In identifying**  **the more­efficacious**  **substitutes, DOE**  **utilized a**  **database of** 

**commercially available**  **lamps. For**  **GSFL, DOE**  **considered commercially**  **available lamps**  **under**

**two different**  **substitute scenarios:**  **(1) lower­wattage**  **lamps that**  **operated on**  **existing ballasts**  **and**

**whose system**  **light output**  **never dropped**  **below 10**  **percent of**  **the baseline**  **system and**  **(2) more** 

**efficacious lamps**  **that have**  **the same**  **rated wattage,**  **and, therefore,**  **must be**  **associated with**  **a**

**ballast replacement**  **in order**  **to save**  **energy and**  **maintain light**  **output. For**  **IRL, DOE**  **used some** 

**commercially available**  **lamps, but**  **also developed**  **“model” lamps**  **which incorporate**  **design**

**options that**  **may not**  **be commercially**  **available for**  **certain lamp**  **types and**  **wattages but**  **which**

**use commercially**  **available technologies.**  **For example,**  **DOE developed**  **efficacy estimates**  **for**

**reduced­wattage IRL**  **with an**  **HIR coating.** 

2.5.4 D eveloped E fficacy Levels

**Having i**  **dentified the**  **more­efficacious substitutes**  **for each**  **of the**  **baseline lamps**  **(or**

**lamp­and­ballast systems),**  **DOE developed**  **efficacy levels**  **based on**  **the consideration**  **of several** 

**factors including:**  **(1) the**  **design options**  **associated with**  **the specific**  **lamps being**  **studied (e.g.,** 

**grades of**  **phosphor for**  **fluorescent lamps,**  **the use**  **of infrared**  **coatings for**  **IRL, etc.);**  **(2) the** 

**2­6 1**  **ability of**  **lamps across**  **wattages to**  **comply with**  **the standard**  **level of**  **a given**  **product class; and** 

**(3) t**  **he m**  **aximum technologically**  **feasible level.** 

2.6 E NERGY USE CHARACTERIZATION

**The e**  **nergy­use characterization**  **provides estimates**  **of annual**  **energy use**  **for the**  **two**

**categories of**  **lamps which**  **DOE uses**  **in the**  **LCC and**  **PBP analyses**  **and the**  **NIA. To**  **develop**

**annual energy**  **use estimates,**  **DOE multiplied**  **annual usage**  **(in hours**  **per year)**  **by the**  **system**

**power estimates**  **(in watts).**  **DOE developed**  **the system**  **power estimates**  **in the**  **engineering**

**analysis. To**  **derive annual**  **energy usage,**  **DOE used**  **data published**  **in the**  **U.S. Lighting**  **Market**

**Characterization: Volume**  **I (LMC),**  **the Residential**  **Energy Consumption**  **Survey (RECS),**  **the**

**Commercial Building**  **Energy Survey**  **(CBECS) and**  **the Manufacturer**  **Energy Consumption** 

**Survey (MECS).** 

2.7 P RODUCT P RICE DETERMINATION

**This c**  **hapter focuses**  **on the**  **methodology followed**  **by DOE**  **in developing**  **end**

**user product**  **prices for**  **lamps and**  **ballasts used**  **in the**  **rulemaking analysis.**  **DOE based**  **the**

**product price**  **determination for**  **lamps and**  **ballasts on**  **marked­down manufacturer**  **price**

**schedules, developing**  **low, mid**  **and high**  **end­user retail**  **prices.**

2.8 L IFE­CYCLE C OST AND PAYBACK PERIOD ANALYSIS

**The e**  **ffects of**  **new energy**  **conservation standards**  **on equipment**  **result in**  **changes in** 

**operating expenses**  **(usually decreased)**  **and changes**  **in customer**  **price (usually**  **increased). DOE** 

**analyzed the**  **net effect**  **of new**  **standards on**  **consumers by**  **evaluating the**  **net LCC**  **using the** 

**efficacies and**  **system power**  **ratings derived**  **in the**  **engineering analysis**  **and the**  **cost trends** 

**derived from**  **the product**  **price determination.**  **Inputs to**  **the LCC**  **calculation include**  **the installed** 

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

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

**DOE r**  **eviewed EIA’s**  **energy price**  **data for**  **GSFL and**  **IRL to**  **establish electricity**  **prices.**

**DOE relied**  **on regional**  **average electricity**  **price data**  **for the**  **residential and**  **commercial sectors.** 

**DOE used**  **projections of**  **these electricity**  **prices for**  **residential and**  **commercial customers**  **to**

**estimate future**  **electricity prices**  **in its**  **LCC analysis.**  **DOE used**  **EIA’s Annual**  **Energy Outlook** 

**(** AEO **) as**  **the default**  **source of**  **projections for**  **future electricity**  **prices.**

**DOE d**  **eveloped discount**  **rates by**  **estimating the**  **cost of**  **capital to**  **companies that** 

**purchase lamps**  **covered under**  **this rulemaking.**  **For residential**  **consumers of**  **GSFL and**  **IRL,**

**DOE derived**  **the discount**  **rates from**  **estimates of**  **the interest**  **or “finance**  **cost” to**  **purchase**

**residential products.**  **By applying**  **the financial**  **theory, the**  **finance cost**  **of raising**  **funds to** 

**1 Efficacy**  **levels span**  **multiple lamps**  **of different**  **wattages. In**  **selecting CSLs,**  **DOE considered**  **whether**

**these multiple**  **lamps can**  **meet the**  **efficacy levels.** 

**2­7 purchase**  **residential products**  **can be**  **interpreted as:**  **(1) the**  **financial cost**  **of any**  **debt incurred**  **to**

**purchase residential**  **products, principally**  **interest charges**  **on debt,**  **or (2)**  **the opportunity**  **cost of** 

**any equity**  **used to**  **purchase residential**  **products, principally**  **interest earnings**  **on household** 

**equity. Household**  **equity is**  **represented by**  **holdings in**  **assets such**  **as stocks**  **and bonds,**  **as well** 

**as the**  **return on**  **homeowner equity.**  **DOE obtained**  **much of**  **the data**  **required to**  **determine the** 

**cost of**  **debt and**  **equity from**  **the Federal**  **Reserve Board’s**  **triennial** Survey of Consumer

Finances

**.**

**For c**  **ommercial and**  **industrial consumers**  **of GSFL**  **and IRL,**  **DOE used**  **the same** 

**approach it**  **relied on**  **for developing**  **discount rates**  **for other**  **commercial equipment.**  **DOE derives** 

**discount rates**  **for commercial**  **consumers by**  **estimating the**  **cost of**  **capital of**  **companies that** 

**purchase commercial**  **equipment. The**  **cost of**  **capital is**  **commonly used**  **to estimate**  **the present** 

**value of**  **cash flows**  **to be**  **derived from**  **a typical**  **company project**  **or investment.**  **Most**

**companies use**  **both debt**  **and equity**  **capital to**  **fund investments,**  **so the**  **cost of**  **capital is**  **the**

**weighted­average cost**  **of equity**  **and debt**  **financing. This**  **corporate finance**  **approach is**  **referred**

**to as**  **the weighted­average**  **cost of**  **capital (WACC).** 

**Chapter 8**  **also describes**  **the PBP**  **analysis, which**  **calculates the**  **amount of**  **time needed**  **to**

**recover the**  **additional cost**  **that consumers**  **pay for**  **increased efficiency.**  **Numerically, the**  **simple**

**payback period**  **is the**  **ratio of**  **the increase**  **in purchase**  **price to**  **the decrease**  **in annual**  **energy**

**costs.**

2.9 S HIPMENTS A NALYSIS

**Shipment f**  **orecasts are**  **required to**  **calculate the**  **national impacts**  **of standards**  **on energy,** 

**NPV, and**  **future manufacturer**  **cash flows.**  **DOE developed**  **shipment forecasts**  **using historical** 

**data as**  **a basis**  **for projecting**  **future shipments**  **of the**  **GSFL and**  **IRL that**  **are the**  **subject of**  **this**

**rulemaking. In**  **projecting shipments,**  **DOE accounted**  **for several**  **market segments**  **including: (1)** 

**new construction;**  **(2) renovation;**  **(3) lamp**  **failure; (4)**  **ballast failure**  **or fixture**  **replacement (for** 

**GSFL only);**  **and (5)**  **retrofit. In**  **addition, DOE**  **used market­share**  **matrices to**  **characterize the** 

**product mix**  **of the**  **shipments and**  **installed stock.** 

2.9.1 S hipment S cenarios

**To calculate**  **s hipments,**  **DOE created**  **several base­case**  **and standards**  **case shipment** 

**scenarios. As**  **rapidly emerging**  **new lighting**  **technologies (such**  **as reflector**  **compact fluorescent** 

**lamps, ceramic**  **metal­halide, and**  **light­emitting diodes)**  **could penetrate**  **GSFL and**  **IRL markets** 

**and significantly**  **affect shipment**  **forecasts, DOE**  **creates two**  **base­case shipment**  **scenarios:**

**Existing Technologies**  **and Emerging**  **Technologies. The**  **Existing Technologies**  **scenario,**

**considering only**  **technologies that**  **have already**  **achieved technological**  **and market**  **maturation**

**assumes more**  **limited penetration**  **of other**  **higher efficacy**  **products than**  **the Emerging** 

**Technologies scenario.** 

**To characterize**  **c onsumer**  **behavior in**  **the standards­case**  **for GSFL,**  **DOE considers**  **many**

**lamp­and­ballast system**  **properties that**  **consumers take**  **into account**  **when purchasing**  **their**

**GSFL systems.**  **Specifically, DOE**  **regards system**  **price, system**  **energy consumption,**  **and**

**2­8 system**  **lumen output**  **as three**  **key drivers**  **of consumer**  **purchases. DOE**  **develops two**  **sets of** 

**shipment scenarios,**  **to characterize**  **consumers that**  **may weigh**  **these factors**  **differently. The**  **first**

**set of**  **scenarios comprises**  **the “Roll­up”**  **and “Shift”**  **scenarios; the**  **second set**  **comprises the** 

**“High” and**  **“Market segment­based”**  **lighting expertise**  **scenarios.**

**In t**  **he first**  **set of**  **standards­case scenarios**  **for GSFL,**  **the Roll­up**  **scenario represents**  **a**

**standards­case in**  **which all**  **product efficacies**  **in the**  **base case**  **that do**  **not meet**  **the standard** 

**would roll**  **up to**  **meet the**  **new standard**  **level. Consumers**  **who in**  **the base**  **case purchase**  **lamps**

**above the**  **standard level**  **are not**  **affected as**  **they are**  **assumed to**  **continue to**  **purchase the**  **same**

**base case**  **lamp or**  **lamp system**  **in the**  **Roll­up scenario.**  **The Roll­up**  **scenario characterizes** 

**consumers primarily**  **driven by**  **the first­cost**  **of the**  **lamp. In**  **contrast, the**  **Shift scenario**  **models a** 

**standards­case in**  **which** all **base case**  **consumer purchases**  **are affected**  **by the**  **standard (whether** 

**or not**  **their base**  **case efficacy**  **is below**  **the standard).scenario.**  **The second**  **set of**  **standards­case**

**GSFL scenarios**  **comprises the**  **lighting expertise**  **scenarios: High**  **and Market**  **Segment­Based.**

**This set**  **of scenarios**  **characterizes consumers’**  **decisions (or**  **lack thereof)**  **to either**  **maintain**

**equivalent light**  **output upon**  **the purchase**  **of a**  **new higher**  **efficacy lamp**  **or accept**  **higher lighting** 

**levels. The**  **High expertise**  **scenario generally**  **characterizes more**  **sophisticated lighting**  **decisions**

**in which**  **consistent lighting**  **levels and/or**  **energy savings**  **play a**  **determinant role**  **in consumer** 

**behavior. In**  **this scenario,**  **consumers are**  **more likely**  **to choose**  **a lower**  **ballast factor**  **to pair** 

**with higher**  **efficacy lamps**  **or reduced­wattage**  **lamps. Conversely,**  **in the**  **Market Segment­Based** 

**scenario, DOE**  **assumes consumers**  **occasionally accept**  **high lighting**  **levels and**  **reduced (or**  **in**

**many cases,**  **zero) energy**  **savings as**  **a consequence**  **of their**  **expertise (or**  **lack thereof).** 

**As w**  **ith GSFL,**  **DOE considers**  **two sets**  **of standards­case**  **scenarios for**  **IRL. The**  **first set** 

**of scenarios**  **for IRL**  **includes the**  **“Roll­up” and**  **“Shift” scenarios.**  **Again, the**  **Roll­up scenario** 

**represents a**  **standards­case in**  **which all**  **product efficacies**  **in the**  **base case**  **that do**  **not meet**  **the**

**standard would**  **roll up**  **to meet**  **the new**  **standard level.**  **Those product**  **efficacies that**  **were above** 

**the standard**  **level are**  **considered unaffected,**  **as consumers**  **continue to**  **purchase the**  **same base** 

**case lamp**  **or lamp**  **system. The**  **Roll­up scenario**  **characterizes consumers**  **primarily driven**  **by**

**the first­cost**  **of the**  **lamp In**  **contrast, the**  **Shift scenario**  **models a**  **standards­case in**  **which** all

**base case**  **consumer purchases**  **are affected**  **by the**  **standard (whether**  **or not**  **their base**  **case**

**efficacy meets**  **the standard).**  **The second**  **set of**  **standards­case IRL**  **scenarios includes**  **the**

**“Product Substitution”**  **and “No**  **Product Substitution”**  **scenarios. In**  **the Product**  **Substitution**

**scenario, DOE**  **assumes consumers**  **do not**  **necessarily continue**  **to purchase**  **the same**  **lamp as** 

**they do**  **in the**  **base case.**  **DOE thus**  **models a**  **shift to**  **both exempted**  **bulged reflector**  **lamps and** 

**to reflector**  **compact fluorescent**  **lamps in**  **the standards**  **case. The**  **No Product­Substitution** 

**scenario assumes**  **all consumers**  **who purchase**  **IRL in**  **the base**  **case continue**  **to do**  **so in**  **the**

**standards case.** 

2.10 N ATIONAL I MPACT ANALYSIS

**The n**  **ational impact**  **analysis assesses**  **the NPV**  **of total**  **customer LCC**  **and NES.** 

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

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

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

**2­9 national**  **economic costs**  **and savings**  **resulting from**  **new standards.**  **The NES**  **Spreadsheet Model** 

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

**uncertainty on**  **the NES**  **and NPV**  **results, DOE**  **can conduct**  **sensitivity analyses**  **for future** 

**analyses by**  **running scenarios**  **on input**  **variables that**  **are of**  **interest to**  **stakeholders. Chapter**  **11**

**of the**  **TSD describes**  **DOE’s assessment**  **of the**  **aggregate economic**  **impacts at**  **the national**  **level.**

2.10.1 N ational E nergy Savings Analysis

**The i**  **nputs DOE**  **uses to**  **determine the**  **NES are:**  **(1) annual**  **energy consumption** 

**per unit;**  **(2) shipments;**  **(3) equipment**  **stock; (4)**  **national energy**  **consumption; and**  **(5) site­to** 

**source conversion**  **factors. DOE**  **calculates the**  **national energy**  **consumption by**  **multiplying the** 

**number of**  **units, or**  **stock, of**  **lamps (by**  **vintage) by**  **the unit**  **energy consumption**  **(also by** 

**2 vintage). DOE**  **calculates national**  **annual energy**  **savings from**  **the difference**  **between national** 

**energy consumption**  **in the**  **base case**  **(without new**  **energy conservation**  **standards) and**  **in each** 

**standards case**  **(with new**  **energy conservation**  **standards). The**  **analysis includes**  **estimates of** 

**energy savings**  **by fuel**  **type used**  **for generating**  **electricity. DOE**  **estimates energy**  **consumption**

**and savings**  **based on**  **site energy,**  **and converts**  **the electricity**  **consumption and**  **savings to**  **source**

**energy. Cumulative**  **energy savings**  **are the**  **sum of**  **the annual**  **NES, which**  **DOE determines**  **over**

**specified time**  **periods.**

2.10.2 N et P resent Value Analysis

**The i**  **nputs DOE**  **uses to**  **determine the**  **NPV are:**  **(1) total**  **annual installed**  **cost; (2)** 

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

**value of**  **savings. DOE**  **calculates net**  **savings each**  **year as**  **the difference**  **between total**  **operating**

**cost savings**  **and increases**  **in total**  **installed costs**  **(including equipment**  **price and**  **installation**

**cost). DOE**  **calculates savings**  **over the**  **life of**  **the equipment,**  **accounting for**  **differences in** 

**yearly energy**  **rates. DOE**  **calculates NPV**  **as the**  **difference between**  **the present**  **value of** 

**operating cost**  **savings and**  **the present**  **value of**  **increased total**  **installed costs.**  **DOE discounts** 

**future costs**  **and savings**  **to the**  **present with**  **a discount**  **factor.**

**DOE c**  **alculates increases**  **in total**  **installed costs**  **as the**  **product of**  **the difference**  **in**

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

**standards case.**  **Because costs**  **of the**  **more­efficient equipment**  **bought in**  **the standards**  **case are** 

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

**in the**  **NPV.**

**DOE e**  **xpresses operating**  **cost savings**  **as decreases**  **in operating**  **costs associated** 

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

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

**number of**  **units of**  **each vintage**  **surviving in**  **a particular**  **year.**

**2 Vintage**  **represents the**  **age of**  **the equipment.** 

**2­10**2.11 LIFE­CYCLE C OST SUB­GROUP ANALYSIS

**A consumer**  **s ubgroup**  **comprises a**  **subset of**  **the population**  **that is**  **likely, for**  **one reason** 

**or another,**  **to be**  **impacted disproportionately**  **by new**  **or revised**  **energy conservation**  **standards.**

**In this**  **NOPR, DOE**  **identified low­income**  **consumers, houses**  **of worship,**  **historical facilities,** 

**and institutions**  **that serve**  **low­income populations**  **as consumers**  **that would**  **be**

**disproportionately impacted**  **by the**  **proposed standards.**  **The LCC**  **sub­group analysis**  **evaluates**

**impacts on**  **these consumer**  **sub­groups by**  **accounting for**  **variations in**  **key inputs**  **to the**  **LCC**

**analysis.**

2.12 M ANUFACTURER IMPACT ANALYSIS

**DOE performed**  **a MIA**  **to estimate**  **the financial**  **impact of**  **higher energy** 

**conservation standards**  **on GSFL**  **and IRL**  **manufacturers, and**  **to calculate**  **the impact**  **of such** 

**standards on**  **domestic manufacturing**  **employment and**  **capacity. The**  **MIA has**  **both quantitative** 

**and qualitative**  **aspects. The**  **quantitative part**  **of the**  **MIA primarily**  **relies on**  **two separate** 

**Government Regulatory**  **Impact Models**  **(GRIMs)**

⎯ **industry­cash­flow models**  **customized for** 

**this rulemaking.**  **The GRIM**  **inputs are**  **data characterizing**  **the industry**  **cost structure,**  **shipments,**

**and revenues.**  **The key**  **output is**  **the industry**  **net present**  **value. Different**  **sets of**  **assumptions**

**(scenarios) will**  **produce different**  **results. The**  **qualitative part**  **of the**  **MIA addresses**  **factors such** 

**as product**  **characteristics, characteristics**  **of particular**  **firms, and**  **market and**  **product trends,**  **and**

**includes an**  **assessment of**  **the impacts**  **of standards**  **on subgroups**  **of manufacturers.**  **The**

**complete MIA**  **is outlined**  **in Chapter**  **12 of**  **the TSD.** 

**DOE c**  **onducted the**  **MIA in**  **three phases.**  **Phase 1,**  **“Industry Profile,”**  **consisted of**  **the**

**preparation of**  **an industry**  **characterization. Phase**  **2, “Industry**  **Cash Flow,”**  **focused on**  **the**

**industry as**  **a whole.**  **In this**  **phase, DOE**  **used two**  **separate GRIMs**  **(one for**  **the GSFL**  **industry**

**and one**  **for IRL**  **industry) to**  **prepare an**  **industry cash­flow**  **analysis. DOE**  **used publicly** 

**available information**  **developed in**  **Phase 1**  **to adapt**  **each GRIM**  **structure to**  **facilitate the** 

**analysis of**  **amended GSFL**  **and IRL**  **standards. In**  **Phase 3,**  **“Subgroup Impact**  **Analysis,” DOE** 

**conducted interviews**  **with manufacturers**  **representing the**  **majority of**  **domestic GSFL**  **and IRL** 

**sales. During**  **these interviews,**  **DOE discussed**  **engineering, manufacturing,**  **procurement, and** 

**financial topics**  **specific to**  **each company,**  **and also**  **obtained each**  **manufacturer’s view**  **of the** 

**industry as**  **a whole.**  **The interviews**  **provided valuable**  **information DOE**  **used to**  **evaluate the** 

**impacts of**  **an amended**  **energy conservation**  **standard on**  **manufacturer cash**  **flows, manufacturing** 

**capacities, and**  **employment levels.** 

2.13 U TILITY IMPACT ANALYSIS

**The u**  **tility impact**  **analysis will**  **include an**  **analysis of**  **the impact**  **of higher**  **energy**

**conservation standards**  **on the**  **electric utility**  **industries. DOE**  **is considering**  **adapting the** 

**National Energy**  **Modeling System**  **(NEMS) produced**  **by the**  **EIA for**  **this analysis.**  **NEMS (EIA** 

**2005) is**  **a large**  **multi­sectoral general­equilibrium**  **model of**  **the U.S.**  **energy sector**  **that has**  **been**

**developed over**  **the past**  **decade by**  **the EIA,**  **primarily for**  **the purpose**  **of preparing**  **DOE’s** AEO

**. In**  **prior rulemakings,**  **a variant**  **of NEMS**  **(currently termed**  **NEMS­BT, BT**  **referring to**  **the**

**2­11 DOE’s**  **Building Technologies**  **Program) was**  **developed to**  **better address**  **the specific**  **impacts of** 

**an equipment**  **efficiency standard.** 

**The NEM**  **S produces**  **a widely**  **recognized baseline**  **energy forecast**  **for the**  **United States** 

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

**forecasts of**  **electricity sales,**  **price, and**  **avoided electric**  **generating capacity.**  **DOE conducted**  **the**

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

**words, the**  **energy savings**  **impacts from**  **amended energy**  **conservation standards**  **were modeled** 

**using NEMS­BT**  **to generate**  **forecasts that**  **deviate from**  **the** AEO **reference case.** 

2.14 E NVIRONMENTAL A SSESSMENT

**DOE c**  **onducted the**  **environmental assessment**  **(EA) pursuant**  **to the**  **National**

**Environmental Policy**  **Act and**  **the requirements**  **under 42**  **U.S.C. 6295(o)(2)**  **to determine**  **the**

**environmental impacts**  **of the**  **amended standards.**  **(42 U.S.C.**  **6316(a)) The**  **primary**

**environmental effects**  **of energy**  **conservation standards**  **for GSFL**  **and IRL**  **are likely**  **to be** 

**reduced emissions**  **resulting from**  **reduced electrical**  **energy consumption.**  **The environmental** 

**impact analysis**  **will track**  **the impact**  **of possible**  **standards on**  **three energy­related**  **emissions:**

**carbon dioxide**  **(CO 2**  **), nitrogen**  **oxides (NO**  **X ),**  **and mercury**  **(Hg). The**  **analyses do**  **not include** 

**the estimated**  **reduction in**  **power plant**  **emissions of**  **sulfur dioxide**  **(SO 2**  **) because**  **the Clean**  **Air**

**Act Amendments**  **of 1990**  **set an**  **emissions cap**  **on SO**  **2 emitted**  **by the**  **power generation**  **sector**

**and it**  **is assumed**  **that SO**  **2 emissions**  **will always**  **be at,**  **or near,**  **the ceiling.**  **DOE based**  **the**

**environmental assessment**  **calculations on**  **the NEMS­BT**  **modeling work**  **proposed for**  **the utility** 

**impact analysis.**  **The output**  **is the**  **forecasted physical**  **emissions. The**  **net benefit**  **of the**  **standard**

**is the**  **difference between**  **emissions estimated**  **by NEMS­BT**  **and the**  AEO2008 **Reference Case.** 

**This approach**  **has the**  **advantage of**  **examining the**  **marginal impact**  **of standards**  **for general** 

**service fluorescent**  **lamps and**  **incandescent reflector**  **lamps on**  **the utility**  **generation mix**  **and the** 

**subsequent environmental**  **emissions.**

**CO 2**  **emissions are**  **tracked in**  **NEMS­BT by**  **a detailed**  **module that**  **produces robust**  **results**

**because of**  **its broad**  **coverage of**  **all sectors**  **and inclusion**  **of interactive**  **effects. NEMS­BT**  **also**

**includes a**  **module for**  **SO 2**  **­allowance trading**  **and delivers**  **a forecast**  **of SO**  **2 ­allowance**  **prices. It** 

**is important**  **to note,**  **however, that**  **simulation of**  **SO 2**  **trading tends**  **to imply**  **that physical** 

**emissions effects**  **will be**  **zero, as**  **it is**  **assumed that**  **SO 2**  **emissions will**  **always be**  **at, or**  **near, the** 

**emissions cap**  **set by**  **the Clean**  **Air Act.**  **Thus, there**  **is virtually**  **no possible**  **SO 2**  **environmental**

**benefit from**  **electricity savings**  **as long**  **as there**  **is an**  **enforcement of**  **the emissions**  **ceiling.**

**However, there**  **is an**  **SO 2**  **benefit from**  **conservation in**  **the form**  **of a**  **lower allowance**  **price and,** 

**if big**  **enough to**  **be calculable**  **by NEMS,**  **this value**  **can be**  **reported.**

**NO X**  **emissions are**  **currently not**  **regulated by**  **a national**  **cap and**  **trade program.**  **DOE**

**generated low­ and**  **high­end estimates**  **of changes**  **in NO**  **X emissions**  **associated with**  **an energy** 

**conservation standard**  **using current**  **emission rates**  **for the**  **power sector**  **in** AEO2008

**. Hg** 

**emissions are**  **also currently**  **not regulated**  **by a**  **national cap**  **and trade**  **program. DOE**  **generated**

**low­ and high­end**  **estimates of**  **changes in**  **Hg emissions**  **associated with**  **an energy**  **conservation**

**standard using**  **current emission**  **rates for**  **the power**  **sector in**  AEO2008

**.**

**2­12**2.15 EMPLOYMENT I MPACT ANALYSIS

**The i**  **mposition of**  **standards can**  **impact employment**  **both directly**  **and indirectly.**  **Direct**

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

**covered lamp**  **types, along**  **with the**  **affiliated distribution**  **and service**  **companies, resulting**  **from**

**the imposition**  **of new**  **standards. DOE**  **will evaluate**  **direct employment**  **impacts 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 the**  **imposition of**  **standards. The**  **combined direct**  **and indirect**  **employment impacts** 

**will be**  **investigated in**  **the employment**  **impact analysis**  **using the**  **Pacific Northwest**  **National**

**Laboratory’s “Impact**  **of Sector**  **Energy Technologies”**  **(ImSET) model.**  **The ImSET**  **model was** 

**developed for**  **DOE’s Office**  **of Planning,**  **Budget, and**  **Analysis, and**  **estimates the**  **employment**

**and income**  **effects of**  **energy­saving technologies**  **in buildings,**  **industry, and**  **transportation. In** 

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

**automated analysis**  **of the**  **economic impacts**  **of energy**  **conservation investments.** 

2.16 R EGULATORY IMPACT ANALYSIS

**In t**  **he NOPR**  **stage, DOE**  **prepared a**  **regulatory impact**  **analysis (RIA)**  **pursuant to** 

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

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

**Regulatory Affairs**  **at the**  **Office of**  **Management and**  **Budget. The**  **RIA addressed**  **the potential** 

**for non­regulatory**  **approaches to**  **supplant or**  **augment energy**  **conservation standards**  **to improve** 

**the energy**  **efficiency of**  **GSFL and**  **IRL on**  **the market.** 

2.17 D EPARTMENT O F JUSTICE REVIEW

**Section 3**  **25(o)(2)(B)(i)(V) of**  **the Energy**  **Policy and**  **Conservation Act**  **(EPCA) states** 

**that, before**  **the Secretary**  **of Energy**  **may prescribe**  **a new**  **or amended**  **energy conservation** 

**standard, the**  **Secretary shall**  **ask the**  **U.S. Attorney**  **General to**  **make a**  **determination of**  **“the**

**impact of**  **any lessening**  **of competition...that**  **is likely**  **to result**  **from the**  **imposition of**  **the**

**standard.” (42**  **U.S.C. 6295)**  **Pursuant to**  **this requirement,**  **DOE will**  **solicit the**  **views of**  **DOJ on** 

**any lessening**  **of competition**  **that is**  **likely to**  **result from**  **the imposition**  **of a**  **proposed standard** 

**and will**  **give the**  **views provided**  **full consideration**  **in assessing**  **economic justification**  **of a** 

**proposed standard.**  **In addition,**  **DOE may**  **consult with**  **DOJ at**  **earlier stages**  **in the**  **standards**

**development process**  **to seek**  **to obtain**  **preliminary views**  **on competitive**  **impacts.**

**2­13**